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Post-Prohibition Pot Regulation: Should It Be More Like Tobacco?

The Messenger

December 4, 2023

Recreational cannabis is now legal in 24 states and more are likely to follow suit. But the black market in pot has not disappeared; in fact, it has continued to thrive. New York City alone is estimated to have some 1,500 unlicensed sellers of marijuana products with a combined inventory predicted to be worth nearly half a billion dollars. 

In addition to problems of quality control and avoided taxation, the situation sends a message that urban public disorder is being tolerated. In California, “two out of every three cannabis purchases are made in the illicit market … [and l]egal sales have been on a two-year slide.” This, in the nation’s largest cannabis market. Non-legal sales are so common that consumer guide sites to cannabis purchase locations, such as Weedmaps, have included black-market outlets (although authorities have pressured these sites to “delist” them). In the Golden State, unlicensed sellers have gone so far as to advertise their wares in local newspapers.

It’s tempting for state and local governments, eager to reap sales tax revenues on legal pot, to believe that a law enforcement crackdown on black-market growers and sellers can tame the market. But the extent of non-legal sales, and the limits of police departments and other agencies, make that unlikely. It’s hard to imagine a practical way to put the pot genie back in its pipe.

It’s time to rethink what can be called our post-Prohibition era for cannabis — to accept the fact that, its health dangers notwithstanding, it makes more sense to accept pot as just another consumer product and to make it easily and widely available. One approach: Think of cannabis as less akin to liquor and more like tobacco — an unhealthy habit, which some find pleasurable despite the risks, but which can be legally purchased by adults in hundreds of thousands of locations across the U.S.

It’s useful to consider how pot legalization compares with the situation in 1933, when the 21st Amendment abolished Prohibition of beer, wine and liquor sales nationally. A famous black market had boomed during the bootlegger and speakeasy era in the 1920s. The repeal of Prohibition did not, however, replace a ban with a single national system of regulation. Instead, states and municipalities were, in the U.S. federal system, free to adopt their own types of regulation and taxes. 

That patchwork quilt remains in place. Most states issue a limited number of licenses for the sale of hard liquor; some states, such as Pennsylvania and New Hampshire, limit its sale to government-owned “state stores.” California permits its (fine) wines to be sold in supermarkets; New York limits sales of wine to licensed premises that also sell hard liquor. A few “dry” counties remain, reminders of the era when the politics of “wet” vs. “dry” was as pitched as today’s battle over abortion.

Although black-market sale of liquor to avoid taxation continues as a low-level problem, Americans typically buy beer, wine and liquor from legal sellers. But this approach is proving difficult to replicate for post-Prohibition pot, for a number of reasons. The extent of illegal grow farms is enormous. The Drug Enforcement Agency alone claims responsibility for eradicating 5.7 million illegally cultivated marijuana plants in 2022 (and seizing nearly 3,000 weapons from illegal cultivators). In southern Oregon, incoming pot farmers have even triggered a land boom: “Cartels roll in and offer long-time residents as much as a million dollars in cash for their property. … Residents have become accustomed to hearing Bulgarian, Chinese, Russian and even Hebrew spoken at the grocery store.” 

What’s more, large numbers of localities — the majority in California and New York — have chosen to disallow pot “dispensaries” from opening, fearful that such tavern-equivalents would be undesirable gathering spots.

Some jurisdictions, notably New York State, have been intent on achieving “social justice” aims in their cannabis licensing process, in order to favor former illegal drug dealers who are said to have been the victims of “mass incarceration.” As a result, legal licensing has proceeded at a snail’s pace, swamped by non-legal competitors. The first licensed cannabis dispensary opened in 2023, nearly two years after weed was legalized, a period in which illegal retail locations proliferated.

Perhaps this situation will right itself in time — as legal licenses catch up to demand. But there’s good reason to see cannabis as different from alcoholic beverages. As a practical matter, it’s simply easier to grow and smuggle; Americans seem indifferent to the fact that our purchases of illegal drugs effectively support narco-gangs in Latin America. It can even be grown clandestinely indoors; in fact, cannabis law in most states, including New York, authorizes home cultivation for personal use — opening the door to illegal sale. Illegal indoor grow operations have shielded themselves from the suspicion of authorities by operating out of suburban homes, such as in the case of a 500-house growing operation police busted in suburban Denver in 2019.

It all suggests that we are thinking about cannabis regulation in the wrong way. We accept the sale of beer and wine in convenience stores and gas stations — yet strive to limit pot sales to select locations. The impracticality of such efforts suggests thinking of cannabis as less akin to liquor and more akin to cigarettes.

Granted, pot is a more mind-altering substance than tobacco, the latter’s mild buzz and addictive character notwithstanding. But tobacco, too, is also generally smoked — and its users, like pot smokers, are clearly willing to tolerate health risks associated with it. In contrast to cannabis, however, tobacco retail licenses are extremely common; according to the Centers for Disease Control and Prevention (CDC), there are more than 380,000 licensed tobacco retailers in the U.S. and its territories. License application fees are modest, ranging from $6 in New Hampshire to $800 in Connecticut. High state taxes meant to bolster state revenues and to discourage use of an unhealthy product (these can be in conflict, of course) do lead to black markets in cigarettes — most notably via cross-state smuggling from low-tax to higher-tax states, according to the Tax Foundation. Such tax avoidance pales, however, in comparison to cannabis sales from unlicensed outlets.

Moreover, those cigarettes smuggled across state lines are brand-name products distributed by a small group of recognizable major manufacturers. This contrasts with the cannabis market, in which unlicensed outlets notoriously sell “gummies” and other “edibles” packaged to resemble candy and which may be of uneven purity. 

In other words, in contrast to marijuana, a product that can be considered a close cousin — a smokeable, recreational drug with ill effects on health — cigarettes have a black market only as regards tax avoidance, rather than one in which unlicensed products are distributed through unlicensed and unvetted retailers. As with post-Prohibition alcoholic beverages, tobacco products do not suffer a black market which poses significant concerns related to public order, in part because of their ubiquitous availability.

A similar cannabis market is imaginable: Brand-name cannabis products, inspected and approved for purity and potency and relied upon by consumers. These would be sold, like cigarettes, from locked cabinets behind store counters and restricted to adult buyers, to the extent possible. Sales taxes, in contrast to those on tobacco, might be minimal, at least at first, in order to marginalize black-market sellers. Over time, however, taxes could be used as a deterrent to use, as they are for tobacco — since most Americans likely would prefer to purchase pot legally.

None of the above should be understood as an endorsement of more widespread use of cannabis.  Indeed, rather than cheerleading pot legalization in the name of social justice, state and local public health authorities should make it their business to alert the public to its health dangers. 

The CDC warns that pot poses a range of dangers, including “marijuana use disorder” (inability to stop using); brain damage (effects on attention, memory and learning, especially among those under 18), and mental health (anxiety or paranoia). Says the CDC: “The association between marijuana and schizophrenia is stronger in people who start using marijuana at an earlier age and use marijuana more frequently.”

In addition to warning about pot’s health hazards, authorities should develop reliable tests for cannabis-impaired driving.  

Broadly, it is not a healthy development for American society that cannabis has become more commonly used. But the profusion of illegal cultivation, distribution and sale makes clear that, as a practical matter, law enforcement has been swamped by the side effects of legalization. It’s time to take up a practical cannabis regime — and to seek to make clear its dangers.