Marijuana Law, Policy & Reform

Editor: Douglas A. Berman
Moritz College of Law

Sunday, March 24, 2019

"Marijuana Legalization: Dealing with the Black Market"

The title of this post is the title of a presentation to be made by one of my students in my Marijuana Law, Policy & Reform seminar this coming week.  Here is part of his explanation of his topic and links to some background reading:

Summary:

I will be looking at the prevalence (and in some cases, the dominance) of the black market for marijuana in jurisdictions that have legalized marijuana. I will specifically be looking at states that have legalized recreational use. However, I may still look at states that have only legalized medical marijuana because the black market still dominates in many of those states as well.

A major argument for marijuana legalization is potential revenue, but the black market can steal a significant amount of revenue from states.  Additionally, the existence of a black market is detrimental to public health and safety for a variety of reasons, including the distribution of potentially laced products. 

At first, I was surprised by just how dominant the black market remains in states that have legalized. For example, in California the black market is estimated to be worth 4 times the legal market. But consider major reasons why consumers choose to purchase cannabis products from the black market:

  • The black market offers much cheaper weed with no sin taxes;
  • The black market is able to sell higher potencies of marijuana;
  • The black market is able to sell larger amounts of marijuana;
  • The black market is oftentimes much more convenient.

Another reason people choose the black market is because they are familiar with it. Someone who has had a dealer for years is not all of a sudden going to switch to buying from a legal source.  Additionally, the black market (generally) has no age restrictions, so the black market still exists for minors who wish to use marijuana products.

I also plan on talking about the regulations on legal cannabis providers and how those contribute to the struggle to subdue the black market (ex: marketing, banking, barriers to entry, supply problems, lax enforcement of black market).  Finally, although I recognize that wholly eliminating the black market is infeasible, I will analyze potential solutions to the problem, such as deregulating (decreasing barriers to entry, lowering the age restriction, increasing enforcement, increasing strength of legal products, etc.) and working with the black market dealers.

Background Resources:

"Can a marijuana dispensary’s budget pot put illegal dealers out of business?" (discussing Nevada’s lower cost product dubbed the Black Market Killer) 

"Marijuana Black Market ‘Business Has Never Been Better’ In Canada Despite Legalization, Cannabis CEO Warns" (discussing Canada’s struggle with the black market)

"'I deliver to your house': pot dealers on why legalization won't kill the black market" (interview with two black market dealers in Canada)

"How marijuana entrepreneurs can outsmart black-market competitors" (discussing ways to possibly beat the black market)

"California’s black market for pot is stifling legal sales. Now the governor wants to step up enforcement" (discussing California’s black market)

"Marijuana Advertising Rules Challenge California Businesses" (discussing marketing regulations (including <30% of Minors Rule)

https://lawprofessors.typepad.com/marijuana_law/2019/03/marijuana-legalization-dealing-with-the-black-market.html

Business laws and regulatory issues, History of Marijuana Laws in the United States, Recreational Marijuana Commentary and Debate | Permalink

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