Legal Cannabis Vs. Black Market: Who Will Win?

Prices, quality, and available cannabis are all factors in this ongoing war.

Yellow background with money, joints, a grinder, and green buds lying on the surface Photo credit: Shutterstock

Recreational marijuana is gradually becoming more widely accepted across the United States. The majority of Americans now support it, and there are multiple bills in the works to legalize adult-use cannabis at the federal level. Yet the Black Market hasn’t gone away – in fact, in some states where marijuana is legal, the Black Market has barely even waned.

The California Cannabis Advisory Committee says as much as 80% of the cannabis sold in the state is illicit. In Massachusetts, an analytics firm thinks 90% of weed that people use is illicit. Southern Oregon has been called the “national center of illegal weed cultivation.” 

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Why is that, and what can be done to combat it?

Prices

The price of legal weed is the biggest deterrent for its purchase. The product is taxed at multiple levels, from its cultivation, to processing, to its sale in dispensaries. There, weed has a state sales tax, and often a municipal one on top of that. The result is that weed bought legally is often twice as expensive as the same product bought from the Black Market.

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Someone shaking hands with another man, both wearing dark colors

The black market is prevalent even in legalized states. Photo credit: Shutterstock

There are some efforts to reduce taxes, especially in California where the product is marked up 80%. The theory is that if people could buy legal weed for a reasonable price, they would do it, even if it were slightly more expensive than the Black Market stuff. When it becomes ludicrously expensive is when people stop heading to dispensaries. 

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Access

Another thing to keep in mind is that although marijuana may be legal in a particular state, that doesn’t mean it’s accessible to everyone in that state. Counties can decide to opt out of allowing dispensaries in their area; many that do allow them still have enormous hoops to jump through, making it extremely difficult for cannabis shops not only to open, but to continue operating once they do get up and running. 

Hand placing green cannabis bud on to scale to weigh.

Some people don’t have access to cannabis in their county and will purchase from the black market. Photo credit: Shutterstock

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The result is that someone could live hours away from the nearest dispensary, and most people simply aren’t going to make that trip when they could stick with their Black Market dealer, whose quality, prices, and availability they’re already familiar with. 

Shortages

When marijuana is first legalized, it doesn’t instantly hit the shelves. It can take years between legalization and recreational pot actually showing up in dispensaries, as governments at the local and state level work out licensing. After that, the issue becomes supply.

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In many cases, dispensaries that started out as medical marijuana operations are the first to start selling recreational marijuana. However, the effort to ramp up supply isn’t always smooth. Marijuana takes time and care to grow, and increasing supply can’t be done overnight. It takes planning and investment, and many growers operate with narrow margins, making it difficult to pour money into new supply. Further, most banks won’t work with the cannabis industry because the product is still illegal at the federal level, so those business operators have a tough time getting loans.

cannabis grow that is full of green leaves and green buds

It is common that recreational and medical cannabis can’t keep up with the demand of consumers. Photo credit: Shutterstock

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When marijuana is legalized, dispensaries looking to sell both medicinal and recreational marijuana have to first prioritize their medical patients, making sure they still have access to their prescription and enough options. Then, they can begin thinking about adult-use cannabis. 

Arizona is the perfect example. Its residents had a healthy appetite for recreational marijuana once they were permitted to purchase it, but supply started running thin almost immediately. Wikileaf reported on that issue in 2021: 

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“Just a few months ago, the idea of recreational marijuana being available in Arizona was still a dream; the time between the law’s approval and the product being available for purchase was so short, growers didn’t have much time to make up for the massive increase in demand.”

Quality

In Canada in particular, there have been many complaints about the quality of “government weed.” While the market is working to  address the issue, there’s still quite a gap to fill if companies want to retain their customers.

People have complained about the product being dried out and not having much variety to choose from. When the price is so much higher than marijuana they could get from an off-market dealer, they’d hope the quality would be much better and that the regulations and inspections of the product would make them feel safer. The truth is, no one wants to pay more for a worse product, even with the risk they could get in trouble for buying illicit drugs. 

How to Get Rid of the Black Market

Trying to crack down on the Black Market is a slippery slope. Lawmakers have been clear that the past War on Drugs was incredibly damaging, particularly for communities of color. That means it isn’t beneficial to anyone to go after low-level dealers just for growing and selling weed, particularly in states where it’s legal to have a certain number of marijuana plants in the household for personal consumption. 

Cannabis buds, money, and joints in a pile.

Illegal cannabis sales make almost a fifth of what legal sales made in Nevada.

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In Nevada, a detective for the Las Vegas Metro Police Department, says the Black Market produced $20 million in sales in the southern part of the state alone. That’s about a fifth of the legal market for the entire state. Las Vegas Assembly member Steve Yeager is quoted as saying

“When we have limited resources, it is probably not the No. 1 issue. But I think it is important that the Cannabis Compliance Board should really get into that space and make sure we are trying to crack down on those (black market dealers),” But what would that crack-down entail? 

One idea out of Las Vegas is basically to increase access to legal marijuana, allowing consumption lounges so people can have more opportunities to enjoy legal weed.

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It could also mean going after larger suppliers, rather than low-level dealers. The Drug Enforcement Agency has been making some huge busts recently, for instance leading raids in Sacramento that resulted in 7,500 illegal plants being wiped out. Some areas in California are hoping for extra “cannabis eradication funds” from the federal government to make more busts like that. 

The CATO Institute argues that the only way to get rid of the Black Market is to go all-in on legalization. An article on the topic states, 

“Legalization without excessive regulation or taxation is the only way to eliminate the black market,” 

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You can read about the efforts to legalize marijuana at the federal level and why the process has been so slow-going here.

Legal Cannabis Vs. Black Market: Who Will Win? was last modified: by