Why Illicit Marijuana Sales Are Up — In States Where It's Legal

With Meghna Chakrabarti

The illicit market for pot is hot in some states where weed is legal. We look at why.

Guests

Natalie Fertig, federal cannabis policy reporter for Politico. (@natsfert)

Alphonso “Tucky” Blunt, co-owner of the marijuana dispensary Blunt & Moore. He was granted a license to sell recreational cannabis through his city’s equity lottery program. He sold marijuana illegally from the age of 16, until he was arrested in 2004 and convicted, receiving a 10-year felony probation.

Tom Adams, managing director and principal analyst for industry intelligence at BDS Analytics, which provides the legal cannabis industry with market research. (@BDSAnalytics)

From The Reading List

Politico Magazine: “How Legal Marijuana Is Helping the Black Market” — “When the new marijuana shop opened up just down the street from his own marijuana shop, Greg Meguerian, owner of The Reefinery in Los Angeles, kept an eye on it. When that shop stayed open past the legal closing time of 10 p.m. and sold customers over a quarter-pound of cannabis at once, four times more than the legal limit, Meguerian knew he wasn’t competing with a licensed dispensary.

“‘It’s so shady, if you look at it,’ Meguerian said. ‘It looks like a shady crack house.’

“The 15 Spot—as the tarp sign hung in front doesn’t appear on Los Angeles’ list of authorized retail businesses. Meguerian and his lawyer reported the dispensary, but it’s still open—and Meguerian is paying a price. He said his sales are down noticeably since his illicit competitor moved in. Calls to the 15 Spot went unanswered because its phone is disconnected.

“‘I told the state, “If I lose 20 percent, you just lost 20 percent in taxes,”‘ he told POLITICO Magazine. ‘You feel like your words are falling on deaf ears.’

“What’s happening to Meguerian is a window into one widespread side effect of marijuana legalization in the U.S.: In many cases it has fueled, rather than eliminated, the black market. In Los Angeles, unlicensed businesses greatly outnumber legal ones; in Oregon, a glut of low-priced legal cannabis has pushed illegal growers to export their goods across borders into other states where it’s still illegal, leaving law enforcement overwhelmed. Three years after Massachusetts voters approved full legalization of marijuana, most of the cannabis economy consists of unlicensed ‘private clubs,’ home growing operations and illicit sales.

“Though each state has its own issues, the problems have similar outlines: Underfunded law enforcement officers and slow-moving regulators are having trouble building a legal regime fast enough to contain a high-demand product that already has a large existing criminal network to supply it. And at the national level, advocates also point to another, even bigger structural issue: Problems are inevitable in a nation where legalization is so piecemeal.”

Los Angeles Times: “California now has the biggest legal marijuana market in the world. Its black market is even bigger” — “California is on track to post a record $3.1 billion in licensed cannabis sales this year, solidifying its status as the largest legal marijuana market in the world, according to a study released Thursday by financial analysts who advise the industry.

“Legal sales are up significantly from an approximate $2.5 billion in 2018, the first year of licensed cannabis sales in California, according to the analysis by sales-tracking firms Arcview Market Research and BDS Analytics. After a rocky start in 2018, retailers that have survived California’s tough licensing, testing and packaging regulations are ‘battle hardened’ and stronger because of an influx of investment that has allowed them to take advantage of the state’s large population and pent-up demand for legal products, said Tom Adams, managing director and principal analyst for BDS Analytics.

“‘Any market in the world would be ecstatic about a 23% growth rate,’ Adams said. ‘That is fabulous for any industry to have that kind of growth.’

“But California’s black market for marijuana continues to flourish as high taxes and a refusal by most cities to allow licensed shops makes it cheaper and easier for people to buy from illicit dealers, he said. An estimated $8.7 billion is expected to be spent in the illegal cannabis market in 2019 — more than double the amount of legal sales.”

USA Today: “New marijuana laws in 2019 could help black and Latino drug dealers go legal” — “Fourth-generation Oakland native Tucky Blunt grew up around weed. His grandmother used it. So did his parents and his friends.

“Blunt (yes, that’s his real last name) started selling to friends in the neighborhood when he was 16. He was usually careful, buying in bulk from a trusted supplier and selling to customers who’d call him to meet up.

“After nearly a decade of illegal sales, it was $80 worth of pot that got him in trouble. He was found with a handful of baggies stashed in his pants when police officers came for him, tipped off by someone Blunt thought was a friend.

“‘We were out there trying to make money to help support our families at a time when people didn’t have a lot money. We didn’t think we were hurting anyone,’ said Blunt, now 39. ‘I liked weed. I knew people who liked weed. Why not facilitate them getting good weed? That’s how I looked at it.’

“His arrest in 2004 and his conviction left Blunt with a 10-year felony probation, allowing police to stop and search him anytime, for any reason. Meanwhile, all around Oakland, young black men like him were getting arrested while most of the white guys who were selling weed were left alone.”

Stefano Kotsonis produced this hour for broadcast.

This article was originally published on WBUR.org. [Copyright 2019 NPR]