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  • Post Time Posted March 13, 2019
According to a statewide investigation last year by the Southern California News Group, of the 540 cities and counties in California, only 162 - just 30% - have permitted medical cannabis businesses. The numbers are even smaller for adult-use sales - only 89 cities (less than 20%) and six counties allow it.

Cannabis is easily accessible where it’s permitted. But in the rest of the state, the divide between residents who want it and their elected officials has created “cannabis deserts.” The unintended consequences include a thriving black market to meet consumer demand and a subsequent loss of tax revenue for the state. Last year, one in five Californians said they had purchased black market cannabis in the last three months.

In addition to opposition from local officials, high taxes and complex regulations are big reasons why the black market persists. Then there are the sky-high fees in many states that make it hard to even apply for a licence, and special operating costs that can run to tens of thousands of dollars annually for licence renewals, attorneys, storefronts and state-mandated product testing. They all drive up the costs of legal cannabis versus what’s available from unlicensed sellers.

In some parts of California, taxes can account for up to 45% of the purchase price of legal cannabis, which encourages consumers to look for cheaper alternatives. In fact, California consumers spent $500 million less on legal cannabis in 2018 than they did in 2017; before it was legal for adult-use. That meant California came up more than $100 million short of its expected tax revenue last year.

In Massachusetts, 75% of the cannabis sold this year will come from the untaxed, unregulated black market due to the state’s slow pace of licencing cannabis shops.

It’s also a problem in states that recently lifted prohibitions, as cannabis oversight boards are having trouble designing regulations fast enough, driving consumers to the black market.

The problem with the black market isn’t just a loss of tax revenue. There’s simply no way to know what you’re buying if it’s not coming from a reputable seller, leading to numerous health and safety risks for consumers who are purchasing untested, unregulated cannabis.

Source: https://www.forbes.com/sites/nickkovacevich/2019/03/13/cannabis-black-market-thriving-despite-legalization/#7dfbf7f15ea2

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