Can Legal Marijuana Snuff Out the Black Market?

The long-awaited moment is nearly here: marijuana will be legal to sell in the state of Massachusetts as of July 1 — with a license. But a question that has arisen for many long-term users of marijuana is: what is going to happen to the unlicensed, illegal marijuana black market.

Many believe it’s here to stay.

No licenses have yet been granted by the state, and longtime users and dealers alike argue that higher quality and lower prices will keep people loyal to their street dealers. At the same time, leaders of the fledgling legal marijuana industry say that safety, consistency, and a desire to work within the law will bring new customers through their doors. Meanwhile, marijuana users who are now legally growing at home are operating in a new reality where instead of having to find a secret spot in the woods, their bigger worry is that neighbors will raid their open gardens.

Jane, a 37-year-old Westfield resident, asked that her real name not be used due to employment and legal concerns with using cannabis. She thinks the black market will survive, but that it will be greatly reduced. A daily cannabis user, she said she is seeing price discounts on ounces of marijuana in the black market as the July 1 date approaches.

“People seem to be trying to get rid of stuff or establish a very competitive price with what stores will be charging,” she said. “Also, the quality available has dipped a bit.”

Jane believes that many of the people who will be getting marijuana for recreational use from stores will be the lighter users, who buy a little here and there. For dealers, those customers are not their bread and butter, she said.

“When you talk to a dealer about it, like ‘Hey, are you worried about this,’ they will say no,” she said. “It’s because they feel like they have their customers and with the taxes, the stores aren’t going to be able to compete. They will take a little hit probably, but they are not too worried about it.”

Jane said she expects to stick with the black market for the time being, as she thinks buying from a store will be more expensive. Though she said she will certainly check out what the stores have to offer, especially for fun or novel products she could put out at a party.

“It seems like it is going to be a luxury to go to the stores because of the prices,” she said.

At the same time, she said dealers on the illicit market will likely have a tough time finding new customers, especially younger ones.

“I think people who want to try marijuana, my guess is their first stop will be the store, not the forest or the alley,” she said.

Peter, a 40-year-old Amherst resident who asked that his name be changed due to legal and employment concerns over his cannabis use, believes that the black market will eventually wither.

Peter thinks that many people who had used the black market may begin to grow their own.

“If I retired, and we’re going far into the future here, yeah I would grow because the law allows for that,” he said. “It is cheaper and it is interesting to me. I like plants.”

Describing himself as a heavy cannabis user — not daily, but frequent — Peter said he has seen prices fall.

“The most I have ever paid for an ounce of marijuana is $400, and these days it’s in the 200s,” he said.

At the same time, Peter said many people will visit the licensed marijuana sellers due to the consistency and the professionalism that is offered there.

“If you see what’s going on in California or Colorado, for a lot of people who like cannabis, it is the golden age,” he said. “Prices are dropping; the quality and selection are expanding.”

Peter visited a marijuana store in Colorado recently and described the experience as a cross between visiting a CVS and a head shop.

“You go in and it is a normal store and it’s a very low-key experience,” he said. “You have clerks who are very well versed in what they are doing and you can talk to them about different products or strains like you would talk about different options on a car. I bought a few things and then I left; it took 10 or 12 minutes.”

Peter believes that he and many others will look back on the outlaw culture of marijuana with some nostalgia, but that the danger of getting arrested and the unequal treatment of minorities under the law will not be something he will miss.

 

Getting ready for legal sale

Norton Arbelaez is director of government affairs for NETA, a medical dispensary with locations in Northampton and Brookline, and a cultivation facility in Franklin. The company has applied for a recreational marijuana sale license, as well.

“We really see this as an opportunity to expand our services, not change course,” he said. “It is more of an expansion.”

NETA plans to hire 100 people, and open a third retail location in Franklin. Arbelaez said NETA’s products will be tested by third parties, labeled and packaged to indicate specific doses, and there will be branding elements. On the black market, he said, the marijuana will be completely unregulated.

“It’s not so much of a competition,” Arbelaez said. “It’s apples and oranges.”

Arbelaez said it was the same for the “gray market.” Like the black market, the gray market is also illegal, but operates somewhat inside the legal system, he said. He used the example of someone legally allowed to grow marijuana for medical purposes, but who grows more plant than needed and sells to others.

While he does not believe it will happen overnight — Arbelaez predicted a few years — he thinks that cannabis users will migrate toward buying in a store rather than sticking with their dealer.

“They get used to the quality, they get used to the consistency,” he said. “They are buying a product that has been sustainably manufactured. The quality can’t compare, particularly of the infused products, on the gray and black markets. That is the consistency and quality that regulation provides.”

There will also be a learning curve for new cannabis customers, and Arbelaez said that NETA is prepared to welcome people of all knowledge levels. He said he expects long lines at NETA’s dispensary locations early in July, and there will be staff members going up and down the lines offering water to customers waiting. Medical patients will have their own line, so they won’t have to be delayed behind all of the new customers, he said.

Paul, a 34-year-old resident of Hampden County, has been growing and selling marijuana on the black market for 10 years. He asked not to have his name used due to legal concerns over his black market activity.

He said legalization has brought prices down, and that is squeezing many dealers. Also, customer tastes are changing with legalization.

“You’re seeing more demand for edibles, wax, distillate, cartridge pens,” he said. “A lot of guys just sold flower, and now customers are not smoking flower.”

As the price plummets, dealers are looking to cut costs. Some of those costs come from hiring people to trim marijuana. He said as a result, the marijuana doesn’t come out looking as nice.

Sinking profits are making others look to get out, though Paul said he is not considering taking that step yet. “But, you know, there’s numbers where I would,” he said.

Massachusetts growers and sellers in particular are vulnerable due to a short growing season for outdoor growers and high electricity costs for indoor growers.

“In Oregon, Washington, and California, they are producing so much because they have the outdoor space to do it,” he said.

Paul believes the market for premium marijuana will stabilize and that the black market will continue to thrive in this area in particular, but he thinks there will be a place for lower quality marijuana, too.

“If you can get the product for less money at increased or similar quality, it is silly to waste money at the dispensary,” he said, adding that some black market dealers test their products to show they are pesticide free, just as stores do.

 

‘Sketchy’ experiences

Thomas, a 23-year-old Westfield resident whose name was changed over legal concerns is a senior at a college in Brooklyn, New York, said he’s sold medical marijuana to friends in the past. He started smoking weed after high school and the first dealer he knew was a close friend who had connections with other dealers. There have been both positive and negative experiences for Thomas interacting with people on the black market.

Among the negative experiences was buying from a woman who knew multiple dealers and would often manipulate him into buying her weed, Thomas said.

“While I wouldn’t say that this is necessarily the fault of the dealers per say, it sort of put me into awkward situations where she’d tell dealers that I was looking for some to smoke even though I told her that I’m not going to buy any. So, in a way I was kind of forced into being a middle man and I didn’t exactly know how to get out of that whole situation without jeopardizing some of the positions I was in at the time. She would also end up having a fit if things didn’t go her way.”

Thomas said he thinks most people would opt to buy weed at a shop or dispensary because it would be less of a risk.

“Whether or not the people you deal with are dealers, if you’re trying to get any sort of weed illegally then you’re going to run into some sketchy people that you may end up having to force yourself to cut ties with,” he said.

Nathan, a 25-year-old resident of Hartford has been smoking pot since high school. When Massachusetts voters decided to legalize recreational marijuana he was excited for the opportunity to buy marijuana legally without the risk of buying it on the black market. Nathan asked to have his full name withheld due to marijuana’s illegality in his home state of Connecticut.

“You don’t know where the source of the marijuana is coming from and there’s going to be an industry that regulates this,” he said. “It’s putting the safety for the consumers more that forefront.”

Nathan said he thinks the black market for marijuana in Massachusetts would be diminished, but wouldn’t go away completely either — black market weed is still an opportunity for people to make money.

He said people typically get their weed from “someone who knows someone,” and after a while customers become more acquainted with their black market dealers.

“It can always feel kind of sketchy because you don’t know where the pot’s coming from; you don’t know the dealer’s background, and you’ve got to be cautious. The substance is illegal and you don’t want them to get in trouble and you want to be able to use it like you would alcohol, but the process of getting ahold of it — there’s more steps involved.”

 

Growing your own

Mary, a 37-year-old North Adams resident, asked not to have her real name used due to legal concerns over her marijuana use. She grew up with two parents who grew and smoked marijuana openly. She began smoking it in high school but stopped for years. She resumed after experiencing pain issues as an adult and now uses it as medicine.

She also thinks the black market will continue to exist.

“People that are buying from growers or have a weed guy they like aren’t going to stop buying from those people,” she said. “Generally speaking, I’ve tried weed in dispensaries and I think the weed being grown by growers is better than the weed grown by dispensaries.”

Mary uses cannabis every day, most often through smoking or with tinctures. She doesn’t often buy or sell on the black market, instead growing marijuana herself and using excess trimmings to make edibles. Sometimes she sells or trades edibles.

“I’m pretty connected here in Berkshire County with a lot of growers in this area,” she said. “There’s a lot of people who grow for their own personal use who are my parents’ age.”

Some of the changes she has experienced with regard to the illicit market as marijuana has become more available through medical use is that younger users in particular are asking more specific questions about how much THC — the chemical compound in the marijuana plant that produces a high — is in certain products.

“It’s made a lot of people think they know a lot about cannabis, but it is showing me they don’t understand,” she said. “I’m not a laboratory. I don’t test. I can’t possibly do that.”

She has heard younger people say that they will only get marijuana from a dispensary, which is able to test for specific amounts of chemicals.

“I like to give the comparison of a person saying, ‘I only go to Big Y. I would never go to a farmers’ market where I’d be buying directly from people who grow the plant,’” she said.

For Mary, what local growers have to offer is that they have been growing the same strain for 10 to 20 years in some cases. Since legalization has happened, she said she has seen their knowledge devalued as businesses have gotten into the market.

Black market dealers continue to operate in the shadows, and Mary said she doesn’t actually know who her regular dealer is.

“People are really scared and secretive, and those old habits are dying hard,” she said. “I get scared even when I do a trade now, and it is completely legal what I’m doing.”

At the same time, that reality is changing. Rather than having to worry about finding a secret spot to grow her marijuana, Mary’s biggest worry now is whether her neighbors will steal her plants.

John Eaton is the owner of Aquarius Hydroponics in Agawam, a garden supply store tailored to indoor gardening, and the place where many home marijuana growers get their supplies.

Eaton said his business, which consists of about 80 percent marijuana growers and 20 percent for other types of gardening, has expanded from a 2,400-square-foot facility when they opened five years ago, to a 5,600-square-foot facility a few years later. About a year ago, they moved yet again to a 14,600-square-foot facility. Eaton used to be excited by $20,000 in-store sales in a month; now he’s disappointed with a month below $100,000.

Eaton said he had many customers who purchased equipment intending to use it for medical marijuana, which was approved in 2014. Since recreational marijuana was approved in 2016, allowing for people to grow the plant but not yet legally buy it, Eaton saw his business grow further. He sells both to small-time growers and is increasingly working with larger operators.

“With the new laws opening it up, there were more new growers who knew nothing and had bad information from the internet,” he said.

Eaton believes legal sale will eventually diminish the black market, though he believes the taxation level will affect how quickly that happens. He pointed to Washington state, where initial high taxes slowed sales at legitimate businesses and the taxes were later lowered.

Eaton also thinks that it will take a while for the legal commercial growers to get their marijuana to the quality level that exists on the black market.

Meanwhile, Eaton is helping his own customers along by gifting seeds to them at raffle events twice per year. Customers must be over 21 to participate. He’s also looking into potentially opening his own dispensary and has hired attorneys to investigate the possibility.

 

Politicians hope to end illegal sale

Congressman Richard Neal (D-Springfield) told the Valley Advocate he thinks the state has to be mindful about regulating marijuana sales as it moves forward.

“It’s pretty clear, if you want to draw a parallel, that the lottery has put a lot of underground business by the wayside,” Neal said. “Certainly the end of Prohibition put underground alcohol sales on the wayside. I think here, what’s important is to be able to successfully regulate it and incidentally tax marijuana sales.”

State Sen. Eric Lesser (D-Longmeadow) said he hopes that the black market would diminish after July 1.

“I think one of the main arguments for having legalization in the first place was to close the black market and to really end a really pernicious and backwards-focused War on Drugs that had criminalized a lot of low level marijuana possession. The hope is that legalization will bring that all out into the daylight and end the black market. We’ll see how that plays out, but I think it’s very important that happens. We need to make sure that the marijuana law is really flexible so that we are producing a market that’s competitive enough to end the black market.”

Gov. Charlie Baker told the Valley Advocate that he’s uncertain what would happen to the marijuana black market after July 1.

“When we talk to the people from Washington and Colorado, they’ve made pretty clear to us that while they have a pretty good handle on the regulated market, they don’t have information or visibility into the black market either. And when you think about it, Washington [and Colorado] are very big states geographically. You could fit most of New England into either of those states. I think the proximity here between states that regulate recreational marijuana and those that don’t have recreational marijuana is just going to be a much more complicated situation to figure out.”

Baker said he’s been impressed with the work of the Cannabis Control Commission and he thinks as long as the state creates policies to further limit the black market and is adaptable in its approach to marijuana.

“Intuitively, you would think that if you have a recreational market, you’d have less black market activity, but that really becomes a question of how much new supply domestically gets created and how accurately it can be tracked … I think that’s certainly going to be a big challenge for the commission. I know that’s on their radar.”

Jay Gonzalez, a Democratic candidate for governor, told the Valley Advocate that he hopes legalization would spell an end to the marijuana black market in Massachusetts.

“Obviously one of the goals of legalizing recreational marijuana is to bring it out into the open, to regulate it,” he said. “Hopefully it will diminish if not eliminate the black market. I think my bigger concern is where things stand in the implementation of this new state law that the voters clearly want to be implemented in Massachusetts.”

Gonzalez said he thinks the challenges that face the burgeoning marijuana industry include municipalities across the state that have banned retail marijuana shops. The Boston Globe reported in March that 189 of Massachusetts’ 351 municipalities have banned or created moratoriums against marijuana sales.

“We’ll see how that plays out whether there are enough municipalities who are allowing it in order for the industry to establish itself and grow in a way that meets the demands and needs of the people of the state,” he said.

Northampton attorney Richard Evans, 74, was the chairman of the Campaign to Regulate Marijuana Like Alcohol in 2016, one of the organizations that successfully got the recreational marijuana question on the ballot that year.

For Evans, who has been engaged in the fight to legalize marijuana since the 1970s, how the black market fares will come down to economics.

“The law that is going to have the biggest impact on the fate of the gray market is the law of supply and demand,” he said.

As marijuana businesses open, the principal purpose of the illicit market will be for the consumer to avoid the 20 percent sales tax and for the producer to avoid working within the law, he said. The question at that point becomes how long it can hold out, he said.

“If the people like me and the citizen activists who wrote the law and the Legislature who rewrote it did our job right, the answer is not very long,” he said. “Although the strict answer is ‘as long as money can be made.’”

Evans said it has taken a lot longer than he expected for marijuana prohibition to end, but he said he believes the pro-marijuana side has won. He even feels comfortable admitting that he, too, has been a marijuana user.

“It used to be I wouldn’t answer that question because I didn’t want to put my law license at risk, but I don’t think anybody will be surprised to hear that I have occasionally used it,” he said.

For Evans, the fight for legalization has been one for social justice. While some might grumble about strict regulations under legalized recreational use, it is a far better situation to be in than people getting arrested, and the law being enforced in much harsher ways for minority users, which was the situation under marijuana prohibition.

“Many good people have sustained themselves and their families for years selling marijuana without any adverse effects,” Evans said, adding he had heard of at least one woman putting two kids through college on income she made selling marijuana illegally.

Dave Eisenstadter can be reached at deisen@valleyadvocate.com. Chris Goudreau can be reached at cgoudreau@valleyadvocate.com.

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