Colorado and California have some of the most liberal cannabis laws in the country. In both states, cannabis can be used medically and recreationally while pharmacies and dispensaries operate freely. Now, it appears as if Colorado and California have something else in common: a thriving black market.
The Denver Post ran a story in 2021 exploring why there is such a strong black market in Colorado when just about anyone of legal age can buy cannabis at will. One of the Post’s central arguments was that legalization did not create the black market – which is true – and that perhaps the black market isn’t any bigger than it was before. The Post rationalized those police officials aren’t social scientists. Therefore, their reports of criminal activity do not tell the whole story.
Let us assume that legalization hasn’t encouraged a stronger black market. Let’s say that legalizing marijuana in Colorado didn’t create more black-market operators. It is at least clear from arrests and prosecutions that legalization did not eliminate the black market, or even reduce it. That’s the real issue.
Legalization Is Better
It is one thing to push for legalized marijuana just because you want the freedom to consume it. It’s another thing to convince others that legalization is better based on hard-to-prove assumptions. That is exactly what claims of a legalized market eliminating the black market are. They are assumptions with very little data behind them.
Strangely enough, some of the same organizations that claimed legalization would reduce the black market in Colorado are now saying that the black market continues to thrive because marijuana is federally illegal. In other words, they are laying the blame at Washington’s feet. But that doesn’t wash.
Alcohol has been legal in the United States since the end of Prohibition in 1933. Yet an entire division of the U.S. Bureau of Alcohol, Tobacco, Firearms and Explosives is dedicated to investigating and prosecuting alcohol-related crimes. The alcohol black market still exists.
The Black Market Is Cheaper
We can argue public policy all day long and still avoid the main issue here. That issue is money. The cannabis black market exists because there is a lot of money to be made. From the consumer’s perspective, buying on the black market is okay because black market products are cheaper.
In places where marijuana is still illegal, the black market is the only option. But states with legal medical and recreational programs haven’t escaped the black market, either. It is alive and well. We just don’t know how alive and well because we are forced to work on estimates provided by law enforcement who know full well that black market operators try their best to remain hidden.
It’s Taxes and Regulations
The truth of the matter is that black market anything is simply a response to consumer demand. People want cheaper options. When it comes to recreational marijuana and medical cannabis, legal operators have trouble competing with the black market due to taxes and regulations.
In Utah, where cannabis can only be used medically, consumers frequently complain of high prices and limited access. Rest assured there is a black market supplying Utah consumers with cheaper products. Legal operations like Salt Lake City’s Beehive Farmacy cannot compete on price.
Meanwhile, California legislators are seriously considering rolling back marijuana taxes in order to combat black market sales. They are finally listening to legal dispensary owners who have long complained they cannot compete on prices because taxes are so high. Here is the bottom line: legalization hasn’t eliminated or reduced the black market. If anything, it has encouraged black market operations via taxes and regulation.
