"In 2019, 71 percent of Canadian marijuana sales are expected to come from the black market."
Even though Canada legalized marijuana for recreational use this year, the fight against black market cannabis is still going strong. Although marijuana has been legal to buy since the beginning of this year, authorities are still trying to snuff out the illegal practices that people are doing to try and work outside the system. With higher prices, lower supplies, taxes and restrictions on legal weed, many have forgone the legal route now available and are continuing to buy from the streets. In 2019, 71 percent of Canadian marijuana sales are expected to come from the black market. That number is expected to sharply drop over the next couple of years, but with a new series of unlicensed shops, sidewalk sales and mislabeled products, Canadian authorities are trying to put a stop to illegal shops that act outside the law. Looking ahead, how this fight pans out could have an impact on American states, which in the shadow of full legalization, face problems of black market weed in legal states as well.
Why Buy From The Black Market?
Canada’s woes with legal weed began almost as quickly as it hit the streets. In April 2019, Canadian business owners itching to get into the cannabis game were allowed to open their doors for business, if they got a license. Over 100 companies have been given licenses for a variety of marijuana uses, with Toronto allowing 25 licensed physical shops to open in 2019, however, since they’ve opened, 32 illegal shops have also opened. With the license comes a wide range of fees and taxes that the business has to take on. Luckily for Canadians, most of the taxes from marijuana come from the distributor, rather than the consumer, but this elevated taxes still drive up the prices.
The average cost of a gram of marijuana in Canada is around 9 Canadian dollars, which is around 7 American dollars. On the black market, Canadian marijuana is going for around 5 to 7 dollars, which is pretty cheap considering the taxes that come with legal weed. In Canada, the cannabis excise tax is the main taxing component
for dispensaries with flowering material being taxed at $0.25 per gram, non-flowering material at $0.075 per gram and Viable seed/seedling at $0.25 per seed. However, there are four other taxes that dispensaries and consumers are subject to paying, including provincial sales taxes, social responsibility fees, goods and service fees and more. Overall, these extra costs make buying legal weed much costlier and less appealing to those who know where to find it on the streets. With the difference in prices and the still thriving black market, many are trying to take advantage of pots new legal status and not pay taxes.
Toronto Is Cracking Down
When recreational dispensaries were permitted to open in April 2019, many shops went full steam ahead, even as the rollout was plagued with problems. Not long after physical stores began hitting the streets, Toronto officials announced that they were looking to shut down 21 shops that were not legally operating. Six months after legalization, Canada has brought 41 charges to illicit shops around the country. These illegal stores operate as if they are legal, selling cannabis and cannabis products at usually cheaper prices. Unlike licensed stores, this weed is not regulated and not taxed, meaning there is more of it for cheaper.
IStock / Stacey-Newman
According to Mark Sraga, director of investigative services in Toronto, a new problem has emerged, where businesses that are shut down are ignoring the police and continuing to operate. Speaking to CBC
, Sraga said that despite being shut down, the owners and employees of the illegal dispensaries are finding their way back into the business and continuing operations. "We've had a couple of operators who have been repeatedly, defiantly reopening despite our barring of the entry to the premises," Sraga said to CBC. "The amount of profit that these operations are making, they aren't just going to close up and go away with the marketplace the way it is right now — with not enough legal storefronts available to service the population," Sraga has made it known to the city of Toronto that more is needed to truly stop these illegal shops, saying his efforts to keep these highly profitable businesses are not doing enough, saying his office has had to put metal doors and bigger locks on shutdown shops to keep them from being reopened. When legalization went into effect, Toronto allotted 25 physical shops to open, with 32 illegal shops opening in the following months. While the number of illegal shops will go down as time passes, Sraga and his team are ramping up efforts to keep black market cannabis out of the picture. Putting pressure on the government, the penalties for illegal shopkeepers are expected to get harsher.
America’s Legal Weed Problem
Canada isn’t alone in the fight against black market cannabis, as the nearly dozen American states with recreational marijuana are also in the midst of a black market problem. In California, illegal cannabis shops garnered more than $30 million dollars for the state. Officials in the state have increased the number of raids and Governor Gavin Newsom recently authorizes fines of up to $30,000 dollars a day for unlicensed sellers and growers of marijuana in the state.
IStock / Oleg Malyshev
When cannabis was legalized in 2016, many believed that the legal market would quickly snuff out the illegal market, however while the black market has weakened, there is still a major problem that authorities are scratching their heads over.
Neighboring non-legal states have complained that their black markets have thrived because of the success of the plant in states like California and Colorado, but would full legalization change that? Canada’s weed problems are those of a country who hasn’t even had legalization for a full year, and while California and Colorado have had longer to grow their markets, there cannot be a true fight against the black market in America until full legalization. With conflicting laws and interests, there isn’t room for a truly coordinated attack against those who are trying to take advantage of the system. Canada’s woes will work itself out over time, however, when legalization efforts ramp up in America, it will be interesting to see how much of our northern neighbors' experience will affect the plant here.