An interesting article was published on today on the topic of how much of the black market remains after medical marijuana legalization in Colorado.

An increased legal supply of anything will result in a shrinkage of the illegal market – if one exists. In theory, legal growers and sellers of marijuana don’t have to worry about being busted; they can operate in the open, buy advertising, and generally offer a better atmosphere than a back alley or some dude’s apartment. If supply can outpace demand for a given commodity, prices will fall. Yet – in Colorado at least – medical marijuana dispensaries still charge a much higher price than the black market.

There’s no consumer price index for pot in Denver, but police commander Jerry Peters has a pretty good idea of the cost. He heads a drug task force in the metro area.

“An ounce of marijuana goes anywhere between $270, $280 to about $400 an ounce… that we’re seeing in the different dispensaries,” Peters says. “In the black market, though, when … we buy an ounce of marijuana, it’s about 150 bucks.”

There are several reasons for this. As a college student points out in the article:

“It’s just way safer, it’s better quality, and … I don’t know, it’s just way easier.”

The marijuana you can buy at a dispensary is generally of much better quality than marijuana on the street. You can get carefully grown strains that target specific symptoms, and since the medicine is so much better, you can consume less of it. Also as she points out, it’s safer; if you’ve ever been to a bad neighborhood trying to score some weed, you know what she’s talking about.

Medical marijuana dispensaries also have the advantage of a more consistent supply chain. Most dealers never know where their next “re-up” is going to come from, or how much it will cost. Dispensaries – again, in theory – grow their own without interference from authorities, or they buy it from legally-sanctioned growers.

But some people are still buying illegally. And they have their reasons: They’re comfortable with a dealer, or they don’t like the idea of putting their name on a government registry, even one that’s supposed to be confidential.

There will remain some sliver of a black market for a time, even after full marijuana legalization. It will take time for the legal supply of marijuana to outpace demand. It will also take time for the drug dealer culture to give way to the dispensary experience. But we must be careful: excessive government regulation and taxes have the ability to push the price of marijuana too high. The only winners in that scenario are the drug dealers.

Joe Klare

3 Responses

  1. Professor Orange Hair

    There are other reasons why dispensaries are so much more expensive than the street, as I argue here. Communities are afraid that medical mj will make its way to the street, and dispensaries have to compete with the black market on wholesale pricing.

    What I forgot to mention on my blog was the fact that in places like Colorado and California, where the police are relatively light-handed about small marijuana offenses, the forces that drive prices up on the black market (“risk” is a good one-word synopsis) are reduced, widening the price discrepancy between legal and illegal bud even further!

  2. dersely

    There will alway be a black market. The black market is very flexible business, the black market can avoid being taxed. The black market can also control the price of marijuana. The black market can also sell to teenagers.

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