We are seeing it more and more these days— cannabis is being legalized. States across the U.S. every day are making changes to former, strict cannabis laws and beginning to integrate different forms. From medical, to recreational, and even just CBD— the market is growing. But, what you might not realize, is that with the growth of legal cannabis— also comes a growth in the black market. It might seem counterintuitive. After all, why would someone buy cannabis illegally when they could go on down to a dispensary and pick it up, easy as that? Well, the answer is pretty simple— high taxation.

In Legal Times, The Black Market Booms: Understanding Black Market Buyers In Legal States
Why are people willing to take the risk?

Short answer, as we’ve said, is that the tax rates on recreational cannabis is pretty high. So, many of those regular users are laughing at those prices on the way to their dealer’s house. The need for taxes is obvious. The state needs to get their cut to make it worthwhile for them. Because, let’s face it, plenty of people will take that tax rate off the chin in exchange for legal, safe, quality cannabis. But, it’s those smokers who know who to call, what to pay, and the origin of their buds— that can skip those tax rates and fly under the radar. Not to mention, they save a few bucks while they’re at it.

When will these people shift towards dispensaries?

Ultimately, in my opinion, those potential customers will shift towards dispensaries when they need or want a product that they can’t find on the black market. Those products might be concentrates, edibles, skin salves— what have ya. Chances are, if you can’t find it on the street— you’ll find it in a licensed dispensary. So, creating a more desirable, harder to reach product could be the key. Or, just finding a more reasonable tax rate than the ones many states reflect. Both of these things will increase the amount of customers, and in turn, the revenue. But, the hard part is finding that mutually beneficial rate that makes the customer, and the state happy.

Not to mention, legalization in one state can prompt the black market in others

Take Utah for example, which is right next to Nevada. Nevada is a recreational state as of the middle of last year, which means that cannabis is easily accessible. But, what does this mean for little old Utah? It means that Utah, which features no form of legalization— has much easier access to high-grade, commercial cannabis. They can go to the dispensaries themselves, pay those taxes, and take the risk of transport. Or, they can wait for their regular dealer to gain access to that same cannabis— and buy it just the same, and a little cheaper.

Ultimately, the only solution to squashing the black market is to make it less appealing than the legal one

While that might sounds easy, it really is not. The black market is cheaper, there’s a lot more to it than cannabis, and it’s an age-old system. And, ultimately, many people are comfortable with the way things have been. In the days of marijuana prohibition, any smoker had someone they called out to. That doesn’t change just because laws change— it just makes it easier for those who want to go about their cannabis lifestyle in a legitimate way.

So, something has to give. Whether that be a harder crackdown on black market sales, lower taxes, or finding a way to close the gap on high-grade marijuana leaving the legal system. No matter what route is chosen— a change must occur if those legal states want to minimize that black market.