The illegal marijuana trade is booming in California, seven years after the state legalized its possession, cultivation and distribution. Unlicensed sales totaled $8.1 billion last year, dwarfing legal sales of $5.4 billion, according to estimates by New Frontier Data, a cannabis analytics firm.
Lawmakers in New York are concerned their state is headed in a similar direction. New York legalized cannabis possession in small amounts in 2021. Two years later, just five shops sell marijuana legally in New York City, while 1,400 bodegas, smoke shops and other outlets without licenses do, according to an estimate by the city sheriff.
The persistence of the illegal pot business in the face of state legalization reflects a variety of forces. Slow rollouts of dispensary licenses leave unmet demand that unlicensed outlets are happy to serve. Police and prosecutors, facing pressing problems such as violent crime, give little priority to stopping illegal pot. And high taxes on legal sales fan the embers of illicit ones.
“When you start seeing tax rates that are approaching 30 to 40 percent on products, it’s really going to be difficult to compete against the remnants of an illegal market,” said Mason Tvert, a consultant who played a role in several state campaigns to legalize cannabis.
Some of the 22 states that have legalized marijuana possession have had better luck extinguishing the black market, said industry observers, because they have permitted more legal retail shops, streamlined the process of going legal or didn’t have such entrenched networks of dealers or growers at the outset. At the federal level, marijuana remains illegal.