Marijuana Law, Policy & Reform

Editor: Douglas A. Berman
Moritz College of Law

Thursday, May 7, 2015

"Why Washington state is extinguishing medical marijuana" ... while the black market endures

The title of this post adds to the headline of this notable Mashable piece discussing notable marketplace developments in one of the first two states that legalized recreational marijuana via initiative votes in 2012.   Here are excerpts:

For the past 10 months, three marijuana markets have been operating simultaneously in Washington state: the street market, the medical market and the recreational market. In the future, however, there will only be two. And contrary to some people’s expectations about legal recreational pot making drug dealers obsolete, it’s the medical dispensaries that will disappear first.

Washington State Governor Jay Inslee signed a bill in April that will overhaul medical marijuana and reconcile the two legal markets into one. Medical marijuana dispensaries as they exist now will either close or seek licenses in the regulated industry. In the future, medical customers will have to look to “medically endorsed” recreational marijuana stores for their supply.

Washington's medical marijuana market has always been "looser than anywhere in the country,” says Rick Garza, head of the state Liquor Control Board, the agency that oversees the marijuana industry.

"With I-502 (the recreational market), you have a tightly regulated business that has to make a big investment and pay taxes and fees," says Garza. And while medical marijuana is legal, it has become somewhat of a "gray area" because the "vast majority" of users served by the dispensaries are truly recreational users anyway, says Garza. "You have this unregulated and untaxed [medical] dispensary that's competing directly with the regulated market." "You have this unregulated and untaxed [medical] dispensary that's competing directly with the regulated market."

It's hard to measure the size of each of these markets, but to get a general idea I talked to a budtender and an illegal street dealer to get their perspectives on the state of Washington pot. Regardless where the lines of legality are drawn (and redrawn), there's a lot of pot floating around the Evergreen state. A study by the RAND Corporation found that marijuana consumption in Washington during 2013 was between 135 and 225 metric tons (that’s 297,624 to 464,040 pounds).

Garza guesses the recreational stores have so far only captured 3-5% of the total marketplace. And seeing as how the recreational market has generated $168 million in sales in the 10 months it has been operational in Washington, that gives you an idea of the size and potential of the industry as a whole.

A male pot dealer in his early twenties, who spoke on the condition of anonymity, has been selling weed in the state for the past couple of years while finishing a degree. He sells primarily to college kids, so he didn’t expect business to change, but says he doesn’t see a drop in sales for dealers who sell to older demographics either. “People don't realize just how big the street market is,” he says....

The Liquor Control Board guesses the medical industry has captured 40-50% of the market, but it’s impossible to say how big the medical marijuana population is because Washington has never required a patient registry or ID cards like other states with medical systems do.

Since the state’s first recreational stores opened in July 2014, about 134 retail locations have opened alongside some 1,100 medical dispensaries in the state. However, the Liquor Control Board calls the estimated number of dispensaries “conservative.”

Pricing at medical dispensaries has remained cheaper than that of recreational stores because they aren't subject to the same high taxes. A gram of weed at a dispensary generally costs around $10-12 versus $12-16 on average at recreational stores. Weed on the street, however, remains at a pretty steady $8-10.

"The street can always offer prices that are below that of the stores," says the dealer I spoke with. And while street products may lack the variety of brick and mortar stores, they have added convenience because dealers can move around. "The street can more effectively distribute, because people don't have to come to you."

For some people illegal pot sales are more simple (and familiar). Text your dealer, meet up, trade cash for whatever weed they have and part ways. At recreational stores, customers have to be 21, visit at set hours and locations, and sort through a dizzying array of products. Some people find it more complex to buy legal marijuana.

http://lawprofessors.typepad.com/marijuana_law/2015/05/why-washington-state-is-extinguishing-medical-marijuana-while-the-black-market-endures.html

Medical Marijuana Commentary and Debate, Medical Marijuana Data and Research, Medical Marijuana State Laws and Reforms, Recreational Marijuana Commentary and Debate, Recreational Marijuana Data and Research, Recreational Marijuana State Laws and Reforms | Permalink

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