Why hasn’t legal weed killed the marijuana black market?
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It’s been 10 years since the first states legalized recreational marijuana. Over the past decade, the legit weed trade has exploded into a massive industry as personal pot use has rapidly spread to more parts of the country.
One of the core arguments used by legalization advocates — on top of the impact on health, criminal justice and personal freedom — is the belief that the legal marijuana market would bring an end to the illicit weed trade and eliminate the criminal activity surrounding it.
But that hasn’t happened. The marijuana black market has to the point where legitimate growers and sellers are struggling to stay afloat in areas of the country awash in illegal weed. In , for example, the illegal weed market is “indisputably many times larger than the licensed community,” according to an analysis from the . That same report found that unlicensed farms outnumbered legal operations by as much as 10 to 1 in the state’s biggest cultivation areas.
Other states that have legalized recreational pot use, including and , have faced similar challenges. has grappled with a booming “gray market” of unlicensed weed sellers that emerged as the state worked to set up its new system for legal retailers. Other nations that have legalized pot like and have faced similar challenges.
The thriving marijuana black market isn’t just harming legitimate sellers trying to compete. The proliferation of illegal pot farms has also brought with it a surge in , human trafficking and severe environmental damage in the areas where unlicensed growing is concentrated. States are also missing out on hundreds of millions of dollars in tax revenue when weed sales happen outside the legitimate market.
Why there’s debate
There’s a certain amount of logic to the idea that legal weed would eliminate, or at least dramatically diminish, the marijuana black market. But lawmakers, cannabis industry insiders and outside experts say there are a number of reasons why illegal weed hasn’t been snuffed out.
The most common explanation is that laws governing the legal trade in most states give enormous advantages to illicit traders and even push legit operators toward the black market. In many cases, starting and maintaining a legit marijuana business — whether it’s a farm, distributor or retail shop — means having to deal with fees, taxes and bureaucratic hoops that can make it hard for a lot of companies to stay afloat, let alone make a profit. Those extra expenses also drive up the price of legal pot products, giving consumers an incentive to buy cheaper weed from off-the-books sellers.
Legalization supporters frequently argue that the black market will continue to exist as long as marijuana remains illegal in large swaths of the country. Not only do most states still prohibit recreational pot use, but states like California also allow individual cities to ban it. Pro-pot advocates say this gives illegal sellers a huge consumer base for their products that would disappear if marijuana was legal everywhere.
Many conservatives, though, say the legalization push is itself the problem. They make the case that growing acceptance of marijuana has dramatically increased the potential customer base, raising demand to a level that legal sellers can’t possibly meet. Some argue that the expansion of the legal market has made it impossible for authorities to differentiate between legitimate and illicit operators. Others say tying legalization to criminal justice reform efforts, as many Democratic-run states have done, means criminals know they won’t face severe penalties if they get caught.
Despite ongoing struggles to contain the black market, marijuana legalization is primed to expand to even more states soon. will begin permitting recreational use next year. Voters in will decide whether their state should do the same in March. Campaigns to get legalization measures on future ballots are .
Legit operators can’t compete because of overregulation and excessive taxes
“The fact that unlicensed pot dealers continue to thrive in California is testimony to the ways in which the state has botched legalization. Most local governments do not allow recreational sales, and even those that do frequently impose caps that artificially limit the supply. Bureaucratic barriers, costly regulations, and high taxes are daunting deterrents for weed dealers who otherwise might be inclined to go legit.” — Jacob Sullum,
Heavy taxes push prices up, driving users to the black market
“Too much taxation and regulatory baggage is a recipe for legal weed to stagnate and for illegal weed to flourish. The more expensive legal weed is, the more people choose illegal weed — especially the consumers who buy the most weed, and thus care most about the price difference.” — Robin Goldstein and Daniel Sumner,
Legalization has created millions of new customers for the black market
“If you make weed legal you’re going to embolden black marketeers to either get into the game or to increase the amount of illegal weed that they’re already selling. … By legalizing, you’re only increasing that demand, a demand that the cartels are clearly more than willing and able to meet.” — Tom Wrobleski,
Small-time illegal dealers could easily be absorbed into the legit market
“Yes, the ‘black market’ guy down the street is still going strong and receiving visitors at all hours as usual. But, due to the collective power of state-sanctioned dispensaries, the guy down the street is still an underground entity, just as before.” — Bob Flaherty,
The business proposition of legal weed has completely collapsed
“Boom-and-bust cycles are part of this county’s history, from gold mining in the 1800s to, a century later, the crash of the logging industry. Legal cannabis was going to be a lifeline for residents. But that promise has quickly collapsed.” — Adam Elmahrek, Robert J. Lopez and Ruben Vives,
Misguided social justice motivations hamstring law enforcement’s ability to crack down of criminal operators
“The unlicensed market operates with impunity because policing pot is thought to be racist and bad. … The public rightly wants not just a marijuana market but a regulated one. Yet leaders are too squeamish about stopping criminals from running businesses that routinely break the law to deliver such a market.” — Charles Fain Lehman,
It’s naive to think illegal pot sales will ever truly disappear
“For individuals who think this is a cannabis-only issue, it’s important to remember there are black markets for alcohol, for cigarettes, for a lot of goods. Combatting the black market … it’s a nearly impossible task. It’s a battle of diminishing it.” — John Hudak, cannabis industry expert, to
The black market will persist as long as weed is illegal anywhere in the U.S.
“Federal decriminalization — removing cannabis from the list of controlled substances — is, by all accounts, the magic bullet. It would remove the [tax penalties], allow normal access to banks and facilitate more interstate sales.” — Will Yakowicz,
Legal markets are fueling illicit sales in states where pot is still banned
“Legalisation has also benefited criminals in states where pot is still illegal. Gangs have seized the opportunity to smuggle products across state lines, selling legal weed at a huge profit. … Dealers are suddenly stocked with a cornucopia of various cannabis strains — all of which were grown under the charade of statewide pot laws — as well as vapes, edibles and concentrates, all of which would never have travelled more than 1,000 miles across America if legalisation hadn’t come about.” — Mike Adams,
There are no practical or moral incentives for users to abandon their old buying habits
“Most growers and sellers did not break any laws other than producing and selling cannabis. Thus, many cannabis consumers did not see a great moral, ethical or safety advantage to switching from their benign, long-term providers to the new legal system.” — Mike DeVillaer, drug policy researcher, to
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