It is becoming very apparent that the black market, rather than dwindling and disappearing like many experts predicted, is still going strong and thriving. The fact that illegal sales have continued and thrived could potentially dissuade lawmakers in other countries from adopting similar legislations. All of this begs the questions “what’s really going on?” Is the legalization argument flawed or are there other factors at play that we have been ignoring? One could argue that excessive regulations, quality problems, pricing, and a lack of supply in the legal markets that are keeping the black market alive.
The eradication of the black market was one of the Canadian government’s main goals, it’s ironic that one of the factors feeding it is the regulatory framework which has been put it place. Not only are the government restrictions on licensed producers extremely strict, but so are many of the provincial application processes for cannabis retailers and processors. Many of the laws that have been put forth surrounding the distribution, sale and advertising of cannabis are incredibly strict, and in many cases downright bizarre. If you walk into one of the Toronto dispensaries, you will get a sense of how heavy-handed everything is. The windows are blacked out, the labels and logos on the packages have been stripped to the bare essentials, and the product is hidden away behind thick glass. All of this is the result of the federal government’s aim to legalize cannabis without normalizing its use.
One of the largest hurdles facing the legal market that hasn’t been well addressed are issues surrounding quality. While it’s definitely a more difficult variable to quantify, a number of surveys and reviews have shown that many consumers are dissatisfied with the quality on offer. Many of the quality control issues ultimately tie into supply. Canada already had some of the highest rates of consumption in the world, and that number has only increased since legalization. Put simply, the supply of cannabis is still being outstripped by the incredible demand. Most of the licensed producers are struggling to simply get enough product out the door, meaning that a lot of inferior pot is being shipped out in the process. To offset the issue, it’s the experienced users who routinely hit up their black market dealer during prohibition that are the least likely to tolerate these problems.
Another major culprit behind the persistence of the black market is a simple case of basic economics. While many are attracted to the idea of purchasing cannabis from a regulated source, at the end of the day there will always be those who simply aren’t going to buy legal when unregulated product is cheaper. For example, the average price in April 2021 for a gram of cannabis sold legally in Canada is $9.99 verses $6.40 for a gram of black market cannabis. To make matters worse according to statistics Canada the gap between legal and illegal cannabis is $4.72 per gram on average.
One of the biggest issues and probably the simplest explanations is that there’s not enough of the legal stuff to go around. While the issue has improved in many regions in the past year, cannabis shortages have plagued provinces throughout the country, particularly in the early days of legalization. Many retailers found themselves unable to stock product for days at a time. Health Canada is showing high levels of inventory, but critics have rightly pointed out that a significant amount of that product is unfinished and not ready to sell.
Despite all of these problems it’s important to put things in perspective. First and foremost, one fact that has been pointed out constantly is that legalization is still in its early days. The hope is that as the Canadian government and the cannabis industry continue to evolve, we’ll start to see these problems work themselves out. Despite what many anti-cannabis proponents are claiming, the situation is not actually that bad. A number of reports have indicated that the black market sales are indeed declining. One study by Statistics Canada found that illegal sales decreased by 13% over the last year. So while it may not be happening as quickly as the government hoped, it is clear that things are trending in the right direction