(This is an abridged version of the cover package that appears in the August issue of Marijuana Business Magazine.)
The Illegal cannabis market continues to be one of the biggest threats to legal marijuana industry, whether through diverting revenue from licensed businesses or stunting the growth of legal MJ companies across the United States.
Though industry advocates persist in their pitches that legalization – either through new states coming on board or a federal mandate – would put an end to the illicit market, their argument has not come to fruition.
Instead, illicit operators are still open for business in most markets where adult-use marijuana sales are legal.
In California, for example, about 80% of marijuana sales are illegal, according to New Frontier, an analytics firm in Washington DC.
The illicit market is even stronger in states that have legalized only medical marijuana sales. And, of course, the illicit market is the only option to procure cannabis in states where no form of marijuana sales has been legalized.
According to industry insiders contacted by Marijuana Business Magazine, here are three key factors that should be considered in any discussion about the illicit market:
- The costs of doing business.
- Hurdles illicit operators face to become legal.
- Not all illegal businesses are bad.
According to Kris Krane, president of Arizona-based multistate operator 4Front Ventures, the illicit market is “probably going to remain an issue until cannabis is legal nationwide and we can really enjoy the economies of scale of interstate, international commerce that’ll bring pricing down to a point where it’ll be virtually impossible for the illicit market to compete.”
Legal marijuana businesses don’t have to wait for federal legalization to compete with the illicit market, however.
Cannabis executives provided Marijuana Business Magazine with insights and advice on how the industry can combat the illicit market on its own:
- A checklist for taking on illicit competitors.
- Why some illegal operators can’t become legit.
- Alternative methods to shutter illicit businesses.
- Two underground operators tell their stories.
- Offer products that the illicit market cannot.
- Create packaging that is difficult for illegal operators to duplicate.
- Why federal legalization is the ultimate answer.