How To Solve The Completely Contrived Problem Of Unlicensed Weed Stores

Though cannabis legalization has been a positive development overall, in many places, the black market still exists to one degree or another, albeit much less so than when cannabis was illegal.  Nowhere else is this more true than in New York, whose uniquely arcane, difficult, and disastrously sluggish rollout of cannabis licenses statewide has led to a massive proliferation of unlicensed weed shops, especially in NYC where such shops outnumber licensed ones by a whopping 250+ to one.  Even in early 2024, this state of affairs still persists. So how does one solve such a bedeviling problem?

Enter Rear Admiral Luther E. Gregory.  In the 1930s, Prohibition was repealed, and Washington State along with other states were now faced with the task of shutting down the well-established bootleggers and speakeasies that persisted even after Repeal.   Admiral Gregory was asked to head the state's Liquor Control Board, and given carte blanche to come up with a solution, one which worked surprisingly well in fact:

1. End Prohibition, first of all.
2. Give amnesty and issue licenses to anyone willing to play by the state's rules, whether former bootleggers or otherwise.
3. Set the alcohol taxes as low as possible at first, the lowest in the country in fact.
4. Punish sellers who don't play by the rules, with an iron fist--i.e. blacklisting scofflaws from ever selling liquor in the state again.
5. After holding down alcohol taxes for three years, abruptly raise taxes to the point where they're now the highest in the nation.

Problem solved.  The legal market proved to be competitive with what was left of the black market, and drinkers overwhelmingly preferred the former over the latter, driving the latter out of business.  And the black market never came back even after raising taxes dramatically.  Looking back, it should have been so obvious indeed.

Substitute "cannabis" for "alcohol", and there is literally no reason whatsoever why this strategy would not work in this day and age.  And instead of holding down taxes for three years, merely one or two years should be sufficient to get the same results, even if the hike is automatically scheduled.  Doing so would minimize the greatest risk of the strategy, namely, that the fledgling legal cannabis industry would then become so powerful that they would resist and successfully quash any attempt to raise taxes in the future.  They would not become that powerful in just a year or two, and probably not for several years, but the black market could be easily quashed in that timeframe all the same.  But most importantly, cut the ridiculous red tape and, and make cannabis licenses easier and cheaper to get, particularly for the current gray market shops.

Now over to you, New York.  Remember, the cart does NOT go before the horse.

UPDATE:  We are now up to a grand total of 420 blog posts since 2009!  Those who still don't know the significance of that number are free to Google it.

UPDATE 2:  Another good idea:  allow cannabis with less than 10% THC to be sold anywhere that beer and wine is licensed to be sold (half-license), and cannabis with both greater and less than than 10% THC to be sold at dedicated liquor stores and/or dedicated cannabis stores (full license).  That will of course also incentivize the production and sale of lower-potency weed alongside the current high-octane weed and edibles and concentrates, instead perversely driving cannabis producers to grow exclusively strong flower and reflexively extracting THC from all of their leaf and trim into strong edibles and concentrates (as opposed to simply selling it as a loss leader).

Sketchy Vape Vendors, Stop Spamming And Advertising On This Site!

To anyone who has been spamming and advertising questionable things in the comments section of our blog posts, we at Twenty-One Debunked are asking you to stop doing so.  Yesterday.  Just because of the subject matter of our blog posts or the fact that they contain certain key words, it does NOT mean that you should take that as an invitation to hawk your sketchy wares here.  Needless to say, I have deleted all of your posts.  Don't let the door hit you on the way out.

This applies particularly to people persistently trying to advertise black-market cannabis vaping products (which of course are most likely adulterated with questionable and harmful additives) in the comments section of our posts.  That is practically the definition of chutzpah, given the fact that the "mystery" vaping illness (EVALI) has in fact been traced to adulterants such products.  Twenty-One Debunked does NOT endorse or support the sale, use, or promotion of ANY illicit or black-market products, period.  So cease and desist NOW.  You have been warned.

And for any readers who seek to buy such black-market vape products, please keep in mind that you are essentially playing Russian Roulette when you buy such sketchy stuff, since there is ZERO quality control and a massive profit motive to adulterate their products to inflate their profit margins.  Nearly 60 people have been KILLED by such products, and over 2600 have been seriously injured and sickened.

So buyer beware!

The Cannabis Black Market Has A Kill Switch, And We Know What It Is

We keep hearing over and over again that the black market for cannabis comtinues to persists despite legalization for several years in several states.  And we also are learning that this black market is selling notoriously tainted counterfeit THC vape products which are the primary cause of the "mystery" vaping lung illness now known as EVALI.  National legalization should really be a no-brainer at this point.

But why does the black market persist so tenaciously even in states like Colorado and Washington that have had legal recreational sales for over five years now?  The answer is overtaxation and overregulation, particularly in terms of retail licensing fees and quotas.  And the kill switch for the black market is thus really quite simple:

So what to do?  Cut the taxes on cannabis, yesterday, for at least a year or two before raising them again.  Consider a complete tax holiday for a few months, like Oregon did when legalization began there.  Ease up a bit on licensing regulations (and fees) for both producers and retailers.  Allow at least all liquor stores to sell weed alongside their booze, and further consider allowing any store that sells cigarettes to also sell weed as well, including grocery and convenience stores.  Lower the age limit to 18, yesterday.  Encourage current black market dealers to "go legit", by giving amnesty to unlicensed sellers and allowing them to obtain retail licenses.  And once these things are done, then crack down hard on what remains of the black market, particularly the illegal commercial growers and higher-ups in the illegal businesses and organized crime syndicates.

Problem solved.

And of course, fully legalize cannabis at the federal level as well.  Period.

Of course, once the black market is dead and gone, then by all means, tax away.  But now is NOT the time for overtaxation or overregulation.

So what should the tax on cannabis be?  To start with, we at Twenty-One Debunked believe it should be no higher that $10/ounce for bud and $2.50/ounce for trim at the production/cultivation level, with no other taxes aside from regular sales tax.  Consider a three-month tax holiday as well, like Oregon did in 2015.  Then, after the first year or two, the tax should be no higher than $50/ounce for bud and $15/ounce for trim, much like it is in Alaska today.  As for concentrates and edibles, those are best to tax based on THC content, e.g. 1 cent/milligram of THC.

Indeed, recent studies in both the USA and Canada do bear this out.  Allowing a legal alternative to the black market will out-compete with the latter, but only if the price of legal cannabis flower remains below about $14/gram.  Above that threshold, adult customers will readily switch back to the black market if it is the cheaper option, at least in the first few years post-legalization.

As for the price elasticity of demand for cannabis, that has been a controversial topic, but recent studies find that it is relatively inelastic at low prices, but becomes quite elastic at high enough prices, implying an "elastic zone" above some threshold (in one study, $15/joint, or about $30/gram based on the study's half-gram definition of a joint) for high-quality weed.

Interestingly, some other studies find cross-elasticity between alcohol, tobacco and cannabis among young people, such that raising the cigarette tax and even the beer tax can lead to reduced cannabis consumption.  Thus, any fears that falling cannabis prices will lead to more teen use can be addressed by simply raising the taxes on the other two substances in the meantime, before the cannabis black market is eradicated.  (Which will also decrease the use of alcohol and tobacco as well, by the way.)

Remember, there is really no good reason why cannabis needs to be regulated any more stringently than alcohol or tobacco.  After all, while it is not completely harmless for everyone, the fact remains that by just about any objective, rational, scientific measure, cannabis is safer than alcohol, tobacco, most prescription drugs, aspirin, and even Tylenol, while it is less addictive than coffee.  Thus our laws and regulations need to align accurately with reality, since facts > feelings, even in a "post-truth" society.

When It Comes To Vaping, Don't Throw Out The Baby With The Bathwater

In the wake of both the mysterious vaping-related lung illness epidemic, and also the recent increase in vaping among young people (something for which Tobacco 21 laws have apparently done NOTHING to stem the tide, by the way) both the federal government and several state and local governments are beginning to crack down on vaping to one degree or another.  Yes, Houston, we have a problem.  But it is important to keep a cool head and not throw out the proverbial baby with the bathwater.

The FDA plans to ban all flavored vape products other than tobacco (yuck!) or unflavored (meh), as is Michigan.  San Francisco, on the other hand, already passed a ban on ALL vape products regardless of flavor.  The state of New York just passed an emergency executive ban on all flavored vape products other than tobacco or menthol, effective October 4th.  And California's governor announced a crackdown on counterfeit vape products, though he lacks the authority to pass any flavor bans without the state legislature passing it.

Going too far with such bans would only increase the very black market that is the most likely cause of the mystery vaping illness (though with that it is mostly black-market THC products, though some appear to have been nicotine only).  At the same time, while vaping can help some adult smokers quit, it's not like there really is any overarching benefit society from nicotine that comes in fruity, candy, or dessert-like flavors either.  It really is a balancing act.

Twenty-One Debunked once grudgingly supported some degree of flavor bans in the past, mainly as an alternative to Tobacco 21 laws, but in light of current events, we no longer support such bans today.

New York's flavor ban--if there must be one at all--is somewhat more reasonable than the ones that don't even allow menthol.  And clearly counterfeit products need to be cracked down upon, and bad actors and questionable additives rooted out at once.  And capping and reducing nicotine levels of vape products down to European and Israeli levels would also make such products less addictive than they are currently.  But anything more stringent than these things would likely do more harm than good.  (That goes for setting the age limit any higher than 18 as well.)

As for cannabis vaping products, the best way to eradicate the sketchy and janky black and gray market products is to fully legalize and regulate cannabis nationwide, period, with an age limit of 18, strict quality control, and reasonable taxes on such products.  And again, crack down on counterfeit products and products with questionable additives.  But that would make too much sense, wouldn’t it?

So let's be adult about this, shall we?

UPDATE:  Looks like Michigan's emergency executive flavor ban contains a loophole that allows flavored nicotine-free e-liquids and pods, and also allows flavorless nicotine packets one can combine with such e-liquids (albeit sold separately).  So this particular ban is actually far more reasonable than meets the eye, while still having the intended effect of making it somewhat harder and less convenient for people under 18 to vape flavored nicotine.  And it will likely keep vape shops open for business for the foreseeable future, while JUUL will still get a swift kick in the margins now that their ready-made pods will be verboten if they have any flavor other than tobacco.

And at the other extreme, on September 24th, Massachusetts Governor Baker has literally banned ALL vape products for four months by an emergency executive action.  And that will just throw gasoline on the fire by dramatically growing the black market. DERP!  Didn't think that one through, did you Charlie?

California's--And America's--Black Market Cannabis Problem

Looks like the black market for cannabis is unfortunately alive and well in states that have legalized cannabis. This includes California after over a year of legal retail sales, and in other legalization states even after several years of legal retail sales.  So what gives?

The two biggest reasons appear to be high taxes/prices and a limited number of legal dispensaries/outlets.  The black market can easily undercut such high prices and fill in the gaps left by not enough legal retail stores, and do not have to deal with the rather onerous licensing and other regulations that legal businesses must adhere to.  When there is an artificial shortage of legal cannabis, the black market easily picks up the slack, and where there is an oversupply that makes it less profitable, some of it gets diverted to the black market to sell illegally to other, non-legalization states as well.

And then there is that 21 age limit as well, which is currently the case in all legalization states.  That also encourages illicit sales as lower-hanging fruit compared to legal dispensaries with strict enforcement. Can we get a resounding, "DUH"?

So what to do?  Cut the taxes on cannabis, yesterday, for at least a year or two before raising them again.  Consider a complete tax holiday for a few months, like Oregon did when legalization began there.  Ease up a bit on licensing regulations (and fees) for both producers and retailers.  Allow at least all liquor stores to sell weed alongside their booze, and further consider allowing any store that sells cigarettes to also sell weed as well, including grocery and convenience stores.  Lower the age limit to 18, yesterday.  Encourage current black market dealers to "go legit".  And once these things are done, then crack down hard on the black market, particularly the illegal commercial growers and higher-ups in the illegal businesses and organized crime syndicates.

Problem solved.

And of course, fully legalize cannabis at the federal level as well.  Period.

Of course, once the black market is dead and gone, then by all means, tax away.  But now is NOT the time for overtaxation or overregulation.

So what should the tax on cannabis be?  To start with, we at Twenty-One Debunked believe it should be no higher that $10/ounce for bud and $2.50/ounce for trim at the production/cultivation level, with no other taxes aside from regular sales tax.  Consider a three-month tax holiday as well, like Oregon did in 2015.  Then, after the first year or two, the tax should be no higher than $50/ounce for bud and $15/ounce for trim, much like it is in Alaska today.  As for concentrates and edibles, those are best to tax based on THC content, e.g. 1 cent/milligram of THC.

Remember, there is really no good reason why cannabis needs to be regulated any more stringently than alcohol or tobacco.  After all, while it is not completely harmless for everyone, the fact remains that by just about any objective, rational, scientific measure, cannabis is safer than alcohol, tobacco, most prescription drugs, aspirin, and even Tylenol, while it is less addictive than coffee.  Thus our laws and regulations need to align accurately with reality, since facts > feelings, even in a "post-truth" society.

Canada's Black Market For Cannabis Won't Die Quickly

Six months after Canada's cannabis legalization went into effect on October 17, 2018, the black market still seems to be alive and well.  This is despite rather modest taxation of legal weed, and the fact that the age limit is 18 or 19 depending on the province, as opposed to 21 in the US states that have full legalization.  So what gives?

Apparently, there are chronic shortages of the herb throughout Canada that persist to this day, with the legal stores often selling out too quickly, and the black market dealers seem to have no difficulty filling the gap, and cheaper.  Why is this happening?  Well, it is clearly not due to any real scarcity, but the artificial scarcity of overregulation.  Most provinces only allow it at government-run stores which are few and far between, while the few privately-run ones are also few and far between due to a limited number of licenses.  The rollout of legal weed has been painfully and deliberately slow so as not to offend the public-health crowd too much, and they don't even sell edibles, beverages, or hashish yet (until October 2019, a whole year after phase-one of legalization began).  So it doesn't take a rocket scientist to see how this would create shortages for illicit dealers to fill.

Best thing for Canada to do?  Implement phase-two of legalization yesterday, as it is long overdue.  Consider a tax holiday for a few months, like Oregon did when legalization began there.  Ease up a bit on licensing regulations (and fees) for both producers and retailers.  Allow at least all liquor stores to sell weed alongside their booze, and further consider allowing any store that sells cigarettes to also sell weed as well.  And those provinces that set the age limit at 19 (including Manitoba, despite their drinking and tobacco smoking age being 18) should lower their age limits to 18.  Encourage current black market dealers to "go legit".  And once these things are done, then crack down on the black market.  Problem solved.

Of course, once the black market is dead and gone, then by all means, tax away.  But now is not the time for overtaxation or overregulation.

Remember, there is really no good reason why cannabis needs to be regulated any more stringently than alcohol or tobacco.  After all, while it is not completely harmless for everyone, the fact remains that by just about any objective, rational, scientific measure, cannabis is safer than alcohol, tobacco, most prescription drugs, aspirin, and even Tylenol, while it is less addictive than coffee.   Thus our laws and regulations need to align accurately with reality, since facts > feelings, even in a "post-truth" society.

How to Quash a Black Market in Five Easy Steps

A black market (or underground economy) typically occurs when the legitimate market for a particular good or service is either nonexistent, out of reach, or otherwise far too insufficient to meet the demand for that good or service.  Black markets are by definition illegal to one degree or another, while informal markets that are technically legal or quasi-legal are known as gray markets.   While the usual proximal cause for a black market is prohibition of a good or service (and thus no legitimate market existing), a black market can also occur (albeit to a much lesser extent) when the taxes and/or other government fees on or surrounding the product or activity are excessively high relative to what consumers are willing to pay (and relative to the informal economy).  Sometimes taxes can be so high so as to be considered "prohibition by price", though the relative price difference is typically far more important than the absolute price.

Twenty-One Debunked believes in raising alcohol taxes significantly in conjunction with lowering the drinking age to 18.  The level we suggest ($24/proof-gallon, equalized for all alcoholic beverages), though significantly higher than now, would still be too low to encourage a significant amount of moonshining and bootlegging.  But what about cannabis, which is currently being legalized in more and more states, many of which started out with fairly high taxes and/or licensing fees?  Though a positive development overall, in some of such places, the black market still exists to one degree or another, albeit much less so than when cannabis was illegal.  And of course we all know that places like NYC with extremely high cigarette taxes have their share of black markets in untaxed, out of state, counterfeit, and/or stolen cigarettes as well.  So how does one solve such a problem?

Enter Rear Admiral Luther E. Gregory.  In the 1930s, Prohibition was repealed, and Washington State along with other states were now faced with the task of shutting down the well-established bootleggers and speakeasies that persisted even after Repeal.   Admiral Gregory was asked to head the state's Liquor Control Board, and given carte blanche to come up with a solution, one which worked surprisingly well in fact:

1. End Prohibition, first of all.
2. Give amnesty and issue licenses to anyone willing to play by the state's rules, whether former bootleggers or otherwise.
3. Set the alcohol taxes as low as possible at first, the lowest in the country in fact.
4. Punish sellers who don't play by the rules, with an iron fist--i.e. blacklisting scofflaws from ever selling liquor in the state again.
5. After holding down alcohol taxes for three years, abruptly raise taxes to the point where they're now the highest in the nation.

Problem solved.  The legal market proved to be competitive with what was left of the black market, and drinkers preferred the former over the latter, driving the latter out of business.  And the black market never came back even after raising taxes dramatically.  Looking back, it should have been so obvious indeed.

Substitute "cannabis" for "alcohol", and there is no reason why this strategy would not work in this day and age.  And instead of holding down taxes for three years, merely one year should be sufficient to get the same results, even if the hike is automatically scheduled.  Doing so would minimize the greatest risk of the strategy, namely, that the fledgling legal cannabis industry would then become so powerful that they would resist and successfully quash any attempt to raise taxes in the future.  They would not become that powerful in just one year, and probably not for several years, but the black market could be easily quashed in that timeframe all the same.

As for cigarette taxes, both NYC and NYS should implement this strategy as well.  And of course, the low-tax states such as Virginia should also raise their cigarette taxes (within reason) so as to not be such a source state for cigarette smuggling to other states.  And of course, lower NYC's age limit back to 18 as well.  Same for cannabis in legalized states as well.

In fact, this strategy would work for just about any type of black market.  That's because it is based on the hard facts of economics, not half-baked wishful thinking.  Unlike prohibition or unrealistically high age limits, taxes are not a "blunt" policy instrument, but rather a razor-sharp, double-edged sword.

So what are we waiting for?