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Why Government Efforts to Promote Legal Pot Often Fall Flat

Why Government Efforts to Promote Legal Pot Often Fall Flat

New York governor Cathy Hochul recently announced a brand new campaign to encourage marijuana users to purchase only from licensed dispensaries. As is normally the case with such campaigns, this one is ostensibly aimed at ensuring consumer safety and funding expansion of the state’s legal marijuana program. Don’t expect it to succeed.

Government efforts to promote the legal pot industry fall flat more often than not. Such has been the story in California for years. It has been the story in state after state that has attempted to throw open the doors of recreational marijuana consumption without restriction.

The question is why. Once a state legalizes recreational marijuana, why does the legal market struggle to keep pace with the illicit market? There are a number of reasons. All of them go back to government.

Too Few Dispensaries in New York

In New York’s case, government ineptitude seems to prevail. The state okayed recreational marijuana without having the necessary infrastructure in place. People were using recreationally long before dispensary licensing began. Where did people get their pot from? Unlicensed operators selling on the street.

Even today, the number of state-licensed dispensaries is limited. There are too few dispensaries in the Empire State to even make a dent in public demand. The governor can push the legal pot industry all she wants, but residents are going to buy their pot from whoever gives them easiest access and the cheapest price.

Hochul has responded to criticism of New York’s legal cannabis infrastructure by saying that consumers should purchase only from licensed shops so that tax revenues can go back into expanding the system. The argument would be laughable if it weren’t so typical of government. People are smart enough to know that neither a state nor a nation can tax itself into prosperity. They will not pay for highly taxed cannabis if cheaper, untaxed cannabis is readily available on the street.

Different Problems in Different States

New York regulators shot themselves in the foot through actions that propped up the black market while they were trying to put together the infrastructure necessary to support legal operators. But lack of infrastructure isn’t the only problem. Moreover, New York isn’t the only state struggling with this.

There are different problems in different states. Onerous regulations are a problem in California as well, but a bigger issue for legal operators in the Golden State is taxation. In the simplest possible terms, taxes are killing California’s legal marijuana industry. Operators have been begging for tax relief for years, to no avail. Meanwhile, their competitors in the illicit market sell for less because they don’t collect and pay taxes.

Black Market Medical Cannabis

The legal cannabis industry’s problems are well known in states where recreational consumption is allowed. But what about medical-only states, like Utah? The picture isn’t so clear in those states. That could be due to a lack of reporting. It could be a matter of lower demand. No one really knows.

Utah has only licensed 15 medical cannabis pharmacies to date. The Beehive Farmacy in Salt Lake City is one of them. Are so few pharmacies enough? Probably not. Does that mean there are black market sellers competing with Beehive? Probably. We just don’t know how serious the problem is there.

We do know it is serious in New York and California. We also know that government efforts to promote the legal market fail more often than they succeed. A governor asking residents to buy from legal operators doesn’t carry as much weight as lower prices on the black market.

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