Black markets and grey markets pervade daily life in nearly every way. The idea of below board brands, or fakes markets are certainly nothing new. What do they mean to the newly legal cannabis market? And what are the problems that have been popping up as cannabis becomes the new darling of legally sold goods?
As legal cannabis markets grow, both medicinal and recreational, governments are tasked with figuring out regulatory structures to govern the production, supply, and sale of products, because that’s how things are done. This process of making laws to govern it, whereby it can be put in a legal store, and sold as a part of the standard economy – complete with tax, and reported revenue to the government – changes the manner in which something is made and sold, as well as who is able to profit from it.
Legal cannabis markets don’t look much like the black-market setup, and they certainly seem to cost more, but they offer specification in products, and enhanced forms of otherwise scarcely-found cannabinoids, and if safety regulations ever really get firmed up, a way to control for pesticides and other bad substances.
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What’s the difference between a black market and a grey market? And where do fakes fit in?
Let’s start with some basic definitions.
“A black market is one where the buying and selling of products and services take place in an illegal manner. A black economy is a highly organized and vast market where the regular taxation rules and norms of trade are not adhered to. A black market is known by several names, including black economy, underground market, shadow economy, underdog and parallel economy.”
This describes the standard and long upheld setup of going to your friendly neighborhood dealer who works out of a backpack, and spends his/her time avoiding cops.
“A grey market involves the buying and selling of goods and services that are not illegal, but the channels used in their distribution are either unauthorized or unofficial.”
This describes how a product that should be sold in a dispensary in America, is actually being sold by a black-market dealer in Mexico. It also encompasses – to a degree – the counterfeit market.
The counterfeit market is comprised of “phony products that are designed to mimic trademarked products without the consent of the original manufacturer. The products themselves are not illegal, but the way they are marketed is. Often, these goods can be difficult to identify, which is how they go unnoticed in the grey market in the first place.”
This describes knock-off products, fakes. Products specifically designed to look like an actual, known product. Sometimes the quality between original and counterfeit version is very close, sometimes it can mean an entirely different product – often inferior in quality and with possible dangers.
The black market cannabis world
As stated earlier, we’re all familiar with the standard black market cannabis setup. Usually you have a local dealer, who himself has a supplier. There is an entire supply chain, but no worker in it is on the books, and no product sold is taxed by the government. Products or production practices are not regulated, and often the end-user has no way of knowing anything about the supply chain.
It’s an entire business, from cultivation to sale, that exists off-the books, sometimes even with its own branding, and often with a certain amount of real pride behind the product, as many of these operations really do work to provide something good, black market or not.
In fact, some black market brands are high level brands that simply haven’t paid to go through registration and regulation processes, or are in an industry where there is no option for this. Very high quality cannabis is often sold on the black market, and sometime, if the business is known to its user, things like controlling for organic can be done. There is even a push these days by established brands to legalize and build up some of these unregulated brands in order to get their followings, and build on their already existent popularity.
The grey/black cannabis market
Sometimes when dealing with the grey market its about fakes. But sometimes it’s about real products being sold illegally in the wrong places. While there are plenty of fake vape cartridges out there, for example, there are plenty that can be bought through the same illegal channels as the fakes, but are actually real products that are simply no longer in their intended supply chain, and instead moved to an illegal one. In this case one can picture in their head a box of perfectly good vape cartridges *falling off a truck on its way to a dispensary.
Often the counterfeit market operates along with the grey/black market, and it’s a market that is growing to massive proportions. One of the points made in this article about consumers buying black market products, is that: “California, for example, is the biggest legal marijuana market in the world, and still, the black market is three times larger than the legal one.”
This means that the majority of people are still going to their friendly neighborhood dealer rather than waiting in line for inflated prices at a dispensary. It also implies that for something like vape cartridges, of all the ones floating around out there, for which there are many, it can now be expected that only a small percentage are real, and the vast majority are fakes, or black market, unregistered brands.
Black market dangers?
When it comes to cannabis flowers, the black market has survived pretty well through time with no real death count to speak of. Which means, if there’s some massive danger to not being able to control for pesticides, additives etc., it’s obviously not the biggest deal. We all know that if we get marijuana off the street, it’s probably not going to be the best quality, and this can even mean dangerous additives and practices. In low level buying, this is always an issue, but it’s one that prevails at the lowest monetary level of any black market structure, meant for those who will never have the ability to pay more.
If it becomes a bigger deal, with more dangerous chemicals being used on more than just low-level flowers, and if deaths pop up, this could signal a point where a regulated system really is more ideal, although that regulated system would have to actually provide something safer, which having regulation unfortunately doesn’t guarantee. Trying to pick away at the standard, centuries-old cannabis flower industry as dangerous, while bowing down to regulated brands as the only real solution, is silly at best, and supports very unnecessary fear-mongering at worst.
Considering just how long-running and functionally stable the standard cannabis black market is, the idea of saying there’s a necessity for it to be legalized sounds like way more of a ploy to create new above-board revenue streams where they are currently being lost…than a way to protect the health of users.
When it comes to fake cannabinoids, and products like fake vape cartridges, and unregistered black market brands, there is question as to what is put in them, and how safe these unknown-to-the-user additives (or production methods) are. There have – no doubt – been plenty of issues associated with synthetic cannabinoids, and fakes in general.
This article highlights some of the more recent cases which do show a disturbing trend toward using chemicals that are dangerous, but which backs up the idea, nonetheless, that it’s still an incredibly low death and injury rate associated with this issue, especially as compared to the massive death counts we’ve been seeing every year from opiates, benzodiazepines and tons of other pharmaceuticals out there.
In fact, compared to all three of these groups, synthetic cannabinoids really aren’t looking so bad. This isn’t to say that because the death rate is still technically lower than for other drugs that there shouldn’t be concern. It’s certainly a place where we collectively need to keep an eye in the future, and watch out for unsavory practices that can cause damage. Luckily for now, though, it does seem that the risk isn’t quite as intense as the fear built around it.
The cannabis black market is much less scary than it gets the wrap for, and we know this logically by the fact that the majority of us smokers have been using the black market to buy our cannabis our whole lives. We therefore intrinsically know that black markets can provide perfectly good products. We also know that no government entity can profit from them, and that competing enterprises would rather wipe them out or steal their clientele. These reasons often get translated to the public as a fear for safety, when the bigger fear is on the business end, of not being able to get enough of the revenue. This is then mirrored back in raised dispensary prices.
When buying cannabis flowers, it’s not hard to tell if you’re getting something weird, and if you buy it off the street you should expect a bad product. Like anything else, you have to know who to buy from. When buying cannabis products like vape cartridges or pre-packaged edibles, be a little careful if you want the real product, and not to worry about health issues from bad ingredients. But also know that some black-market brands are perfectly fine, they just never paid to be registered companies. And while most fakes might not give the best effects, and probably aren’t doing anything to help your health, they’re still (at least for now) far less likely to kill you then most pharmaceuticals with a death count.
More and more I wonder if the answer to all this is for people to grow their own flower and produce their own extracts through easier-to-use equipment meant for regular people in their own homes. Maybe making such equipment is the next direction this goes in, in order to avoid high dispensary prices and government infiltration into the market.
This would then erase the possibility of dangerous additives, or weaker ingredients, while giving freedom to users to create products to the safety level they desire, without depending on government regulation which often falls very short of actually providing safety. If there’s any question about this, I suggest doing a little research into just how many pesticides are allowed on legal cannabis in different states, and then see if you think that level of safety warrants you paying twice the price or more in a dispensary.
Or maybe that’s what my next article will be about…
Thank you for stopping by CBD TESTERS. We’re happy to keep you up-to-date on everything in the world of weed. Come back frequently and make sure to subscribe to the Medical Cannabis Weekly Newsletter to get all the important industry news.
Cannabis and the 2020 Election
Next month, five states will be voting on seven ballot measures to legalize cannabis. A variety of proposals, including constitutional amendments, statutory initiatives, and alternative measures, could establish new medical cannabis markets in two states and expand legalization to include adult use legalization in four states. Three of these proposals would enshrine cannabis possession and consumption within state constitutions.
This article will explore the proposals themselves as well as the short-term implications of legalization on existing license holders and the industry.
Arizona voters have another opportunity to legalize cannabis next month, after narrowly defeating adult use legislation four years ago. In recent years, the Copper State’s medical cannabis market has seen significant MSO expansion, and new mandatory testing requirements launch at the beginning of November.
There are roughly 150 medical cannabis licenses in the state currently — all of which would receive priority status in the application process for adult use licensing. Additionally, diversity applicants and applicants in areas currently lacking cannabis retail access would be fast-tracked applicants.
Prop. 207 does include local control and opt-out provisions, and a new 16% tax would direct revenue to a variety of funds, while retail operators would be able to launch delivery services as soon as 2023.
Mississippi could become the 34th state to legalize cannabis for medical use, but two competing measures are creating complications on the ballot. A citizen-driven campaign led to the placement of Initiative 65, while the legislature responded with Alternative Initiative 65A.
Initiative 65 establishes a medical cannabis program similar to the program structure of many other states; with clearly defined qualifying conditions, possession limits, taxes, registration fees, and a regulator — the state health department. The alternative includes no definitions and only allows smokable cannabis products for terminally ill patients, leaving a highly restrictive market requiring enabling legislation.
Previous bills have been proposed, but never brought to a vote — leaving some skeptical that anything at all may come of Initiative 65A.
Montana’s existing medical cannabis program relies on a system of caregivers who cultivate cannabis and make manufactured products, including edibles and concentrates. Additionally, there is a limited number of licensed dispensaries throughout the state. Legalization would be a major evolution for Montana, which has seen multiple ballot initiatives and legislative interventions in recent years.
Two measures have been placed: one constitutional amendment to set the age of 21 as the minimum buying age and a measure to establish a commercial adult use market. While no early sales provisions are included, Montana companies would be the only businesses able to start sales for the first year after legalization.
New Jersey voters may make history, legalizing the adult use of cannabis and triggering a race among Mid-Atlantic states to implement sales first. While all of New Jersey’s neighbors have existing medical cannabis programs, none have taken steps to expand further. In recent years, numerous regional state legislatures have attempted to legalize, and Public Question 1 may tip the scales for an entire region with over 50 million residents.
The text of the amendment is brief, but it establishes a definition for ‘cannabis’ while permitting possession, use, and industry operations for adults ages 21 and up. The existing Cannabis Regulatory Commission would be tasked with regulating the industry, but the state legislature must first come to an agreement and pass enabling legislation.
Currently, New Jersey’s medical market includes roughly fifteen licenses, including cultivation and manufacturing, as well as a limited number of dispensaries. The next phase for cannabis in NJ is uncharted territory for now: it is unclear if existing licenses will be given the first opportunity to serve the general public.
Given licensing delays and a slow rollout in Illinois, lawsuits and delays could be in New Jersey’s future — with some analysts suggesting a four-year timeline from amendment passage to full implementation. This may be good news for MSOs, including Columbia Care, Verano, and Acreage Holdings, among others.
South Dakota has long been unfriendly to cannabis in all forms and has some of the nation’s strictest marijuana possession penalties. While other non-medical states have at least given a nod to low-THC medical hemp programs, the Mount Rushmore state hadn’t established any kind of hemp or cannabis program at all until the legislature passed industrial hemp legalization this past spring.
Now, the state could make history as the first to legalize cannabis for medical and adult use purposes at the same time. Two proposals are on the ballot: an initiated measure to launch a medical cannabis program, and a constitutional amendment to fully legalize cannabis, with provisions including adult use, a medical program, and expanded hemp legalization.
Medical use is enshrined in both proposals, while the constitutional amendment would prevent the legislature from any type of statutory tampering to limit a retail market. The constitutional amendment would establish a commercial market for both adult use and medical purposes. Medical use would include home cultivation. As there is no cannabis market in the state at this time, no businesses would be able to take advantage of “early sales” provisions, as seen in other states.
Previously, medical cannabis programs and commercial licensing schemes predated adult use legalization, and the majority of these proposals came into existence by way of the ballot. In most of the earliest states to fully legalize, this was the case: Colorado, Washington, Alaska, Oregon, California, Massachusetts, and Nevada all had some form of voter-approved medical cannabis legislation first.
Implementation of adult-use legalization has, however, varied across the states. In these proposals, Arizona, Montana, and New Jersey have existing medical cannabis infrastructures, but the implementation of adult use will likely lead to program changes.
Some legalization measures have allowed for existing medical dispensaries to launch sales to adults during a period of late-stage rulemaking. These businesses have operated under modified compliance rules, with track-and-trace requirements and varying tax rates until legalization rules are completed.
After Oregon voters approved legalization in 2014, the state’s medical market rapidly expanded with early sales on the horizon. At one point, there were more medical dispensaries in the state than Starbucks or McDonald’s locations. That number later dropped as businesses converted their licenses over.
For some of the states with legalization on the ballot this year, the transition out of medical will pose challenges: product shortages, long customer lines, new tax rates, uncertainty over product offerings, and testing requirements on top of an already difficult pandemic business environment.
Overall, legalization measures promise to bring a significant impact to consumers and patients in Arizona, Mississippi, Montana, New Jersey, and South Dakota. It’s hard to quantify the short-term improvements to consumers and industry operators, as passage of these initiatives will set off a flurry of legislative and regulatory discussion over the holidays and into the spring. Existing licensees and hopeful applicants should keep an eye for new opportunities: public comment periods, application deadlines, and new sales opportunities on the horizon.
Jason Kikel is a Senior Data Analyst at Cannabiz Media, where he researches licenses across the cannabis marketplace and the policies behind them. He brings forth a variety of experience in urban planning, agriculture, and education, as well as enthusiasm for an expanding industry. Jason graduated magna cum laude from West Virginia University and recently completed his Master of Community + Regional Planning at The University of New Mexico. A longtime cannabis policy reform advocate, Jason first jumped into the cannabis economy as a graduate student while completing his master’s thesis, studying the legalization-land use-water policy nexus in Colorado. Jason recently delivered a presentation on this research, “Land Use, Water, and Policy Considerations in Emerging Cannabis Markets: Lessons from the Arid Mountain West” at the inaugural Institute for Cannabis Research conference at Colorado State University-Pueblo.
Cuomo advisor predicts New York will legalize pot in April
New York Governor Andrew Cuomo’s advisor on marijuana policy said this week the Empire State could legalize weed in April of next year with a bill that would serve as a model for other states looking to allow recreational pot in the United States.
Axel Bernabe, assistant counselor to Governor Cuomo, was a guest on the Under The Canopy series, recently launched by Canopy Growth, where he discussed cannabis legalization efforts in New York. According to Bernabe, a bill to legalize marijuana will be introduced through the state budget in January again, while he expects legalization to take effect by April.
As New Jersey appears ready to legalize marijuana this November, Bernabe said the Cuomo administration has been watching its neighbor “closely.”
“We’re watching New Jersey closely. We’ve always been confident that we’d get to this before New Jersey, so if they pass the referendum they still have to have an agreement between the governor and the Senate over there,” he said.
“If New Jersey can beat us to it, they’ll get a gold star but I still think we’re gonna set the model for this,” Bernabe added, referring to the bill’s social equity provisions, among other things.
During the interview, Bernabe also said that New York has been monitoring how legalization has been unfolding in Vermont, Maine, and Massachusetts, but has also consulted with states on the West Coast, where the legal pot industry is larger and more developed.
Regarding hemp, Cuomo’s advisor said the state will release its guidelines and regulations for CBD consumer products early next year as well.
“Those products are already out there, so there’s no sense in pretending they’re not,” Bernabe explained.
For this reason, the governor and his team have been working on guidelines, which will include maximum dose per serving labeling and warnings about potential THC content in various hemp-derived products. New York has copied a lot of Florida’s hemp regulations while crafting its own policies, Bernabe stated, before telling Canopy Growth’s David Culver that the administration is currently putting the finishing touches to the guidelines.
Although Governor Cuomo promised his state would legalize weed soon, marijuana legalization was left out of the New York state budget for 2020 due to the coronavirus pandemic, which hit the state particularly badly earlier this year.
Cuomo previously proposed working in conjunction with the neighboring states of New Jersey, Connecticut, and Pennsylvania on coordinating a recreational marijuana system for the region.
PURA Concludes Farmersville Meetings – Deal Imminent
Dallas, TX – October 20, 2020 – OTC PR WIRE — Puration, Inc. (OTC PINK: PURA) today announced that CEO Brian Shibley concluded a key meeting yesterday essential to finalizing the acquisition of 72-acre property in Farmersville, Texas central to the company’s recently announced Farmersville Brands strategy. “The acquisition is imminent. Look for an announcement very soon,” said Mr. Shibley.
PURA has scheduled the release of a comprehensive update this Friday, October 23, 2020, to provide the latest information on progress with the Farmersville Brand strategy. The Friday update this Friday will include the latest on the company’s planned dividend of PAO Group, Inc. (OTC PINK: PAOG) stock in conjunction with PURA’s sale of its cannabis cultivation business to PAOG.
For more information on Puration, visit http://www.purationinc.com
This news release contains forward-looking statements within the meaning of the Securities Litigation Reform Act. The statements reflect the Company’s current views with respect to future events that involve risks and uncertainties. Among others, these risks include the expectation that any of the companies mentioned herein will achieve significant sales, the failure to meet schedule or performance requirements of the companies’ contracts, the companies’ liquidity position, the companies’ ability to obtain new contracts, the emergence of competitors with greater financial resources and the impact of competitive pricing. In the light of these uncertainties, the forward-looking events referred to in this release might not occur. These statements have not been evaluated by the Food and Drug Administration. These products are not intended to diagnose, treat, cure, or prevent any disease.
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