Defining The Gray Market

Gray market is a label applied to cannabis outlets behaving and advertising themselves as legal businesses with only some or none of the required business certifications legally required to sell cannabis. The term gray market simply denotes a black market operation that resembles a legal operation. Gray Market operations may possess a legal state business license and even rent and pay taxes for a physical storefront, but they are still strictly illegal operations unless they follow their jurisdictional regulation on the sale of cannabis. 

Gray Markets Operating On The Internet - Is That Legal?

Internet sites and services provide all the gray market’s advertising, communication, and payment processing services, in what constitutes an obvious legal loophole. According to The Guardian, "In much of the state [California], gray-market companies operate in plain sight, and it’s not necessarily clear to customers whether a store is legal or not. Weedmaps, a popular online dispensary locator, doesn’t distinguish between licensed and unlicensed dispensaries – nor do mainstream sites like Google and Yelp."

Weedmaps functions in part as a direct ordering platform but claims no responsibility or advisory over the services it supports. Weedmaps’ Terms of Use explicitly offers no guarantee over quality, the truthfulness of business’ claims, or purported THC/contamination test results —  they are totally hands-off whether or not the business is legit. Websites directly profiting from gray market cannabis dance on a legal hot ground similar to which ThePirateBay does and Limewire once did.

There really is no way to verify a business or validate its claims where there is no regulation or enforcement. To avoid gray market businesses where legal alternatives exist, use a site like Wikileaf which verifies its listings by their business license. That way, you are supporting legal cannabis and have as strict a guarantee of quality as exists in your area.

The Slippery And Narrow Bridge To Legalization

The gray market sprouts up where governments promise and then fail to provide legal cannabis markets. Typically, states will enact piecemeal legislation, a precedent set by early state adopters in Colorado and Washington, and trend over the years towards full legalization. When that legalization gets stuck in limbo, some temporary legal framework, such as a medical industry, might already be implemented. The gray market abuses the existing framework in such a way that its businesses are as protected as possible while they sell recreational cannabis illegally. Here are some of the commonly enacted state laws that engender gray markets when promises for recreational cannabis are not realized:

• Recreational Legalization: This watershed moment marks the point in time where a state announces plans for a new path forward. It’s like Brexit — no realistic timeline comes with the announcement, but it sure creates a huge buzz!
• Decriminalizing Cannabis: An admission of past mistakes important to removing the cannabis stigma. An important early step on the spectrum of weed’s legality. Minor criminal offenses are often expunged.
• Legalizing Medical:  Introducing the medical market is a state’s first attempt at managing the market, but at a regulated size. The doctor’s approval marks a major gateway and control mechanism, but the growers are typically nowhere near as scrutinized as they are during recreational. As a result, a surplus of cannabis typically floods black and gray markets.
• Allowing Personal Planting: Governments essentially allow for the small scale production of cannabis such that people can have and realistically trade it, but without ever infringing on the government’s trade. States often lack the resources or authority to investigate homes containing larger operations. 

Many states have faltered or crashed off of the slippery steps toward legalization and some of these states have developed entrenched gray markets. Arcview’s Golden Opportunity paper estimates that Californian’s consumers spent $3.7 billion on legal cannabis in 2018 compared to $5.5 billion in gray/black markets. An entrenched gray market with years of history develops better business practices and customer loyalty, creating an early cash sink for legal operations.

The State Of Cannabis In Our Nation’s Capital

Washington, D.C. legalized cannabis for recreational use in 2014, just one year after Colorado and Washington. In 2015, Washington D.C. went a step further, decriminalizing cannabis and setting a legal limit for growing cannabis plants inside the home. Quick-moving legislation reflected the excitement of a hard-working and well-educated population ready to bring cannabis use out from the shadows. Half a decade later, there are still zero recreational dispensaries in Washington D.C., and progress has stymied. People fed-up with waiting now support a mature gray market providing a service the government promised and failed to deliver.

In Washington D.C., the sale of cannabis is thinly disguised through the purchase of nothing-items that come with cannabis. Paper Boy Paper Co. is one among D.C.’s ever-rotating delivery services. Paper Boy delivers branded rolling paper for $60 that comes with an 1/8th of cannabis as a thank you. D.C.’s “pop-up” open-air cannabis markets collect donations at the door to garner some obscure protective legal status. Much of the cannabis sold through these avenues is sourced through the medical dispensaries operating in D.C. and neighboring Maryland. The result of years of half-realized legislation is a booming gray market benefiting from none of the advantages of a legalized market, but paying for every drawback.

Why You Want A Legal Market

I witnessed the transition from medical to gray to recreational in Seattle. During each transition, a swath of operations died off. To illustrate the unpredictability and insecurity of the times: Have-A-Heart, now among the most recognizable chains of recreational dispensaries, once taught the employees of its single remaining dispensary a “raid protocol.” After Seattle ended medical status without providing a framework for legal licensing, operating a dispensary (whether an operation was once legal or not) became a game of Russian Roulette.

In 2019, there are no raid protocols and Seattle has no gray market. As someone who’s interviewed probably 50% of Seattle’s recreational dispensary owners, I know the people and how they’re trying to raise quality of life by creating a culture of activism and positivity that accompanies the sale of high-quality cannabis. Price, selection, and quality have all improved. These improvements belong to the efforts of good people operating good businesses that support their local communities. Legality, in Seattle and hopefully everywhere, has fostered the growth of an important, young, and influential community of thought-leaders; people who hope that the cannabis of the future is as influential as today’s Coca Cola and Big Tobacco, but will never sell out. Legalization comes with hope and power to create an industry that belongs not to mega-corporations, but to robust small operations that dot each state’s landscape — by the people, for the people, and for our future.