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Multi-billion dollar cannabis black market challenges law enforcement

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The cannabis black market is making headlines in both Canada and the US. Just this week, officials seized $1 billion of illicit cannabis growing in California

A supposedly legitimate hemp farm in Kern County, California, was growing 10 million illicit cannabis plants. Spanning 459 acres and 11 fields, the THC content of these plants measured significantly higher than the legal threshold of 0.3% for hemp. 

Cannabis growth and sales are illegal in Kern County, but that didn’t stop growers from raking in millions on the black market. 

This isn’t a problem that’s unique to California, either. Canada and legal states in the US face an uphill battle against pressures from the cannabis black market. 

Black market product costs both the government and legitimate cannabis producers billions. Lawmakers and law enforcement work hard to stamp out illegal operations, but with mixed success. 

But why is the black market flourishing when a legal market is available to consumers? It comes down to 3 issues with legal cannabis: 

  1. Black market products are often cheaper: In Canada, legal cannabis costs $8/gram, while black market cannabis is half the cost at $4/gram. This is because legal cannabis has to pay for licensing, fees, and other business expenses that black market dealers don’t. 
  2. The lengthy licensing process: It can take months for growers to get their license approved. Canada has a tremendous backlog of applications that the government doesn’t have the resources to process. Legal operations are incredibly behind as a result. 
  3. Lack of competition: Because there are few growers and sellers in the marketplace, there’s less competition. In a capitalist economy, less competition means higher prices. That’s why legal operations have a hard time competing with black market growers. 

Of course, the legal market will eventually outpace the black market. But for companies forging ahead in the new economy of cannabis, the black market is a devastating and harmful problem. In the meantime, legal states need to create smoother pathways to licensing and help canna-businesses grow—or risk losing millions to illicit operations. 

 

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