It is getting more difficult these days to drive through a busy retail district and not see at least one business devoted to cannabis. In recreational use states, retail cannabis businesses are as common as pizza shops. They are less common in medical-only states, but their numbers are growing. With so many legitimate businesses now operating, will the black market eventually be abolished?
The chances are not looking good. Take California, for example. It is widely considered one of the most liberal states when it comes to both medical and recreational use. Yet the majority of cannabis bought and sold in the Golden State is accessed through the black market. It doesn’t seem to make much sense, yet here we are.
Taxation and Regulation
In any industry with an active black market, that black market exists because of demand. That is certainly the case in the cannabis industry. Consumers are happy to purchase their cannabis on the black market because they can get it more cheaply than buying from legitimate dispensaries and pharmacies. Why is that? It is primarily due to taxation and regulation.
States and their legislators are not stupid. Whenever a state legalizes cannabis for medical or recreational use, one of the first things policymakers do is tax it. Taxes only increase retail prices. That is the way the system works. But on top of taxes, legislators and bureaucrats pile on regulations.
Regulations are ostensibly designed to keep things under control. Sometimes they work, sometimes they do not. But regulations always add to the cost of doing business. Like taxes, those extra costs are passed on to customers through higher retail pricing. Black market operators can offer better prices because they neither pay taxes nor adhere to state regulations.
Black Markets in Medical-Only States
It is not just recreational-use states that have a cannabis black-market problem. The same problem exists in medical-only states. The recent arrest of two suspects by Utah State troopers demonstrates a much. According to news reports, the arrests were made after a state trooper pulled over a vehicle for failing to signal. Upon further investigation, the trooper discovered some 240 pounds of marijuana in the car. Neither the driver nor passenger had a valid Utah medical cannabis card.
Even if one of the two had possessed a card, Provo cannabis dispensary Deseret Wellness says that carrying that much cannabis is still illegal. Utah regulations severely limit the amount of medical cannabis patients can carry at any one time. Hundreds of pounds of flower are well above the legal limit.
Utah’s black market is fueled by the same things that drive California’s. Medical cannabis is quite expensive thanks to taxes and regulation. And until lawmakers step up and do something to reduce retail prices, black market operators will have customers.
Federal Decriminalization Won’t Help
It has been suggested that federal decriminalization could eventually lead to the death of the cannabis black market. But such thinking is overly optimistic. If Washington does go that route, decriminalization will not mean a completely unregulated market. Lawmakers will regulate cannabis the same way they do alcohol.
What would that mean for the black market? It would thrive, just as the alcohol black market thrives. Illegal operators will continue serving customers ready to buy from the black market in order to save some money.
Reality suggests that the cannabis black market will never be truly abolished. The only way to facilitate its end is to completely decriminalize cannabis and eliminate all taxes and restrictions. Since both things are unlikely to happen, the black market will continue serving its customer base.