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The Pot Black Market in Pot-Legal States

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In states that have legalized marijuana, the predictions of beneficial effects by the legalization advocates have regularly fallen short.  Steven Malanga has this article in the City Journal.

It takes lots of marijuana to make 1 billion joints, but that's how much pot Oregon has on hand right now--enough to supply the state's marijuana "needs" for six years, even if production stopped right now. The vast oversupply is causing worries that growers, who have made huge investments in their business ever since Oregon legalized recreational marijuana use five years ago, will turn to the black market to dispose of inventory. That, state authorities fear, could lead to new federal enforcement in Oregon--prosecutors busted a black-market ring there last year. To stem the excess, Oregon is moving to deny new licenses to growers, but the state will likely have to take away some current licenses, too, or watch some growers go bust, before the problem disappears.
Oregon is not alone. Though advocates claim that one of the benefits of legalizing recreational marijuana is that the black market will disappear and thus end the destructive war on drugs, the opposite is happening. States that have legalized pot have some of the most thriving black markets, creating new headaches for law enforcement and prompting some legalization advocates to call for a crackdown--in effect, a new war on drugs. In Colorado, cops complain that illegal growers are "hiding in plain sight." They've entered the state and set up marijuana fields, including on public lands, to cultivate pot for export to other states. According to one account, authorities have had to use garbage trucks to collect all the illegal pot they've gathered from raids on homes and businesses. In 2017, officials seized 80,000 illegal pot plants on federal land alone in Colorado.

8 Comments

Comment from pro-pot-heads:
crickets

I think most sensible legalization advocates would (and should) concede that we need nationwide legalization in order to eliminate the black market. As long as lots of states continue to prohibit marijuana production and sale, there is a big profit to be made in the black market.

Concede?

I think the point of the article is that the black market continues even in states where pot has been legalized.

If you mean that legalization advocates concede that nothing short of nationwide legalization will eliminate the black market even in pot-legal states, they certainly did not concede that before the legalization bills passed. That was a major argument for them.

Also, we are now seeing some pot advocates contend that to really eliminate the black market we must also reduce the high taxes on legal pot. Again, milking the legal pot market for big bucks in taxes was a selling point for legalization before the vote.

Kent, you are 100% right that many reform advocates often make exaggerated claims about certain benefits of legalization (and some opponents also overstate vastly certain talking points, too). My point was that sensibly folks advocating for reform will often be quick to say --- not foolishly --- that dramatically diminishing the black market will remain challenging until there is nationwide legalization.

Notably, even with many forms of prohibition persisting in most states, data on federal prosecutions suggests large-scale marijuana trafficking from Mexico over our southern border has diminished significantly. Some might think having a more domesticated black market is a beneficial consequence of reform (though this might be turning the border drug trade to more dangerous drugs). More generally, there is reason to hope that some of the newer legalization states like Massachusetts and Michigan and Illinois will be better able to rein in the black market through strategic reforms. (I had a student work on this important topic in my seminar this past semester and he will soon have a paper on SSRN with some reform recommendations: https://lawprofessors.typepad.com/marijuana_law/2019/03/marijuana-legalization-dealing-with-the-black-market.html)

You are also right, Kent, that some reform and industry advocates are quick to urge lower taxes to reduce the black market. But this is not, of course, the only arena in which advocates seek a reduced tax burdens. Moreover, early data suggests states are in fact making considerable tax revenues from legalization:
https://itep.org/taxing-cannabis/ There may be a trade off between going after the black market and going after tax revenues here (which we may also see in the developing sports gambling work and which already exists with tobacco and alcohol).

Yesterday, Riverside County District Attorney Mike Hestrin addressed CJLF's annual meeting. He said that in his county the black-market marijuana business is bigger than ever.

And Colorado announced having raised over $1 billion in marijuana revenues. Seems like legal and illegal markets are growing -- must be a whole lot of folks like buying marijuana

If THC increases cases of clinical psychosis, so be it;
if it devastates "memory, executive function and emotional processing",
by "a large body of research", why would a progressive fret?
If cannabis "significantly worsens the progression of the disease" of schizophrenia, it's still a hell of a money-maker!

~ https://www.psychiatryadvisor.com/home/topics/schizophrenia-and-psychoses/cannabis-and-schizophrenia-trigger-or-treatment/
~ https://www.bostonherald.com/2019/05/30/ma-doctors-scientists-warn-of-marijuana-dangers/

So far NY Has gained 300 million dollars from legal pot as of January 2019. That is a nice chuck of change to say the least.

A report released in May by city Comptroller Scott Stringer estimated the adult-use marijuana market could add up to $3.1 billion in the state, including $1.1 billion in the city. Tax revenue could total $436 million for the state and $336 million for the city.

There is also a robust Black Market in NY regarding pot that has taken in tens of millions of dollars too.


Not bad I guess. Next step, maybe they will legalize prostitution if they could figure out how to tax each phase of the transaction.

Jeff

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