Local marijuana trade restrictions are helping illegal markets flourish in legal states, report finds

One of the main promises of marijuana legalization is that the reform could help curb the illegal market, where adults can be given legal access to stores where products are tested and ID checked. . But not all states have had the same experience of delivering on that promise—and a new report suggests that local opt-out policies are a major factor.

Leafley and Whitney Economics together analyzed the relationship between opt-out laws and unregulated sales. The report, released Thursday, found that states where cannabis shops are more widely available — without many jurisdictions — have proven to be far more effective at stamping out the illegal market.

For example, states that have 20-40 marijuana dispensaries per 100,000 residents have seen the greatest success in competing against illegal vendors, with 80-90 percent of adults reporting that they buy their cannabis from regulated storefronts.

Via Leafly/Whitney Economics.

In contrast, states with fewer than 10 drugs per 100,000 residents have a thriving illegal market, with about 30-50 percent of sales taking place in the legal market, the report found.

Colorado, Oregon and Alaska stand as examples of early adopter states that have implemented policies that enable licensed marijuana shops to be widely accessible to adult consumers.

At the time of analysis in July, Colorado had 18 marijuana stores per 100,000 people, and nearly all (99 percent) of recreational cannabis sales are at licensed retailers. In Oregon, there are 19 shops per 100,000 residents, and the state also believes that the majority (75 percent) of its sales take place within the regulated market.

Via Leafly/Whitney Economics.

But other states such as California — where local governments have been able to opt out of allowing most cannabis license types in their jurisdictions — have been less effective in decriminalizing the illegal market.

While a person 21 and older can easily find a plethora of California dispensaries in major cities such as Los Angeles and San Francisco, more than half of the state’s cities and counties have banned all license types, making a The policy has created void which empowers illegal sellers to continue servicing. Consumers outside the regulatory framework.

California’s cannabis regulators have tried to draw attention to the problem with officials Releasing an interactive map earlier this year It shows where marijuana businesses are being banned locally. Gov Gavin Newsom (D) signed a bill this week to partially address the problem But the issue is more systematic—by stopping locals from restricting medical cannabis delivery services.

The new report shows that with just three marijuana stores per 100,000 residents in the Golden State, the legal market captures only 45 percent of cannabis sales, while the remaining 55 percent continues to go into the illegal trade.

“This report demonstrates that legal, regulated cannabis stores have put illegal marijuana dealers out of business,” Bruce Barcott, Leafly’s senior editor and lead author of the report, said in a press release.

“The fears surrounding local cannabis shops could prompt elected officials to ban cannabis companies in their cities,” he said. “But adults in every community already buy and enjoy cannabis, legal or not. Cities and counties that outlaw cannabis are essentially voting to keep their local illegal marijuana markets in business. Huh. “

New York’s regulators are currently accepting applications for the first adult-use retailers in the state, and the state may soon serve as another example of how local opt-out policies affect market trends. While a large portion of New York municipalities opted to allow cannabis businesses, hundreds of cities Elected to exit before the deadline earlier this year,

lessons from report good It is that people in those opt-out areas will likely continue to buy marijuana—but the incentive to move to a regulated market will be diminished by a lack of conveniently located licensed access.

In New Jersey—where recreational marijuana sales began in April and where most cities initially chose not to allow retailers After reform implementation – by July there were 0.3 dispensaries per 100,000 people. Accordingly, the illegal market continues to dominate the sale of cannabis, accounting for 80 percent of purchases.

Via Leafly/Whitney Economics.

Another factor that is hindering efforts to end illegal sales is high state and local tax rates for products sold in regulated stores. Analysts and stakeholders have long said that imposing an additional tax on marijuana would deter people from transitioning to the legal market, and so they have urged lawmakers to take this into account when formulating legalization policy.

“Access and taxes are the keys to the migration of clients to the legal market,” said Beau Whitney, founder of Whitney Economics and co-author of the report. “And right now we’re seeing illegal cannabis sales continue to grow by opt-out cities and counties.”

The new report is based on an analysis that looked at public licensing data from state marijuana regulatory agencies and population information from the 2020 US Census. The report methodology section states that the percentage of cannabis sales from illegal versus legal sources was calculated by “comparing each legal state’s annual cannabis sales to that state’s total market estimate (TME).”

Not only do local opt-out decisions stand to benefit illicit marijuana sellers, but the report also found that areas where the cannabis business is regulated have increased public health issues related to unused products. are more likely to be seen, miss out on job creation opportunities and lose revenue. Local tax option.

“Legal cannabis regulation works. It puts illegal marijuana dealers out of business and gives minors fewer opportunities to access weed. It protects public health by keeping tainted products out of circulation,” the report concludes. It allows law-abiding adults to follow the law while creating local jobs and tax revenue. Opting in: This is the right thing to do.”

An earlier 2020 report commissioned by the California Hispanic Chambers of Commerce and Weedmaps similarly found that California has a local ban on marijuana businesses. helped the illegal market flourish and deprived state and municipalities of tax revenue This has been made more necessary to compensate for the economic loss caused by the corona virus epidemic.

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