Did Marijuana Legalization In MA Put Pot Dealers Out Of Business?

Only In Massachusetts is an occasional series where Patch tries to find answers to questions about life in Massachusetts. Have a question about the Bay State that needs answering? Send it to dave.copeland@patch.com.

Ahead of the voter referendum that legalized adult-use marijuana sales in Massachusetts, proponents argued open and regulated cannabis sales would eliminate the black market. So four years after that referendum was approved, it may seem discouraging that a November report estimated about 68 percent of marijuana sales in Massachusetts in 2020 would be on the black market.

Massachusetts deserves credit in how it legalized marijuana. The state's Cannabis Control Commission had approved 774 licenses to sell recreational marijuana as of March 2, and most Massachusetts residents now live within a short drive of one of the dispensaries where anyone over the age of 21 can buy flower, pre-rolled joints, edibles and other pot products.

While the opening of stores since voters approved legal, recreational marijuana sales in 2016 — which involves state and local approval —has been slower than many would have liked, the measures built into the program seem to be working. Since the first adult-use dispensaries opened in 2019, there have been:

• No sales at legal dispensaries to minors
• No change in crime rates around dispensaries
• No increase in cannabis-intoxicated driving arrests
• No reported impacts to businesses or neighborhoods near dispensaries
• No staffing or budget increases in local police, fire, or health departments attributable to cannabis stores.

And the state, along with the cities and towns that host dispensaries, have seen a nice uptick in taxes collected on each sale.

But there's still that pesky black market.

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The good news for lawmakers is the black market's share of marijuana sales seems to be shrinking as more legal dispensaries open up. An analysis done for CommonWealth by cannabis market research firm BDSA in November estimated black market sales would account for 68 percent of all Massachusetts marijuana sales in 2020, down from 75 percent in 2019.

The Cannabis Control Commission's own reports have shown similar drops. But the commission's survey of marijuana users found that about two thirds still get their cannabis from friends or a family member, not at legal dispensaries.

Marijuana Economics 101

The reason the black market has survived is simple: marijuana remains up to 50 percent cheaper when purchased illegally in Massachusetts.

Your friendly neighborhood marijuana dealer, after all, doesn't have to turn over a portion of his revenue to the state and the town where he operates. He doesn't have to lease retail space, install expensive inventory control and security systems or subject his product to stringent testing.

"It takes thousands of dollars just to even think about applying, unfortunately," Joanna Varner, 36, a medical marijuana patient in Weymouth who wanted to start a business selling cannabis-infused products told the Boston Globe when the newspaper looked at the black market for marijuana in February 2019. "That’s not even talking about your business equipment at all. . . . It’s nearly impossible."

As more legal dispensaries open and competition increases, the black market's share of marijuana sales will continue to decline, but it will take time. While there are more than 75 marijuana dispensaries — including medical marijuana dispensaries — operating in Massachusetts, experts estimate the black market won't feel pricing pressure until at least 150 recreational dispensaries are open in Massachusetts.

And controlling the black market in Massachusetts is not entirely within the state's control. Growers in places like Oregon, where an ounce can be purchased for about $100, or about a third of the average price per ounce in Massachusetts, have an incentive to ship their product to states where it can fetch more, even if that means moving it on the black market.

At the same time, law enforcement seems to have eased up on enforcing rules against unlicensed marijuana sales.

Walpole Police Chief John Carmichael, a member of a board that advises state regulators on cannabis policy, told CommonWealth many departments are choosing to focus on the illegal sale of harder drugs, like opioids. The number of Massachusetts court cases involving a charge of marijuana distribution was 2,065 in the fiscal year ended June 30, 2020, down from more than 3,200 in fiscal year 2015. The cases that do go to trial tend to involve quantities of 50 pounds or more.

Catering To The Everyday User

BDSA estimates Massachusetts residents spent $2.81 billion on marijuana in 2020, including recreational, medical, legal and illegal sales. And about 75 percent of that money was likely spent by people who use marijuana daily or almost daily, according to a 2016 study in Journal of Drug Issues.

In the 10 states that legalized marijuana before Massachusetts, converting those everyday marijuana users into legal consumers was key to making the programs deliver on their promise to eliminate the black market.

For the occasional marijuana user, the savings isn't worth the risk of an illegal purchase — if they even knew where to purchase black market pot in the first place. And the occasional user is less likely to be hung up on the intricacies of quality and selection in the same way an everyday connoisseur or medical marijuana patient is.

State regulation, including testing for quality and safety, does not appear to be enough to incentivize those everyday users.

"It’s like going to Whole Foods and buying organic, but you grew up going to McDonald’s and you’re still alive," Marc Hedges told the Globe in 2019.

Dave Copeland is Patch's regional editor for Massachusetts, New Hampshire and Rhode Island and can be reached at dave.copeland@patch.com or by calling 617-433-7851. Follow him on Twitter (@CopeWrites) and Facebook (/copewrites).