Black market cannabis sales continue to be one of the leading markets for cannabis. In states that have legalized such as California, Oregon, and Colorado – the legal market stipulation is that you are purchasing top-quality cannabis. Unfortunately, this isn’t always the case.
Black Market Cannabis Sales Are Still More Affordable Investment
California has had one of the largest illegal cannabis grow operations busted not 2 weeks ago. According to reports the bust was in multiple locations and contained over 350,000 cannabis plants. The value of this? A whopping 1.19 billion dollars.
With cannabis legalized in multiple states in the US the question remains – why does black market cannabis continue to have a foothold on the industry?
The answer to this is pretty simple. Heres why:
Black Market Cannabis is Easier To Start Up Than Legal Regulated Cannabis
The legal market is set up against small-time growers. In order to start a business, you must comply with your states guidelines and pay a number of fees.
Depending on your state (such as California) these fees for full commercial cultivation can come with a hefty price tag. A California cultivation license can be upwards of $180,000 – and that’s just in the licensing itself. This doesn’t include the cost to rent (or buy) the required space, cost of materials and the energy bill. On top of that, it takes approximately 3-4 months until your first harvest is complete. This means that a net short will ultimately happen in the first fiscal quarter.
The second is banking. Since cannabis is still regarded as a schedule 1 narcotic by the FDA – banks are not entirely pone to lending money to start a business. If someone wanted to start a small nursery or small grow, then it wouldn’t be worth it at all for anyone simply due to the fact that the loan needs to meet the required return. Going back to the first part- if there are net losses during the first fiscal quarter – then good luck trying to find a bank willing to fund it. You would have a better chance of meeting someone with a lot of money who would want to throw in on it.
For all intents and purposes – illegal grow operations can provide more money as well as require less money to start up – a greater return of investment.
The Cost to the Public
Legalized states also have the most expensive cannabis. With the cost of a store, paying employees and taxes, the regular price for an eight has almost doubled in comparison to the ways it used to be.
Many medical patients have been steered clear of their local dispensary. Let’s take a look at New Hampshire – for a long time there were only two medical dispensaries. This means that if you had back pain – you had to drive upwards of 2 hours there and back in order to receive your medication. Once you got there, you were instantly greeted by enormous price hikes along with a substantial tax. Where you used to go to your buddies house and he would probably hook you up for an eight at $35-$40 its not upwards to $65-$70. The majority of New Hampshire MMJ cardholders only show up to a dispensary once, look at the price, and go back to their friend. This results in larger black market sales.
In States That Are Still Illegal – People Do Not Even Have An Option
For many states that are still holding onto prohibition, the idea of starting anything even remotely legal is out of the question. Thus, the only option is the illegal one. States that have not legalized (or decriminalized) continue to fuel the black market thus creating more criminals and penalizing people for possessing small amounts of cannabis.
On the other side of the spectrum, the idea for young entrepreneurs is only limited by state legislature. Will cannabis ever not be sold in the US? The answer is undoubtedly no. While many states are now legalizing, the requirement and capitol is out of the hands of small businesses. It relies solely in the hands of wealthy individuals who have the capitol to invest.