In what is an absolute lack of surprise to anyone who’s thought about the issue, the severe regulations imposed by the state of California on legal marijuana shops means the majority of marijuana sales take place in the black market.
After five years of legal recreational marijuana, sales in the illegal market are estimated to be twice the volume in legal stores.
This is the 32nd article I have written covering the legalized recreational marijuana market. You can see my other articles by clicking on the regulation experiment tag.
One way to measure how severely the legal marijuana business has been restricted is to look at the number of licensed marijuana shops per 100,000 residents. For six Western states that allow recreational sales, here is the number of legal dispensaries per 100,000 people:
8/30/17 – Wall Street Journal- Buzz Kill for Pot Farmers: Lower Prices– Estimates are the increasingly legal cannabis business has industry wide revenue of somewhere around $6B of sales a year compared to the tobacco industry with $119B annual sales.
According to companies who track such things, the prices for legal marijuana have been dropping.
A retail company in Seattle offers the pricing of one specific brand as an indicator. It is currently going for $10 a gram now compared to $15 a gram two years ago (9/15), which is a one-third drop.
I have seen two amusing ripple effects of soon-to-be-legal recreational use of marijuana in California.
The first impact is visible in hotels. I am sure you have seen the disclosures at hotels that if you smoke in a no smoking room you will be hit with a large cleaning fee charged to your credit card.
I recently stayed at a hotel which had the typical comment of a $250 smoke cleaning fee on the check-in form, which I had to initial.
In the room, there is a sign in the bathroom, which you can see above. Just in case you weren’t aware that smoking marijuana constitutes smoking, the sign reminds you that if you smoke either tobacco or marijuana there will be a $250 cleaning fee.
Haven’t had an update on regulatory oversight of the recreational marijuana market in a while. With Nevada now allowing the sale of recreational marijuana, it is time to check out the regulatory world.
As readers of this blog already know, I am watching developments in Colorado and Oregon for the newly state-legal recreational use of marijuana. Just as a reminder, my interest is not in marijuana. My curiosity is focused on how much trouble a burdensome and expensive regulatory structure will create for a newly legalized industry.
My hypothesis is the heavy-handed regulations will be crushing and severely restrain a new industry.
The reason I am watching the newly state-legal recreational marijuana markets is to see the impact of heavy regulation on the industry.
A related issue is the social results of recreational marijuana. Here are a few articles providing some early hints of the results. Perhaps these are nothing more than slivers of hints. Yet there are some early indications. On the other hand, perhaps these are merely transition and implementation issues.
The massively important question is whether the increased costs in some areas are worth the drastically lower costs in other areas (mass incarceration, militarization of law enforcement, severe enforcement costs).
I am watching developments in Colorado and Oregon for the newly state-legal recreational use of marijuana. Just as a reminder, my interest is not in marijuana. My curiosity is focused on how much of a drag a burdensome and expensive regulatory structure will create for a newly legalized industry.
My hypothesis is the heavy-handed regulations will be crushing and the expected result will be to severely restrain a new industry.
A related tangent is the tension between recreational marijuana use being legal in certain states under state law yet still illegal at the federal level. Here are a few articles I’ve read on this tension.
Results from the fall 2016 elections show spread of recreational marijuana. That means there will be a lot more states to keep an eye on to see how severely the regulations affect in a new industry.
Currently I’m trying to keep an eye on developments in Colorado and Oregon, since they are further along in the experiment of regulating the industry. At this point I’ll also keep an eye on California, which is one of the states which just voted to allow recreational use. Since I live in California, it will be easier to keep an eye on the regulatory environment.
11/8 – Washington Post – Marijuana wins big on election night– Looks like I’ll need to spend a lot more time watching the crushing effect of overregulation on newly legal industries.
Not much that I’ve noticed in the news about regulation of the recreational marijuana market. Here are a few things of interest. Reminder: Reason I’m following this issue is to watch a natural experiment on whether over-regulation will crush a new industry.
How the marijuana laws have developed, the Department of Justice’s effort to look the other way when states have legalized either medical or recreational marijuana, and the IRS’ stand that most costs of running a marijuana business are non-deductible.
Also, some discussion on how likely Congress is to make changes to federal law. Current assessment: not likely. Doing so would appear to be soft on crime. Current mess with opioid abuse would make any efforts to legalize marijuana appear to be bad.
6/16 – MarketWatch – Microsoft gets into the weed business – One of the requirements in those states where recreational marijuana is legal is the need to track every bit of marijuana from the seed that germinated into a plant all the way to the specific end product the marijuana went into.
I have not noticed a lot of coverage of the efforts to regulate the newly state-legal business of recreational marijuana. Here are a few articles catching my interest.
As a reminder, I am watching the efforts in Colorado and Oregon to develop a new industry which is highly regulated. This is a natural experiment to test my hypothesis that heavy-handed regulation will constrain a new industry.
1/5 – Denver Post via The Cannabist – Federal judge tosses Colorado marijuana banking lawsuit – State of Colorado chartered a credit union, the Fourth Corner Credit Union, with its business model of serving the state-legal marijuana industry. The credit union requested a master agreement allowing it to access the Federal Reserve system and thus participate in the banking system.
The FRB denied the application. The credit union sued.
A federal judge threw out the suit on the basis that allowing the credit union to operate would “facilitate criminal activity” since marijuana is illegal under federal law.
My hypothesis is that state legalization of recreational marijuana sales is a giant natural experiment to test whether heavy-handed state regulation will constrict a newly legalized industry.
My interest in this topic is limited to watching how regulation slows economic development. Recreational marijuana is a new enough and small enough industry that we can actually watch the impact of regulation. Here are a few articles on recent news I have noticed:
According to the article, this left state regulators and the marijuana industry arguing about what pesticides are allowed and what is banned. Multiple comments indicated regulators wanted more restrictions and industry wanted very light restrictions.
The article follows the typical arguments you would expect for any industry that is regulated by the state or federal government. See if the following sounds like the same story as in dozens of other industries:
Haven’t seen much news from Colorado or Washington on regulating marijuana. On the other hand, I haven’t been looking much. As a reminder, I’m watching this topic to see how badly heavy-handed regulation restrains a new industry.
Some news from other states moving toward legalization. North Dakota is taking some steps. Ohio stops.
For background, I am watching the newly state-legal recreational marijuana markets develop in Colorado and elsewhere. My hypothesis, and the reason for my coverage, is that heavy-handed state regulation will strangle a new industry.
Here are a few articles on the status of legalized marijuana in Colorado. Remember I’m following this issue to see what impact heavy-handed regulation has on a newly legalized industry. Two recent articles and an older one I just found.
8/11 – AP at Bismarck Tribune – Colorado may ban ‘candy’ name on marijuana treats– The state government has proposals out that would require better disclosure that an edible product contains THC. A red stop sign with the letters THC would be required on the label. Candy type items won’t be labeled as candy. Liquids would only be produced in single serving containers.
I haven’t seen much news on the legalized marijuana industry lately. Maybe I’ve not been paying enough attention.
For a reminder, the reason I’m talking about this issue is my hypothesis that overregulation will severely constrain this brand new industry. This is a natural experiment on how regulation affects an industry.