Opinion: Legal marijuana and the black market

With Illinois legalizing recreational marijuana, Kansas is increasingly an island of marijuana Puritanism in the Midwest. As more states create legitimate marijuana economies, what do we know about the black market marijuana economy in Kansas? Could legalization tame it?

The marijuana economy in Kansas includes those who produce, sell, or purchase the plant here. Many of us know Kansans who participate in it. Among Kansans I have encountered: a suburban businesswoman who drives marijuana back from Colorado for herself and friends; a veteran who smokes to deal with stress; and, yes, some stereotypical “potheads.” Maybe some of you are part of this underground economy.

The financial value of this black market in Kansas is unknown. However, priceofweed.com crowd-sources data to estimate the street price of marijuana. Self-reported data like this has obvious flaws, but it beats no data. Based on over 3,000 reported purchases in Kansas, it estimates that an ounce of “high quality” marijuana costs about $340 here versus $283 for “medium quality” marijuana. Medium to high quality marijuana cigarettes run from $6 to $8.

No public survey has asked Kansans about their marijuana use, but Gallup has asked that in national surveys. In the most recent Gallup estimates, 45% of American adults reported trying marijuana at least once. Further, 12% of American adults reported that they currently “smoke marijuana,” skewing toward youth of all races, men, and lower income Americans. If that 12% translates to Kansas, that’s about 260,000 adults in our underground pot economy.

Taxing legal sales can be a significant source of revenue for states. Many Kansans happily spend their money in Colorado dispensaries, bloating its state and local government coffers. Understandably, marijuana advocates have promoted legalization as a potential solution to the long-term financial problems that former Gov. Sam Brownback created for Kansas.

But, those advocates oversimplify this argument, as if legalization magically eradicates the marijuana black market and creates a problem-free revenue Valhalla. All states with legal recreational marijuana — and Canada — still have a vibrant black market that accounts for most marijuana sales, not to mention unlicensed production.

Why do these black markets persist? High state and local taxes on marijuana and hefty dispensary markups balloon consumer costs. Local control laws allow clusters of localities to ban dispensaries, creating “marijuana deserts” in the legal market. And neighbors like Kansas, whose unmet internal demand for marijuana strains limited legal production, encourage unlicensed growth and illegal export.

Yes, these states still collect substantial revenue from marijuana, though most have seen lower than expected revenue over time given the persistence of the underground market.

Nor does legal marijuana eliminate policing and prosecution around marijuana. Every state with legal marijuana still polices illegal growth or distribution and possession beyond legal limits. States regulate their marijuana industries tightly (though, see Oregon for a case of under-regulation crashing the marijuana market).

For now, individuals who feign shock at the suggestion that any “normal” Kansan uses marijuana dominate the Kansas Legislature. We lack even medical marijuana. Change will inevitably come, though. FOX News and Kansas Speaks polling shows that most Kansans support legal recreational marijuana. Legalization might even pass were it on the Kansas ballot.

Kansas may eventually change its marijuana laws, but at that future date we should not do so blindly. There will be benefits, yes, but legalization is not the panacea that many imagine.

— Patrick R. Miller is an associate professor of political science at the University of Kansas.

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