Is Legalization a Full Victory?

Cannabis legalization comes with terms and conditions, like cryptocurrency legitimization. That might not prove to be the full victory people were looking for.

April 22, 2019

By: Bobby Casey, Managing Director GWP

A big topic, especially this year, is cannabis legalization. As a staunch opponent of prohibitionist policy, I welcome that discussion and the lifting of these drug war laws.

Prohibition, time and again, creates more danger than it assuages. You don’t have to agree with how someone exercises their rights, to defend their right to do it, or see the impractical outcomes of controlling people’s freedom.

Fifteen states still have their bans in place. The remaining states have legalized it to varying degrees. Rumors started circulating in the second half of 2018 that Trump would be amenable to lifting the federal ban entirely.

The Farm Bill — colossus that it is — includes a measure legalizing hemp. An industry long overdue for release, can at last capitalize on its high demand.

This is good news right? There are good aspects of this, and it’s certainly a step in the right direction (at the risk of sounding trite).

With “legalization” the state defines the terms in which acceptable. When you think about it, everything that is industrious in the US is “legalized”… while hardly anything is “decriminalized”.

If you think about the Cinderella story, for example, Cinderella could of course go to the ball… provided she jumped through an inordinate number of hoops in a short period. Of course, the entire point was to make it impossible for her. That is how “legalization” has played itself out in the US… regardless of intent or letters of the law.

Decriminalization, by contrast, leaves you to it. So, breathing would be decriminalized. There are no terms and conditions to you breathing. (Rather desperate example!)

The government at every level is WELL behind the curve on this. People have been clamoring for legalization for decades, to no avail. Some major cronies behind keeping cannabis illegal are:

• The Alcohol Industry – Here comes the zero calorie, zero-death rate, non-violent competition the boozers can’t afford! Not only does cannabis pose fewer risks, it helps people quit alcohol! They are not eager to watch their market share go up in a plume of smoke, so to speak.
• The Police Unions – Between the state and federal funding for their task forces, along with the asset forfeiture bounty, local police are reluctant to “forfeit” the war on drugs. Don’t forget the behind-the-scenes folks like the drug testing companies! All that money to fight cannabis: gone.
• The Prison industry – States made a deal with the devil when they contracted with “private” prisons. That contract charges taxpayers for not meeting an occupancy quota, but also charges for the occupancy. Couple that with the fact that more people have been arrested for cannabis possession than all violent crimes combined, and you have a river of profits that will soon be coming to a halt.
• The Pharmaceutical Industry – If people can grow their own medicine, what does that mean for the drug companies who profit from managing your sicknesses at a hearty premium?
• Federal Employees – Cannabis prohibition alone is a $20 billion federal industry. The jobs and budgets that would be cut has many shaking in their jackboots.

People in need of medicinal access will at last be able to get it. From a strictly humanitarian standpoint, that is fantastic.

The mass incarceration based on possession of weed goes away.

Wouldn’t that also reduce the amount of asset forfeitures perpetrated in the name of at least cannabis? I don’t know. I think that depends on the terms.

If possession becomes a non-issue but distribution becomes the new sticking point, then nothing changes here. They’ll just take all your stuff based on a presumed intent to sell, and all your stuff is ill-gotten gains of illegal distribution. That’s business as usual.

Again, the terms are unknown, but I know enough about the nature of government and the influence its cronies have, to where my expectations are not high (pun intended).

The drug war itself is inherently discriminatory. Whether you want to say it targets poor people or targets people of color because they are disproportionately poor, is of no real consequence. The enforcement of drug policy was and always has been discriminatory in one way or another.

Rarely did we see suburban housewives being dragged out by the heels in the same ruthlessly efficient manner as a street dealer from the inner city. This presumption that illicit drug use is somehow lower in affluent neighborhoods is precisely the bias that leads to the circular evidence:

Target and focus on inner cities, arrests and convictions are greater in those areas, conclude that inner cities are where the drug problems are.

The drug war was much like broken-window policing. It’s the pre-crime to pre-crime, where signs of “disorder” were indications that the area was ripe for major crime to take place. The distress of poorer areas was the sole excuse needed for police to pry and presume.

The same government that perpetrated all that is going to roll out the terms and conditions for legalization. Let’s see what we have so far!

Excise taxes and regulation are excessive in the states that provide for legalized cannabis. So much so, that the barriers work two ways: buyers can’t buy, and people who want to sell, can’t necessarily afford to meet the requirements to sell.

Because the government is so far behind the curve, most folks are not turning away from their usual street dealer. The dealer doesn’t charge taxes and doesn’t have to meet all these ridiculous regulatory requirements.

However, the dealer has built a significant reputation and customer base off providing a good product at a decent price. They win the price war, and they might even win on quality.

Due to the absence of a market-driven incentive to go the legal route, the government can still pursue the distributors who are “illegally” competing. Those “illegal” competitors would of course be, poor people.

So the government targeted poor people for hustling weed to make ends meet. Then they sullied their records and incarcerated them. Now they are legalizing weed, but pricing them out of the very industry they’ve been running for decades?

It’s a double-edged sword: every business wants experienced employees… but when it comes to cannabis, your experience cannot include getting caught. So those who were caught, but want to go mainstream, can’t, unless they start their own dispensary.

What does it cost to open a dispensary? Anywhere from $150,000 to $250,000 just in start-up capital depending on the state. That doesn’t include the licensing and application costs! Applications run about $5,000 (non-refundable) and licensing fees can be as high as $20,000!

Then there’s the cost of opening and maintaining the storefront.

I guess there is some consolation in a federal lift on cannabis prohibition in that banks can finally get involved. As it stands, banks are federally insured and are limited in how they can interact with cannabis dispensaries.

This isn’t much different from alcohol. The excise taxes, the ridiculously high price-tag on opening a distillery, and the micromanagement of every step of the process.

One interesting question is: Would the black market wane?

What happened to the black market of alcohol? Wouldn’t the regulations and taxes create a void where the black market could fill it? Black market activity by its own nature must be small.

Vineyards have hotels, host weddings, have tastings, all made possible by their proper licensing. They can openly advertise and promote themselves. The same is true for distilleries. They host tours, and have tastings as well. The scale at which they can operate relies on having the proper licenses to do so.

Big brand names from Samuel Adams to Johnnie Walker pay-to- play to build their brands.

Are there still black market moonshiners? Sure. Plenty of people have recipes passed down intergenerationally and make their own. But it’s a small-time, small batch, market because they cannot draw attention to themselves.

There’s still a gray market for cigarettes where people pit one state against another in excise taxes.

With cannabis, you might not be able to have a franchise, or large scale distribution, but I don’t know if that matters to people. Those who want to make a play at a larger experiential model, could go the proper licensing route.

Like I said, there are some good things to come from this, but what I see is a crackdown on distribution. What I see is a clear example of the barriers to entry that hurt the poor.

Regardless of your personal position on cannabis, the real issue here is freeing the markets. This comes down to prohibition, regulations, and taxes, and how those policies hurt the poor most. Protectionist legalization is still prohibition for many.

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