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If you’re gonna legalize it, make sure to do it right

Wednesday, Apr 25, 2018

* Pro-legalization op-ed in The Hill

Despite the progress made on cannabis policies within legislative chambers and ballot boxes across America, the rollout of successful regulated cannabis markets has been stymied in several jurisdictions, and the illegal market has remained strong. The single biggest reason why is legislative fear of creating sufficient retail access to meet market demand. Simply put: if cannabis consumers cannot conveniently access the regulated market, they will continue to purchase from the illegal market, be it the unlicensed dispensary across the street, or the dealer around the corner.

Real cities provide real examples of this. In Denver, where medical cannabis became legal in 2000 and adult use in 2012, city leaders licensed one cannabis retail establishment per 3,091 residents. The illegal market rate quickly fell to 30 percent. But in Seattle — which legalized medical cannabis in 1998 and adult use in 2012, and had a state-imposed cap of just 21 retail licenses and a resulting density of one dispensary per 30,373 residents — the illegal market rate was an astounding 70 percent. Subsequent declines in city’s illegal market rate came about only by doubling the number of licensed retail outlets, but they are still elevated.

Reasonable tax rates, availability of delivery services and social consumption lounges, as well as rational advertising standards that allow licensed businesses to differentiate themselves from illicit operators also play a role in the strength of the legal cannabis market. But bottom line: if the legal market is less accessible to the average consumer than unlicensed businesses, the regulated industry will struggle and likely fail.

State and local officials in California and Massachusetts, which are in the throes of launching their respective adult-use cannabis systems, would benefit from the experiences of other states with adult-use policy frameworks. To date, lawmakers in California have grappled to shift unlicensed operations into the legal market in the wake of opening its legal market in January 2018. Local governments have severely thwarted the ascendance of a regulated industry that is reasonably accessible to consumers. Almost 85 percent of local jurisdictions have placed bans on cannabis retail operations. Not surprising, as a result California is missing its cannabis tax revenue projections and many potential licensed operators have been forced to freeze operations and lay off staff.

Our own independent research of licensed jurisdictions indicates that the optimal density ratio is roughly one legal cannabis retail storefront or delivery service license per 7,500 residents. Once density falls below this level, the illegal market maintains a strong presence, and the legal market struggles to establish itself — to the point where traditional law enforcement efforts remain ineffective at containing unlicensed operators and the failed outcomes of the decades-old war on cannabis continue.

- Posted by Rich Miller        

37 Comments
  1. - Rutro - Wednesday, Apr 25, 18 @ 10:50 am:

    Make it like cigarettes/alcohol, both of which are probably worse for you. Done.


  2. - independent - Wednesday, Apr 25, 18 @ 10:52 am:

    By this math at place Like Bloomington/Normal with approximately 120,000 residents would need 17 dispensaries to meet the demand. That seems like a lot.


  3. - Rich Miller - Wednesday, Apr 25, 18 @ 10:53 am:

    ===That seems like a lot. ===

    Dwarfs the number of illegal dealers there right now.


  4. - SaulGoodman - Wednesday, Apr 25, 18 @ 10:55 am:

    ** That seems like a lot.**

    How many stores in Bloomington/Normal sell tobacco and alcohol?


  5. - Sox Fan - Wednesday, Apr 25, 18 @ 10:56 am:

    My impression in Illinois is that “home rule” towns are going to be a major obstacle to meet that 7,500 requirement. I know my suburb of 56K is going to push back heavily against allowing 7-8 dispensaries in their city limits (at least at first).


  6. - Rich Miller - Wednesday, Apr 25, 18 @ 10:57 am:

    ===would need 17 dispensaries to meet the demand===

    Meh. How many bars/liquor stores do you think are in those two towns?


  7. - Cool Papa Bell - Wednesday, Apr 25, 18 @ 11:00 am:

    17 seems about right.. Maybe a few more than would be needed once the dust settled. Consider how many Walgreens and CVS’s there are and then work your way towards the needs of the legal pot market.

    I’d agree with you Rich about the number of illegal dealers - but how many wholesalers are there for that community? I think that’s a fairer question. 1 distributor for 10 dealers?

    So 15 stores, open a dozen hours a day with 20 employees per store that about covers the market.


  8. - Been There - Wednesday, Apr 25, 18 @ 11:02 am:

    ===Almost 85 percent of local jurisdictions have placed bans on cannabis retail operations. Not surprising, as a result California is missing its cannabis tax revenue projections====
    Illinois has already experienced something like this with video gaming. The projections are way short mainly because Chicago opted out.


  9. - Cool Papa Bell - Wednesday, Apr 25, 18 @ 11:03 am:

    Unscientifically more people drink than smoke pot, so you need more liquor stores and bars.

    For now it’s not akin to the bar business, unless we start to allow for public consumption in places of business. (Is that on the table?)


  10. - Juice - Wednesday, Apr 25, 18 @ 11:08 am:

    Been There, the politics on that are different. The main driver for why Chicago has not adopted video gaming is because the mayor still wants his casino, and video gaming will make that a lot less lucrative.

    But there have been more reversals of prior opt-outs in recent years than new communities just now opting out.


  11. - A guy - Wednesday, Apr 25, 18 @ 11:19 am:

    Intelligent article with appropriate data to not just consider, but adopt. You can always adjust. The market will help determine who’s good or bad at providing goods and services. But, this is totally correct if part of the goal is to eliminate or diminish the illegal market. Price and accessibility transcends everything here. One thing I know for certain is that people would strongly prefer to do business legally on the consumer side.


  12. - wordslinger - Wednesday, Apr 25, 18 @ 11:22 am:

    –By this math at place Like Bloomington/Normal with approximately 120,000 residents would need 17 dispensaries to meet the demand. That seems like a lot.–

    I’m betting there are a few more than 17 sellers of illegal weed there right now. Like by a factor of ten? Over/under? If properly funded, I’m willing to undertake a research project.

    The question is academic if Rauner is re-elected. Even if you could pass a veto-proof bill, he and his public health crew are willfully sabotaging the legal med-mar program right now, slow-walking apps and taking dilatory and frivolous actions in the courts.

    Reefer Madness has been a top “public health” priority for Rauner, as opposed to the Quincy vets home.


  13. - Casual observer - Wednesday, Apr 25, 18 @ 11:25 am:

    Let local gas stations and retail stores sell CDB only edibles and let the dispensaries handle the THC stuff. I would much rather go to my local Circle K and get a bag of gummy bears than a bag of synthetic K2.


  14. - A Jack - Wednesday, Apr 25, 18 @ 11:31 am:

    This is already a problem with the med marijuana market. It’s easier just to get marijuana on the black market than go to the trouble and expensive of getting a medical marijuana card.

    Of course those that don’t have access to the black market get the fake substitute and become ill as a result.


  15. - @misterjayem - Wednesday, Apr 25, 18 @ 12:11 pm:

    “the optimal density ratio is roughly one legal cannabis retail storefront or delivery service license per 7,500 residents.”

    In 2012, Chicago had approximately 5,000 businesses licensed to sell alcohol, i.e. one license per 544 residents.

    – MrJM


  16. - independent - Wednesday, Apr 25, 18 @ 12:39 pm:

    So with 17 dispensaries in Bloomington/Normal and maybe 5 McDonald’s restaurants more people will use legal pot that visit McDonald’s?


  17. - anon - Wednesday, Apr 25, 18 @ 12:43 pm:

    Walgreens/CVS: Based on my internet search, there are a total of 10 such stores in Bloomington/Normal. And those stores sell more than one line of product. Ratio is way out of whack.


  18. - Homer J. Quinn - Wednesday, Apr 25, 18 @ 12:45 pm:

    independent: let’s hope so.


  19. - the Patriot - Wednesday, Apr 25, 18 @ 12:45 pm:

    We are not capable of doing it right. You can’t tax a cash business and until you can use banks, it is a cash business.

    Try having a conversation with the Department of Ag about unethical business practices or violations of the Department of Ag regulations and you learn pretty quickly the current program operates without oversight.

    Any time you exempt most of the relevant information from FOIA, its a dirty program. I am sure this can be done right, but I am equally sure IL can’t do it.


  20. - JS Mill - Wednesday, Apr 25, 18 @ 12:46 pm:

    I guess some of our conservative posters do not believe in market economics? When recreational marijuana becomes a reality, there should be exactly as many dispensaries as the market will support.


  21. - titan - Wednesday, Apr 25, 18 @ 12:47 pm:

    It would seem to make sense to follow the long standing (and well tried and tested) liquor licensing model (that also ended up being the tobacco model most places too).


  22. - @misterjayem - Wednesday, Apr 25, 18 @ 12:52 pm:

    “Walgreens/CVS: Based on my internet search, there are a total of 10 such stores in Bloomington/Normal. *** Ratio is way out of whack.”

    Based on my internet search, there are more than 60 bars in Bloomington alone. https://www.yellowpages.com/bloomington-il/bars?page=3

    – MrJM


  23. - frisbee - Wednesday, Apr 25, 18 @ 1:00 pm:

    The article didn’t address how homegrow will factor into what illegal market remains. I’d reckon that if there aren’t enough retail establishments but folks are allowed to grow there will be growers who offload excess product in their local area without any taxes, licensing or quality controls. However if there are enough retail establishments and the prices and quality are competitive most would purchase from the legal sources. If the prices and quality are below what is available on the illegal market then the illegal market will continue to thrive. Legalization without homegrow would keep the current growers in the shadows and probably even spawn new growers who feel that enforcement won’t be there now that the product is legal for purchase. For example Officer Buzzkill isn’t in my basement examining how much dandelion wine i am fermenting at any given time and this time of year i am growing lots of dandelions in preparation for the next round of fermenting.


  24. - Rich Miller - Wednesday, Apr 25, 18 @ 1:02 pm:

    ===I guess some of our conservative posters do not believe in market economics?===

    Because reasons.


  25. - Amalia - Wednesday, Apr 25, 18 @ 1:05 pm:

    we must be getting close to legal weed in more places because Cheech and Chong were on Colbert on Monday night doing a comedy bit about doing things other than weed to rebel. “Dave’s not here,” was Colbert’s reply to the ask about where Letterman was. Old days, old routines are awesome.


  26. - frisbee - Wednesday, Apr 25, 18 @ 1:19 pm:

    ===the current program operates without oversight. ==

    Every cultivator has weekly inspections and the cameras are live streamed to ISP for both cultivation centers and dispensaries. I’d hardly consider that operating without oversight.


  27. - Arthur Andersen - Wednesday, Apr 25, 18 @ 1:25 pm:

    I’m no expert on this by a long shot, but doesn’t the Federal position which essentially closes off access to banks pose a big problem to legalization? (As the Patriot mentions above)

    That’s a lot of dough to stuff in the mattress, ya know.


  28. - ArchPundit - Wednesday, Apr 25, 18 @ 1:28 pm:

    === maybe 5 McDonald’s restaurants

    Try 13. Now add all of the brands of fast food together.


  29. - ArchPundit - Wednesday, Apr 25, 18 @ 1:28 pm:

    In a few unfortunate nights I’ve hit over 17 bars in Bloomington Normal in one night.


  30. - 33 ward - Wednesday, Apr 25, 18 @ 1:44 pm:

    If we want revenue, we must beat other nearby states to this issue.


  31. - Casual observer - Wednesday, Apr 25, 18 @ 1:45 pm:

    AA is right about the cash only business model. Hopefully Chuck Shumer’s legislation can get passed and eliminate that (stupid) hurdle.

    ArchPundit, dang man.is that you son?


  32. - JS Mill - Wednesday, Apr 25, 18 @ 2:26 pm:

    @AA- I think Colorado was trying to develop what is essentially a state bank to help with that. If it works we could emulate that in Illinois. Maybe?


  33. - crazybleedingheart - Wednesday, Apr 25, 18 @ 2:34 pm:

    There are 295 active liquor licenses in Bloomington-Normal.


  34. - Ed Higher - Wednesday, Apr 25, 18 @ 2:41 pm:

    With such foot-on-the-brake implementation, I’m guessing that conservative factions are waiting for the liberal passing phase to fail?


  35. - Stuntman Bob's Brother - Wednesday, Apr 25, 18 @ 2:58 pm:

    Frisbee at 13:00: You’re on it. It’s a flipping weed, easy to grow and process, especially if you’re not worried about LEO. Decriminalize it (for adults), save dollars from not having to deal with it in the Justice system, and the actual value of it will drop below the price of lettuce. If the argument is that weed is an essentially harmless substance, let people grow their own. How many ounces per person per year are we actually talking about, anyway? I personally know very few people who smoke the stuff, the same way I know very few people who huff gold spray paint - because they know it’s not good for them.


  36. - Arthur Andersen - Wednesday, Apr 25, 18 @ 3:03 pm:

    JSM, thanks. Wonder how that Bank idea sits with the Feds?

    The progress or lack thereof of the Schumer bill will be interesting.


  37. - Ron - Wednesday, Apr 25, 18 @ 5:38 pm:

    Colorado seems to have done it right. So can we now legalize it?


Sorry, comments for this post are now closed.


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