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Does Legalization Fuel the Black Market?

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A recent PBS story attempts to paint the picture that cannabis legalization actually adds fuel to the fire that is the illegal cannabis market by allowing illegal grows to flourish, camouflaged by the legality that surrounds them.

To be sure, the black market for marijuana is alive and well in the United States. Highly taxed, heavily restricted and regulated legal marijuana is not going to make much of a dent in that. But there are a couple of problems with the theory that legalization is actually allowing the black market to grow.

The first, most obvious problem, is that there are no accurate statistics or data sets that track black market activity. Law enforcement in Colorado will point to more and bigger marijuana seizures in recent years, but that could be due to many factors, including *gasp* better police work. It could also be a side effect of police spending less time busting small-time dealers and consumers and being able to focus more on larger illegal cannabis operations, thanks to legalization.

In any case, as long as there is a market for illegal marijuana, it will certainly be grown and sold. And as long as an area lacks low-price, high-quality legal marijuana, the black market will thrive there.

In the beginning of the story linked above, there is an admission that Colorado marijuana is being found illegally in places like Florida, Tennessee, Indiana and South Carolina – all states without adult-use legalization and with the exception of Florida, states with little or no medical marijuana protections.

Why does this matter? In an economic sense, states where prohibition still reigns are becoming magnets for marijuana grown in states with less prohibition. Commodities will naturally find their way to where they can fetch the highest prices in sales, whether they are sold legally or not.

This brings us to the “solution” for the black market “problem”. It’s something I’ve written about before and will continue to write about. The only way to undercut the black market is for the legal market to compete better. Illegal marijuana growers will only take the extra risk if the profits are worth it. Falling prices that result from actual competition from the legal market will shrink those profit margins.

As profit margins shrink, illegal dealers will drop out of the market, either joining the legal market or moving on to something else. But as long as the quality, variety and prices of illegal marijuana products outperform those measures in the legal arena, many consumers will continue to frequent the black market.

1 COMMENT

  1. Marijuana prohibition does not require cannabis prohibition. Rather than full-on legalization, carefully descheduling cannabis could move more black-market growers into the legal market by restoring and protecting the rights of people to carefully use cannabis (demand-control), as well as the exclusive privileges and immunities of citizens to grow cannabis (supply-control), like the 9th, 10th, and 14th Amendments originally intended.

    The current definition is malformed because it adumbrates the actual meaning of marijuana. The adumbrated meaning can be recognized by solving the riddle embedded within the definition: What is “all parts of the plant”, and simultaneously “does not include the mature stalks”? A definition that adumbrates its actual meaning with a riddle cannot be a “necessary and proper” federal law, precisely because it can be (and will be – that’s the point) misconstrued.

    That definition can be reconstructed to reveal its adumbrated meaning by clearly describing how marijuana is actually derived from cannabis, while also explicitly preserving the legitimate federal prohibitions that control the undesired proliferation of marijuana itself, which will carefully deschedule cannabis in the necessary and proper way.

    Growers everywhere can contact their members of Congress about reconstructing the malformed federal definition of Schedule 1 marijuana to carefully deschedule the plant Cannabis sativa L. while retaining the prohibited status of marijuana itself, to allow better studies of the cannabinoids in cannabis to then justify removing marijuana out of Schedule 1. Consider this reconstructed definition that upholds the Constitution:

    The term “marijuana” means all parts of the smoke produced by the combustion of the plant Cannabis sativa L. which is, as are the viable seeds of such plant, prohibited to be grown by or sold by any publicly traded corporation or subsidiary company, and such smoke is prohibited to be inhaled by any child or by any person bearing any firearm, as is the intake of any part or any product of such plant containing more than 0.3% THC by weight unless prescribed to such child by an authorized medical practitioner.

    The legal effect of reconstructing the malformed federal definition of marijuana in this way, is that it will legislatively override the longstanding federal misconstruction that marijuana means cannabis. It will emancipate States to pursue reasonable regulations for cannabis use. By restraining States from maliciously misconstruing federal marijuana law, it will diminish the number of tragedies witnessed daily.

    The practical effect is that it will automatically restore banking privileges to businesses engaged in cannabis commerce. It will oblige corporations to outsource their supplies of cannabis from citizens fairly competing in the supply-side of a diversified cannabis market. It will permit small businesses, as well as corporations, to develop quality products from cannabis, for ingestion or industrial applications, while precluding corporations from enticing children to “smoke marijuana”. It may provoke expungement of many marijuana convictions.

    https://www.theatlantic.com/national/archive/2013/06/brouhaha-behind-argle-bargle-linguistic-explanation/313862/

    Check out the “legalistic argle-bargle” in this malformed definition to be reconstructed, from the Farm Bill of 2018:

    (16)(A) Subject to subparagraph (B), the term “marihuana” means all parts of the plant Cannabis sativa L., whether growing or not; the seeds thereof; the resin extracted from any part of such plant; and every compound, manufacture, salt, derivative, mixture, or preparation of such plant, its seeds or resin.
    (B) The term “marihuana” does not include (i) hemp, as defined in section 297A of the Agricultural Marketing Act of 1946; or (ii) the mature stalks of such plant, fiber produced from such stalks, oil or cake made from the seeds of such plant, any other compound, manufacture, salt, derivative, mixture, or preparation of such mature stalks (except the resin extracted therefrom), fiber, oil, or cake, or the sterilized seed of such plant which is incapable of germination.

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