Regulation for state-legal sales of federally-illegal product

I really don’t know what to make of the Washington state regulatory rules for selling pot, which is illegal under federal law. I hesitate to mention it on this blog, but it is a useful exercise in stretching my understanding of the world around me.

William Barrett describes the new regs in his post, New pot rules for Seattle are a riot-for now, at New to Seattle.

Here’s just a few of the rules:

  • Only 3 stores of the 334 allowed in the state can be owned by one person
  • $1,000 annual license fee
  • 25% excise tax
  • All ‘products’ must be traceable from the plant to the final product
  • There are specific limits to the contents of a single serving and the number of servings per package and the amount of a single transaction
  • All products must be tested by an independent lab

All of that will add a huge amount of overhead to the cost of selling state legal, federally illegal marijuana.

I have no clue of the street prices or underlying economics of illegal drugs and don’t want to know. I have no clue about any part of the current market.  What I can tell is the regulatory regime will drive up prices from whatever they are now.

A huge irony could turn out to be that the law enforcement community may need to continue its enforcement effort against illegal drug sales, which will now be the sellers who don’t comply with the huge volume of new rules.

Mr. Barrett explains the enforcement issue implication:

But to me, the more serious take-away is that the layers and layers of regulations, licenses, restrictions and taxes in the rules–plus the hiring of lawyers to navigate all this–will drive the cost of legal (in Washington, anyway) pot way up. So much so, I predict, the biggest user group–young adults without a lot of money–will still go to the black market and their friendly local dealer, who will have no problem competing on price.  And that’s going to force the authorities to keep arresting or charging folks–not due to anti-drug zeal but to protect what the state hopes will be a cash cow, which includes collection of a 25% excise tax. 

The current batch of drug peddlers won’t go away; they will still have a market. Their sales may shrink, but they will have, pardon the phrasing, a lot of marketing advantages. They will have advantages in terms of price (no testing, ‘tracing’, or 25% excise tax), location availability (any corner will do), quantity availability, and no ID required. On the other hand, when buying at one of the regulated/licensed/tested stores, there won’t be a risk of arrest after the purchase, no danger of being shot if the price negotiations don’t go well, and the purchase will presumably be payable with credit or debit card.

Thus the police will need to continue their enforcement effort against illegal drugs. 

Like I said, I don’t yet know what to make of this unreal world of regulating the legal sale of illegal products.

One thing I know is this complicates the arguments of those who argue for legalization of marijuana. One of the major advantages of legalization is the end of the severe side effects of the illegal sales and related enforcement.

The goal of this blog is to sort out the radical change surrounding us and regulation of illegally legal stuff is part of that change.

What do you make of this?

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