Monday, May 29, 2023

Consumers Still Prefer Illegal Weed

High Prices Drive Illicit Sales


Although New Mexico has legalized adult-use cannabis and dispensaries began opening their doors in April, some users still choose to purchase illicit marijuana. But researchers are finding that unregulated cannabis tends to be contaminated, endangering the health of those who use it. What can lawmakers do to accommodate those who still choose to buy illegal cannabis?

California’s Cannabis Advisory Committee estimates as much as 80 percent of the state’s cannabis sales go directly to the illicit market. “While California is expected to generate $3.1 billion in licensed cannabis sales this year, nearly triple that amount—$8.7 billion—is expected to be spent in the illicit cannabis market,” the state Bureau of Cannabis Control said.

Cannabis research firm BDS Analytics estimates 90 percent of cannabis sold in Massachusetts is sourced from the black market. The firm says over half the pot market in Washington is made up of illicit sales.

In Colorado, authorities made the biggest cannabis bust in the state’s history in 2019, a full five years after adult-use cannabis was made available for sale.

Southern Oregon’s Liquor and Cannabis Commission estimates that there could be as many as 2,000 illegal grow operations in the state. The agency says sales of illicit cannabis in the state may be double the amount made by legal sellers.

High Prices to Blame

The main thing driving illicit cannabis sales in legal states seems to be affordability. With high taxes and immature markets—as is the case with New Mexico—comes high price tags for cannabis products. In New Mexico, the current excise tax for cannabis is 12 percent, but the law stipulates that starting in 2025, it will begin to rise, capping out at 18 percent in 2030. In addition, consumers have to pay a sales tax of 5.13 percent. As long as black market marijuana is cheaper, buyers will choose it over dispensary pot.

Complicating matters is the prohibition of cannabis in states that have not legalized the drug. Residents in states where personal marijuana cultivation is legal and licensed producers may be tempted to grow cannabis off the books and sell it to residents of prohibition states.

The simple answer to the problem is to lower cannabis taxes. Doing so will ultimately result in even more taxes collected as black market consumers turn to state-regulated dispensaries. By all accounts, cannabis consumers want regulated weed that is guaranteed safe to use. With more competitive pricing encouraged by lower taxes, it will become a much more attractive product.

The more complicated answer is that cannabis needs to be legalized federally so black markets aren’t given a space to gain a foothold. Bootleg liquor operations are all but gone from the American landscape, but they were rampant during Prohibition. There is likely a parallel to found here regarding cannabis prohibition.


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