“Recreational” marijuana sales are legal now in nearly half the U.S. states, but the effort has gotten ahead of itself on the retail front–or at least, ahead of the regulation still imposed on it.
The rollout of shops for legitimized selling of weed, which memorably suffered in early-adopting California, is continuing to give New York fits. Attempts there, as elsewhere, to give license preference to individuals or groups thought to have been unjustly penalized during the years of prohibition have tied up the opening of such shops. Affected also are the state’s now-legal marijuana growers. (They are to sell their crops through the blessed stores.) Meantime, a profusion of illicit “convenience” storefronts since legalization, offering drug paraphernalia and often cannabis as well, has confounded the authorities even as Gov. Kathy Hochul and New York City Mayor Eric Adams promise Eliot Ness-like crackdowns on the proprietors and their landlords. Libertarians laugh and stoners smirk at the contrast in market readiness between the formal and informal sectors.
In Oregon, however, a different dynamic has evidently been undoing the experiment. That state made it relatively easy to open a weed store, out of the same intent to ease the barriers for victims of past social injustice to get a piece of the new action. The result was lots of legal shops, but too many of them to profitably share in the market. There are still hurdles to “safe” dope dealing, mind you, starting with the tax (up to 20% in parts of Oregon) that must be imposed on the consumer. No wonder the margins on transactions aren’t enough to cover assorted costs for some in the competitive field—particularly when the base “street” price is set by the skulking guy on the corner.
To be sure, the states have laden the weed industry with many of the constraints put on other vice sectors, such as forbidding sale near protected locations such as schools, even in tight urban areas. Localities add to the restrictions, such that on Long Island, for instance, only a handful of new licensees have found spots, even though the state aids them in site acquisition through its misnamed Dormitory Authority.
But it is the federal government that is really gumming up the works, by not joining in the legalization wave. This most powerfully pains the entrepreneurs by effectively keeping them from nationally-chartered banks and therefore card or phone transactions. When you are a cash-only business, it limits your market–and increases your security risks. (There’s an additional wrinkle: IRS expense deductions common to other businesses are not allowed.)
So, no wonder there’s renewed pressure to get the Biden administration to act on removal of marijuana as a Schedule 1 narcotic. Ben Kovler, a national player in the cannabis business, placed a full-page ad—depicted here–in last Sunday’s New York Times and Washington Post editions making this pitch. He framed the 1970 Controlled Substances Act, a key part of the old drug war, as a concerted attack by Richard Nixon on people of color and Vietnam peace protesters. (You can’t underestimate Nixon, but Kovler does overlook the Congress that enacted it, majority Democrat.)
Maybe a green light from Washington D.C. would finally turn Main St. marijuana into a viable enterprise. Demand exists for the product–that we know from decades of thriving “dealerships.” And there’s a whiff of weed on many Manhattan blocks these days, so the smokes (as well as the chews) are getting to market, for better or worse. If the industry really were allowed to function in a more normal way, we’d at least reach what economists call a market equilibrium. Would that suit the feds and the states? Or is the high here from market manipulation?
Tim W. Ferguson 