The problem of illicit cannabis in states that have legalized it is back in the news again, and once again it's not because of Washington.
Last week, NPR ran a story titled, "Black market cannabis thrives in California despite legalization." The story focuses on California, but also looks at states like Maine and New York, which are having similar issues combating the illicit market despite the presence of a legal market.
Washington is mentioned in the story as well, but as a contrast. The Evergreen State has not had the same issues, because the legal market has almost entirely out-competed the illicit market.
What is it that has allowed Washington to find success where these other states have not?
Possession of cannabis in Washington became legal on Dec. 6, 2012, but the state did not open its legal market until over a year later, on July 8, 2014. That slow rollout allowed state regulators to carefully chart the correct path for the legal market.
In the early days back in 2014 and 2015, low product volume in the legal market led to high prices.
"We knew then that if the total price dropped to below $12 per gram that the regulated retail market would be able to compete with the illicit market," former Liquor and Cannabis Board Director Rick Garza said in a statement regarding a 2021 report from the University of Waterloo in Ontario, Canada, on Washington's cannabis market.
"As more stores opened, the price steadily fell month-over-month until it stabilized in the last five years," Garza continued.
The University of Waterloo report found that the average price of a gram in Washington was $6.51 in 2021. That was despite Washington's cannabis tax rate of 37% being far and away the highest in the nation.
By comparison, troubled California's tax rate is just 15%, but reporting from KCRW Public Radio in Santa Monica, California, found that depending on the jurisdiction, other taxes can quickly pile on top. That makes illicit storefronts, which operate largely with impunity and appear legal in every way except for the lack of a state license, a much cheaper option.
Not only is Washington's legal marketplace cheap, it is tightly regulated. When illicit shops do pop up, the state acts swiftly and harshly, as they did in 2022 with two such locations on the West Side. The state recommended felony charges in both cases.
It seems simple. Make the legal stuff cheap and the illegal stuff unwise. Washington figured that out over a decade ago, but other states are still struggling to do the same. ♦
