The way cannabis commerce takes place in the United States today is radically different from just a short decade ago. Nineteen states so far have legalized recreational marijuana. Well over half the states in the union have implemented medical marijuana programs, and even the federal government legalized hemp and CBD in 2018. With so many legal avenues available to cannabis cultivators, manufacturers, and consumers, what will the future hold for the marijuana black market?
How Does The Black Market Operate?
The cannabis plant has been illegal in most of the world for close to a century, but that hasn’t stopped people from growing and consuming it. In regions where cannabis remains illegal, the sale and cultivation of cannabis haven’t changed all that much.
Most black market growers operate illegal indoor facilities, as they are easier to conceal from authorities and allow cultivation to take place all year long. Once a crop has been harvested, dried, and cured, black market cultivators unload large amounts of product onto either a single criminal organization or onto a few individual dealers.
From there, the cannabis is distributed in smaller quantities to a series of lower-level dealers, who will eventually sell directly to consumers. Each time marijuana changes hands, the price per weight will increase so that each reseller makes a small profit. By the time the weed hits the consumer, it’s likely passed through several intermediaries, resulting in a higher price.
Of course, there’s no governmental oversight with black market cannabis. This lack of regulation can keep prices competitive, especially higher up the reselling chain. However, this does mean there is zero quality control or testing requirements, significantly increasing the potential for the presence of harmful pesticides, mycotoxins, or heavy metals in the product.
Does The Black Market Exist In Cannabis Legal States?
You may be surprised to learn that cannabis black markets aren’t exclusive to states without legal weed. It’s not uncommon for cultivators in legal states to sell off some of their product to black markets in other regions.
Black market dealers in cannabis-restricted areas will pay more money for cannabis than legal dispensaries. Plus, there’s no tax burden for either the cultivator or reseller. This provides a financial incentive for legal cultivators to sell to black market areas.
Robust black markets exist even in some states with recreational marijuana markets available. Illegal dispensaries operating inside weed-legal states can cut down overhead costs by purchasing cheaper black market cannabis and avoiding costly licensing fees and taxes. This allows them to sell cheaper products directly to the consumer, undercutting legal businesses.
Which State Has The Largest Black Market For Cannabis?
You might imagine the largest black market in the country would be in a place without legal cannabis. However, you would be wrong.
California produces more cannabis than any other state by far—both for legal and illegal markets. Despite being the first state ever to implement a medical marijuana program, and completely legalizing recreational cannabis, Cali still has a sizable black market.
California’s biggest cannabis-producing region, the Emerald Triangle, already has developed a culture of lawlessness over the past 50 years of illegal cultivation. With Cali’s incredibly high taxes on cannabis products, many Emerald Triangle growers have opted out of transitioning into the legal market and instead supply the numerous in-state illegal dispensaries or ship out of the state entirely.
How Has The Black Market Stayed Since Cannabis Is Legal In Most States?
Are there laws preventing the black market from growing? Of course, participating in the black market is illegal, even in states with legal weed. But as evidenced by the last 80 years, laws aren’t enough to prevent people from growing and selling cannabis outside of the government’s purview.
One would think that legal cannabis would inevitably eclipse black markets, but as long as there’s a demand for illegal marijuana, black markets will persist. Take the state of Oregon, for example. When Oregon first legalized recreational marijuana, it issued an unlimited number of growing licenses.
So many cultivators entered the market at once, it created a huge cannabis surplus, which dramatically drove down prices. To this day, Oregon has some of the cheapest weed in the country.
While these low prices are great for individual consumers, they can cause serious problems for cultivators trying to recoup their initial investment. Many of Oregon’s legal cultivators are more than willing to illegally sell their harvest to out-of-state buyers who will pay two or three times the price legal Oregonian dispensaries will pay.
Ultimately, replacing the black market entirely will have to begin with complete federal legalization. So long as there are regions of the country where cannabis remains illegal, demand for black market products will persist.