Legal Pot Sales Stoke Illicit Market
By Rick Sobey
Massachusetts police say they are seeing a thriving underground marijuana market, which is booming four months after the launch of legal pot sales -- as dealers take advantage of the heightened demand and short supply -- and compete with cheaper weed, while using the legalization laws as cover.
Police chiefs say their concern that legalizing pot would actually fuel the illicit market -- leading to an explosion of illegal marijuana sales in Massachusetts -- is coming true.
Both the cops and cannabis advocates say the combination of high prices and low supply in the few retail stores -- often located far from their customers -- is driving the newly energized weed consumer base to seek out the cheaper black market.
The illicit market is “as vibrant or more so” than before as a result of the expensive cost of buying legal marijuana during this slow legal rollout, Billerica Deputy Police Chief Roy Frost said last week. Frost said his drug unit is busy with new drug distribution cases, while departments around the state have made massive marijuana busts in the last few months.
“Legalization has made it much more socially acceptable for people to buy from someone down the street, even though that’s still not legal,” Frost said. “The culture has certainly expanded because of the shops, only fueling the black market.”
And it is not a benign trade.
“When large amounts of marijuana is in play, there’s usually a large amount of cash, there’s usually weapons and potential for all types of crime,” Frost said. “It brings a lot of violence.”
The price for marijuana on the illicit market in Massachusetts is about half the cost of marijuana in retail stores, according to consumers. The average price for one-eighth of an ounce on the black market is about $25, compared to the average price of $50 in pot shops before the 20 percent tax for recreational use.
Foxboro resident LaMesha Smith, 47, bought $100 worth of marijuana Sunday afternoon at the bustling NETA pot shop in Brookline, where a constant stream of customers spent about 15 minutes in line waiting for their turn at the counter. She said that the $100 packet of weed would go for about $40 on the street.
“I’m not sure I’ll be back here,” Smith said. It was her first time at the store.
Instead of driving 45 minutes away to the closest pot shop, waiting in line and buying more expensive product, many consumers are heading down the street to their local dealer. People feel more comfortable with marijuana because of legalization, but can get it more easily “from my guy.”
The black market “is absolutely thriving,” Somerville resident Justin Kuhni, 41, said Sunday outside NETA. “It’s way cheaper out there, for a better product sometimes.”
Proponents during the legalization debate ahead of the 2016 Proposition 4 vote had claimed regulating sales would kill the illicit market.
“We’re seeing the opposite of that,” said Maggie Kinsella, press secretary for the Massachusetts Cannabis Reform Coalition. “The whole reason was to prevent diversion to the illicit market, but people are going there because the cost is not realistic.”
State Cannabis Control Commission Chairman Steven Hoffman acknowledges that 15 recreational marijuana stores will not completely wipe out the illicit market. But he said he believes the black market will die down as more shops open across the state.
“Our hope and expectation is that it will diminish,” he said.
The steep prices in pot shops is a supply-and-demand issue, Hoffman said. He expects prices to drop over time with increased competition.
But the extra cost is worth it for Lynnfield resident Kathy Crowley, 42, who used NETA’s reserve-ahead service Sunday. It’s all about peace of mind, she said.
“It’s cleaner,” she said of the legal marijuana. “I don’t have to worry about what’s going on in someone’s basement or attic.”
Everett resident Edgardo Escamilla, 21, after his first purchase at NETA on Sunday, said, “This is way safer. You don’t know what you’re getting on the streets.”
Beyond the costly products in pot shops, Kinsella of the Cannabis Reform Coalition said the state implemented an astronomical tax that should be lowered. The state excise tax for recreational use marijuana sales is 10.75 percent, the state sales tax is 6.25 percent, and the local option for cities and towns is 3 percent, for a total of up to 20 percent.
Hoffman noted that Massachusetts’ tax rate for recreational marijuana is in the middle of the spectrum for states that have legalized sales. In Colorado, for example, consumers buying retail marijuana pay more than 30 percent in taxes: 15 percent state excise, 15 percent special sales tax, and on average a 3.5 percent local tax.
California, now one year into legal pot sales, has also seen a thriving underground market, according to a recent report from its Cannabis Advisory Committee.
“The unlicensed market continues to flourish, due in part to the competitive financial advantage such operations have over legal cannabis businesses, which are committed to paying license fees and collecting taxes,” the report reads.
The 15 stores spread across the Bay State are not easily accessible by the T, except for NETA, which opened last month. In some cases, the product is inferior in the retail store, said Joseph Gilmore, co-founder of the Massachusetts Recreational Consumer Council.
“The state has to be intentional about making sure it’s affordable for consumers,” he said. “Otherwise, there’s no incentive to support these legal shops just yet.”