Yesterday I posted about the competition the legal market for marijuana in Canada is facing from the pre-existing illegal market. Today we turn to California. It's still to early to draw conclusions, but one market design lesson is that even if the attraction of a legal market is regulation and tax revenue, regulators and tax authorities may have to ease up at least in the beginning if they want the legal market to out-compete the legacy black market.
In the NY Times, Thomas Fuller has been following the market(s):
‘Getting Worse, Not Better’: Illegal Pot Market Booming in California Despite Legalization By Thomas Fuller
"It’s been a little more than a year since California legalized marijuana — the largest such experiment in the United States — but law enforcement officials say the unlicensed, illegal market is still thriving and in some areas has even expanded.
...
"The struggles of the licensed pot market in California are distinct from the experience of other states that have legalized cannabis in recent years. Sales in Colorado, Oregon and Washington grew well above 50 percent for each of the first three years of legalization, although Oregon now also has a large glut of pot.
"But no other state has an illegal market on the scale of California’s, and those illicit sales are cannibalizing the revenue of licensed businesses and in some cases, experts say, forcing them out of business.
...
"California gives cities wide latitude to regulate cannabis, resulting in a confusing patchwork of regulation. Los Angeles, San Francisco, San Jose and San Diego have laws allowing cannabis businesses, but most smaller cities and towns in the state do not — 80 percent of California’s nearly 500 municipalities do not allow retail marijuana businesses. The ballot measure legalizing recreational marijuana passed in 2016 with 57 percent approval, but that relatively broad support has not translated to the local level. Cities like Compton or Laguna Beach decisively rejected allowing pot shops.
"Regulators cite this tepid embrace by California municipalities as one of many reasons for the state’s persistent and pervasive illegal market. Only 620 cannabis shops have been licensed in California so far. Colorado, with a population one-sixth the size of California, has 562 licensed recreational marijuana stores.
...
"And the monetary incentives of trafficking also remain powerful: The price of cannabis products in places like Illinois, New York or Connecticut are typically many times higher than in California."
In the NY Times, Thomas Fuller has been following the market(s):
‘Getting Worse, Not Better’: Illegal Pot Market Booming in California Despite Legalization By Thomas Fuller
"It’s been a little more than a year since California legalized marijuana — the largest such experiment in the United States — but law enforcement officials say the unlicensed, illegal market is still thriving and in some areas has even expanded.
...
"The struggles of the licensed pot market in California are distinct from the experience of other states that have legalized cannabis in recent years. Sales in Colorado, Oregon and Washington grew well above 50 percent for each of the first three years of legalization, although Oregon now also has a large glut of pot.
"But no other state has an illegal market on the scale of California’s, and those illicit sales are cannibalizing the revenue of licensed businesses and in some cases, experts say, forcing them out of business.
...
"California gives cities wide latitude to regulate cannabis, resulting in a confusing patchwork of regulation. Los Angeles, San Francisco, San Jose and San Diego have laws allowing cannabis businesses, but most smaller cities and towns in the state do not — 80 percent of California’s nearly 500 municipalities do not allow retail marijuana businesses. The ballot measure legalizing recreational marijuana passed in 2016 with 57 percent approval, but that relatively broad support has not translated to the local level. Cities like Compton or Laguna Beach decisively rejected allowing pot shops.
"Regulators cite this tepid embrace by California municipalities as one of many reasons for the state’s persistent and pervasive illegal market. Only 620 cannabis shops have been licensed in California so far. Colorado, with a population one-sixth the size of California, has 562 licensed recreational marijuana stores.
...
"And the monetary incentives of trafficking also remain powerful: The price of cannabis products in places like Illinois, New York or Connecticut are typically many times higher than in California."
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