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August 20, 2018

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What if legal pot costs more than black-market pot? California wonders


Rich Pedroncelli / AP

Joseph Hough, an employee at the Canna Care medical marijuana dispensary, displays a pre-packaged marijuana bud Wednesday, June 14, 2017, in Sacramento, Calif.

California has a marijuana conundrum.

As regulators in California prepare for the start of recreational marijuana sales in January, people in the industry say they are concerned that the rollout may not be as smooth as was promised by the promoters of Prop 64, the ballot measure last November that legalized pot.

In addition to the low numbers of cannabis farmers who are joining the legalized system — only around one-tenth of growers have applied to county authorities for permits — there is the question of price.

Three years ago, when Colorado began its recreational marijuana program, prices at dispensaries there were significantly lower than the black market, providing an incentive for consumers to join the legal system.

The situation is reversed in California. There is so much pot being grown in California that the wholesale price has been falling sharply in recent years and any pot sold on the legal market in January will have the added costs of taxes, fees and mandatory testing for pesticides and other chemicals.

Tawnie Logan, chairwoman of the board of the California Growers Association, an advocacy group for small-scale marijuana producers, says the black market price for an eighth of an ounce of marijuana is around $20, compared with $50 in dispensaries.

She predicts a bump in legal sales in January when recreational pot goes on sale because of the novelty of being able to buy pot in a store. But that novelty may wear off, she said.

“All of a sudden they are calling their buddy again,” Logan said, referring to black-market vendors who have thrived in California in recent decades.

When regulators are asked how they plan to handle the black market their answer is law enforcement. This may prove difficult in areas of Northern California where pot is central to the local economy.

“You would be turning these law enforcement agencies against their own communities,” said Terry Garrett, a manager at Sustaining Technologies, a marketing company that researches the cannabis market in Sonoma County.

“That’s the conundrum for California.”