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Last Word – Black Market Blues, or What We Can Learn From Minnesota’s Missteps

Is the marijuana black market really a big problem?

I never thought it was. I knew it was out there, or course, but I always subscribed to the common wisdom that marijuana legalization would eventually render the black market moot.

But, what if that is not the case?

The Motley Fool raised this issue recently with an article bearing the provocative title Say Hello to Medical Marijuana’s Biggest Threat. In it, they make the case that despite all the focus on banking and other federal legalization issues being such a big hurdle for the Cannabis Industry, that the ongoing existence of a black market is really the concern.

The story says that:

Minnesota began selling medical marijuana legally just two months prior, but according to informal surveys and the statistics, some have already turned to the black market to cut their expenses.

Based on data published by the state of Minnesota, close to one in five of the 491 registered patients in Minnesota’s medical marijuana program haven’t returned to buy medication after purchasing product in the previous month. To be clear, there are plenty of reasons why this figure could be as high as it is, and a shift to black market marijuana may not account for the entirety of the drop-off.

Still, the data would suggest that black market prices are clearly enticing some medical marijuana patients in Minnesota. For instance, a small vial of marijuana extract runs about double in Minnesota ($130) than what it does in Colorado, a state where medical marijuana has been sold legally for more than a decade and recreational marijuana is also legal. …

In total, five Minnesota residents told the AP that they’ve turned to the black market primarily because of cost.”

Like many people, I always subscribed to the theory that legalizing marijuana would make it easier for people to obtain, so more people would be able to obtain it. Plus, legalization would allow government regulation and taxation just as we see with alcohol and tobacco products.

All of that sounds good and seemed logical. But, what if the government regulators screw things up and regulate cannabis, even of the medical variety, to the point that it is cheaper to buy on the black market? Had anyone even considered that?

Well, they hadn’t in Minnesota, where they overpriced the product and put it out of the financial reach of those who need it the most.

Now, the state is scrambling to do something to make medical marijuana more affordable for those who truly need it there. A report in the Minneapolis Star Tribune says that the state’s two marijuana producers are offering incentives such as loyalty cards and first-time buyer discounts to try to get patients to buy from them rather than the black market.

Will this fix the problem? Maybe, but I doubt it because it is really just a band-aid approach.

The Motley Fool makes this point, and it is relevant because it follows what I keep pounding away on:

Long story short, until medical marijuana is addressed on a federal level and either legalized or decriminalized, it’s going to be veritably impossible for legal stores to compete with black market growers. These black market sales are likely going to continue to eat into the profitability of legal marijuana shops and could be a roadblock the industry struggles to overcome.”

Yes, the fallout from the federal government’s complete inability to reasonably address marijuana legalization continues, and it makes me wonder — how many more Minnesota’s do we need to see before they finally decide to do something.

My guess? It is going to take, at least, a few more.

 

 

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