April 15, 2024

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Data Shows Legalization Doesn’t Hinder Illegal Pot Trade

3 min read
Data Shows Legalization Doesn’t Hinder Illegal Pot Trade
Data Shows Legalization Doesn’t Hinder Illegal Pot Trade

One of the arguments in favor of legalizing marijuana is the belief that doing so will significantly hinder the illicit trade, if not putting it out of business altogether. Unfortunately, data does not bear that out. Legalization has little to no impact on the illegal pot trade.

Anyone who disputes that would do well to look at the ongoing crisis in California. Long considered the nation’s leader in all things marijuana legalization, California continues to struggle with an illicit market that dwarfs the legal trade. Illicit growers continue growing and selling. Buyers keep going to the sellers that offer the best pricing. It is the perfect recipe for a thriving black market.

No Different in Canada

Struggles with the black market are not unique to the U.S. Even in Canada, where regulations are far more permissive, the black market continues to do a brisk business. A recent study from Deloitte proves as much. The well-known consulting firm studied a selection of legal and illegal marijuana websites from which they gleaned data relating to product selection, inventory, and pricing.

According to the data, illegal operators still outperform their legal counterparts in two key areas: pricing and product variety. Illegal operators are able to offer prices that can be as much as 20% lower for small quantity buys. Someone willing to buy in bulk can save as much as 67%.

As for product selection, illicit operators tend to offer more products. However, the reasons behind this particular aspect aren’t exactly clear. It could have something to do with the regulatory requirements legal operators are bound by.

Free From Government Interference

Whether it is in the U.S. or Canada, the illicit marijuana trade exists because it meets consumer needs. Not only that, but it also meets the needs better than the legal sector. The main advantage illegal operators have on their side is freedom from government interference. By definition, black market traders don’t pay any attention to regulations.

When growers do not have to pay exorbitant taxes on their product, they can sell to processors and distributors more cheaply. And when growers decide to sell their own products on the street, they don’t collect sales taxes. They do not have brick-and-mortar stores laden with costly overhead. They don’t have the added expenses of maintaining operations that meet government standards for occupational safety, product quality, etc.

Recreational vs. Medical Markets

Although there is plenty of evidence proving that the illegal marijuana market continues to thrive in jurisdictions where marijuana is legal, it’s not clear if there is any difference between the recreational and medical markets. Are there differences an illegal activity between California and Utah?

California allows both medical and recreational consumption. Utah is a medical-only state. As the operators of the Utahmarijuana.org website explain, state lawmakers have only approved fifteen pharmacy licenses. Only a limited number of grower and processor licenses have been issued as well.

It does not appear as though Utah is having as much of a problem with illicit growers and distributors as California. Perhaps they are and we just don’t know about it because it hasn’t been reported. But all things considered, it wouldn’t make much sense for black market operators to go after medical users.

Regulations Have the Opposite Effect

The legal cannabis industry is actually a poster child for the consequences of government regulation. The more regulations there are, the more people are willing to do things illegally. It is the nature of the beast. So much for the fantasy that legalizing marijuana would reduce illegal pot activity. If anything, legalization has boosted the black market.

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