Could Federal Cannabis Legalization Backfire? Report Says It Could Trigger Higher Prices In California, Benefiting Illicit Market

There seems to be a consensus among analysts that if the legalization bill in the Senate were to pass in its current form, “legal cannabis would become even more expensive than it already is”, reported Dan Mitchell for the East Bay Express.

According to a report by New Frontier Data, called “Up in Smoke? Analysis of the Cannabis Administration and Opportunity Act,” the bill “would advance the legal cannabis industry, while also benefiting local economies.”

However, the report warned that the bill’s proposed federal taxes on cannabis would result in a “less competitive market than the illicit one.”

Higher Taxes On One-Fifth Of The Market

The Cannabis Administration and Opportunity Act would impose a further tax, which after a few years, could reach 25%. Last month the draft bill's sponsor, Majority Leader Chuck Schumer said in an appearance on ABC, “I want to get this done. And I think we will get it done because it’s so, so overwhelmingly supported by the American people.”

Meanwhile, Mitchell argues that the high prices and lack of availability in many areas of California “have resulted in legal pot taking only about a fifth of the total market.”

According to the East Bay Express writer, “the vast majority of weed sold in California is sold illegally, thanks to high taxes, overregulation and home rule, which allows localities to deny licenses to cannabis businesses.”

Cannabis Flooding California

Forbes reported on the “Epic Marijuana Oversupply” in California that could jeopardize legalization. “The black market is still coming here,” Mark Ponticelli, founder and owner of the People’s Remedy dispensary in Modesto, California told Forbes.

Regarding the illicit market, Ponticelli said, “You can get pounds in the streets, $2500 to $3000, all day. And it’s fire, fire weed. And then you can sell it over in Florida for $4,000, $5,000." 

Original publication: September 2, 2021