Black market weed continues to thrive in Canada despite legalization

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Several months before Canada became the first G7 country to legalize recreational cannabis, Prime Minister Justin Trudeau claimed the move would eliminate the back market. 

“And over the following months, and indeed years, we will almost completely replace the organized crime market on that,” Trudeau said in June 2018. 

However, despite having been legalized across Canada 10 months ago, more than 40% of Canadians still purchase marijuana through illegal channels, a new survey revealed. 

According to Statistics Canada’s National Cannabis Survey released last week, 42% of cannabis consumers buy at least some of their weed from illegal sources as retailers find it difficult to enter the legal market. 

Legal sellers that do make the cut often fail to meet demand, while another important reason people are turning to the black market is the price of marijuana. Currently, the gap between legal and illegal marijuana is nearly $5 per gram on average. 

While three out of four Canadians said quality and safety are priority when buying weed, again 42% said that price is the most important factor when making a purchase. 

California, where cannabis sales are about to hit a record $1.3 billion this year, has been facing the same problems. The black market continues to flourish, supported by high taxes, which in turn leads to illegal sales exceeding legal by more than double the amount. 

“It’s abundantly clear that the illicit market is still undercutting the licensed and regulated market. The much lower than projected statewide cannabis tax revenue indicates that significant numbers of cannabis businesses remain in the illicit market not paying their taxes, rather than migrating to the regulated market,” Rob Bonta, who serves in the California state assembly, said. 

Bonta attempted to spearhead legislative efforts to combat the black market for cannabis. Assembly Bill 286, dubbed the Temporary Cannabis Tax Reduction bill would have temporarily cut state excise taxes for legal marijuana retailers. The bill failed to clear a key legislative committee in May. 

The persistence of black markets is evident in other states where weed has been legalized as well. For example, in Massachusetts, police have reported drug dealers have been taking advantage of the short supply of weed in dispensaries, particularly as prices on the street are about half the retail price. 

Back in Canada, Health Canada recently changed its cannabis licensing procedure in order to speed things up for those looking to get into the legal cannabis business. Under the new rules, applicants seeking to cultivate, process or sell marijuana for medical purposes must have a fully-built site at the moment of applying for a license. 

The next phase of legalization in Canada will see the production and sale of edibles, scheduled to take effect in October, with the first stores expected in mid-December.

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