MJBizMag August 2020 - 56

SMOKE OUT THE ILLICIT MARKET?
How to Compete With the Illicit Market
Will Federal Legalization
Experts say underground operators will persist
until cannabis is sold legally nationwide
By Bart Schaneman
A
s long as some states prohibit
cannabis, there will always be an
illicit market for marijuana.
" Until it's legal everywhere, we're
never going to really end the illicit
market, " said Kris Krane, president of
multistate vertically integrated cannabis
company 4Front Ventures, which is
based in Arizona.
Legalizing marijuana at the national
level would help to:
* Drive down prices to make
cannabis cheaper.
* Bring legal prices more in line with
those offered by illicit-market sellers.
* Foster interstate commerce so
marijuana could be shipped from
states that have more suitable
climates for cultivation.
* Allow companies to import
cannabis from low-cost
overseas suppliers.
* Reassure reluctant consumers
and combat the stigma associated
with marijuana.
Krane pointed out that ending alcohol
prohibition meant no one could make
beer cheaper than companies that produce
at scale, such as Anheuser-Busch,
which is why there's no longer a strong
illicit market for alcohol.
" If we want the legal market to
compete with the illicit market, we've
got to make it so people can sell (legal
cannabis) for cheaper, " said Troy
Dayton, CEO of The Arcview Group,
an Oakland, California-based cannabis
investment firm.
INTERSTATE COMMERCE
Opening commerce across state lines
could drive down prices for legal
marijuana if growers in states with
robust production and prime outdoorgrowing
conditions could sell flower to
markets that lack adequate supply and
growing climate.
For the past couple of years, marijuana
businesses in states bordering other legal
cannabis programs-such as California,
Oregon and Washington-have
advocated to allow the sale of marijuana
to licensed companies in nearby markets.
But absent a change in federal law, the
likelihood of the plan ever becoming a
reality is slim.
" Federal legalization means interstate
commerce, and interstate commerce
54 Marijuana Business Magazine | August 2020
means a significant reduction in
wholesale pricing, " Krane said.
Even in states such as Washington
and Oregon, where overproduction in
the state-legal marijuana market has
caused prices to tumble, wholesale prices
might be even lower if producers could
maximize production for nationwide
sales. This would help to stop diversion
of product to the illicit market and curb
prices for consumers as well.
While growers in regions such as
Northern California, which has a climate
naturally suited to producing cannabis,
might be in favor of interstate sales, Krane
posited that some states could even opt
for " import-only " businesses rather than
allow cultivation within their borders.
Other markets that want to protect the
economic benefits of their state programs
might not be so keen to allow out-of-state
marijuana. After all, the current cannabis
Federal legalization would likely permit
interstate commerce, meaning states
with good climates for cultivation could
provide marijuana to other markets.

MJBizMag August 2020

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