Legal Marijuana May Not Completely Quell Black Market Demand

Black market sales of marijuana thrived under a system that totally outlawed the drug. For decades, illicit sales lined the pockets of violent drug cartels and gangs. Legalizing marijuana, as California did with Prop. 64, would effectively quash this problem, or so it was believed. After all, when marijuana is sold in highly-regulated stores, it gives the government more control, it gives taxpayers a cut and it provides safe access for patients and users. However, recent analysis shows black market sales may not be completely eliminated. 

The San Francisco Chronicle looked at this issue in weighing the makeup of the black market.

First, there is the fact the California grows more marijuana than is consumed by residents. Prop. 64 did nothing to effect the laws in other states, but interstate borders aren’t always policed to the point every person crossing from one state to the next with marijuana would be caught. Secondly, the law did not give a rubber stamp to all growers or sellers of marijuana. Sellers have to be licensed by a state agency, and they must comply with a long series of rules that detail everything from plant testing to packaging labels to tracking. 

Marijuana has been illegal for so long, there is uncertainty about the exact scope of marijuana production and sales. We do have some educated guesses though from state-hired economists. They believe farms in California produce around 13.5 million pounds of pot every year, while residents in the state only consume about 2.5 million pounds of that. Where does the other 11 million pounds go?

According to the California Department of Food and Agriculture (the agency in charge of regulating marijuana cultivation), probably out-of-state. Further, even the cannabis consumed within state borders isn’t all bought in shops that are sanctioned by the state. It’s estimated about half of that will still be sold illegally. Part of the issue is that more than 8 in 10 growers vying for a marijuana business license to grow, process and sell the drug aren’t able to get one. In a survey conducted recently by the California Growers Association, 40 percent of respondents said if they were unable to secure a license or permit, they would still continue to operate as they had previously – which is to say, on the black market.

Factor in too the fact that permitting fees are extremely high. For example in Costa Mesa, the city charges $50,000 in permit fees. That can be a huge barrier to would-be law-abiding business owners.

Of course, some longtime growers may simply find themselves out of business. But if they can offer the product at a price lower than marijuana that is state-regulated, they could still turn a decent profit. However, they run the very real risk of facing down state regulators and potentially federal authorities. Marijuana businesses that operate outside of state-sanctioned rules are taking a huge chance, and they may face not just fines and civil forfeiture, but potential prison time.

The California Narcotics Officers Association, which staunchly opposed Prop. 64, said there would be aggressive enforcement by police agencies to stop this state from becoming a staging area for national drug trafficking.

Those who support Prop. 64 say the intention was never to completely decriminalize marijuana, but rather to extend an opportunity to growers and sellers who want to be responsible and law-abiding. A spokesman for the Prop. 64 effort said promising an elimination of the black market would be like promising surveillance cameras could do away with shoplifting. Although it doesn’t completely get rid of it, it does help to reduce it.

The Los Angeles CANNABIS LAW Group represents growers, dispensaries, collectives, patients and those facing marijuana charges. Call us at 949-375-4734.

Additional Resources:

Even with legalized weed, California’s black market will thrive, Aug. 6, 2017, By Laurel Rosenhall, San Francisco Chronicle

More Blog Entries:

San Luis Obispo County Considers Marijuana Growth Ban in the California Valley, Aug. 6, 2017, Orange County Marijuana Business License Lawyer Blog