While Seattle’s first recreational marijuana store opened last year to massive fanfare, which quickly lead to the store selling out by the end of the week and a windfall of $148,256 in tax revenue during the first three days, the high cost of the product has left many wondering whether the legal market will be able to deter customers from using the city’s existing black market once the novelty of a legal store wears thin.
Cannabis City opened with marijuana priced at $20 per gram, almost twice what has been standard for black market prices in the area. Although many have voiced concern about how high the prices are at the moment, a problem exacerbated by the looming marijuana shortage, Washington State marijuana czar Mark Kleiman recently told KPLU that the price for legal marijuana may in fact be too low and therefore encourage use by minors, despite legal marijuana only being available to those over the age of 21.
“The main bad outcome from cannabis legalization, the only one that I think matters, is an increase in heavy use, and particularly heavy use among minors,” Kleiman told KPLU in May. “The strongest policy lever to prevent additional drug abuse is to keep prices up.”
On the other side of the argument, an anonymous source from TopMMJ.com, a former marijuana delivery website that is currently seeking to supply medical dispensaries, told The Capitol Hill Times that the high prices created by marijuana’s current tax structure could put people off of legally-obtained recreational cannabis altogether.
Under current regulations, the product is taxed on every level, from growth, distribution, and sales. As a result, he says that recreational weed stores may soon see their businesses struggle in the face of a thriving black market and medical marijuana industry.
“I see it as a problem, because the recreational stores have started up a business where they can’t serve everyone who wants it,” he said. “Due to the taxes on the recreational front, there really isn’t room for high-quality marijuana at cheap prices. The taxes encourage a lack of quality, since they’re focused on creating as much as possible because they know it will all be sold out because of the government-created shortage, so they can set the prices as high as they want,” said the source.
“And because its $20 to $25 a gram, there’s no incentive for a customer to go to the store that may or may not even have marijuana. You can still buy up to an ounce on the black market legally. The only way to cut into the black market is to make a higher quality product at comparable prices to what’s available on the black market currently.”
The problems created by the current tax structure were largely behind move to medical marijuana he said, which he believes is going to see a surge in demand once the excitement over recreational stores begins to dissipate, which in turn could result in a two-tiered system.
“Regardless of how much you actually need it, medical marijuana is more cost friendly and consumer friendly,” he said. “The difference is like going to the Elysian and getting a microbrew or going to a warehouse and buying a Budweiser. The medical is more of a microbrewery type scenario, which is exactly where the recreational business needs to go. It should be treated and taxed exactly like alcohol so a free market can happen and those that aren’t good at their job will fall to the wayside, and those that offer good products will get more customers and the state still gets its tax revenue.”
While some may see a turn towards medical marijuana as an alternative to the high prices and low quality of legal marijuana as an abuse of the system, he emphasized that a redefinition of what many view as acceptable criteria for use of medical marijuana is required.
“Everyone has a variety of ailments, and even if you don’t need it due to a debilitating illness, a lot of people like it as an alternative to pain medication,” said the source. “Anyone who wants access to cannabis for medical reasons should be able to have it.”
Whether or not marijuana users will soon turn to medical marijuana or continue obtaining it on the black market, he says that the regulations governing recreational marijuana industry need to be rethought, or else the endeavor may fail entirely.
“The only way that the black market is going to be eliminated is competitive pricing, that’s just economics. Until that problem is resolved, there is always going to be a black market. Washington created its own monster because people are not afraid to get an ounce of black market weed because there are no ramifications.”