Thursday, April 18, 2024

Global Pandemic Has Caused Legal Marijuana To ‘Cannibalize’ The Black Market

Worried about personal safety, illicit consumers have flocked to legal retailers amid the coronavirus pandemic.

By year’s end the legal cannabis industry is expected to surpass $15 billion. But the money that marijuana generates on the black market far exceeds that amount. Tracking exact figures is trick because anonymous dealers and criminal networks aren’t exactly sharing sales data with the media. But estimates approximate that the illicit markets more than four times the size of its legal market.

More specifically, New Frontier Data values the United States illicit cannabis market is worth $70 billion. This same disparity exists in our neighbors to the north. Per Statistics Canada, less than 30% of Canadian cannabis users acquire their goods exclusively from licensed retailers.

RELATED: Dark Web Marijuana Sales Soar During Pandemic

Lawmakers and regulators and law enforcement have struggled to establish combative measures against this illicit market. But the global pandemic has caused the legal market to “cannibalize” the black market, recently wrote Mitch Baruchowitz, the managing partner at cannabis firm Merida Capital Partners. Consumers who previously opted for cheaper, unregulated goods have now prioritized the cost of health and safety above all.

How The Marijuana Industry Is Battling The Black Market
Photo by RichVintage/Getty Images

“The vast majority of the current growth in the cannabis space is being driven by consumers transitioning from the black market to the legal market,” Baruchowitz wrote in a paper this May.

A Cowen and Co. survey back in April found marijuana use had reached an all-time high, with 33% of Americans saying they had used cannabis at some point in their life. Another poll conducted by Verilife dispensaries found that millennials and baby boomer cannabis users had consumed about 40% more marijuana since the pandemic started. Both generations also report spending $27 more per month on cannabis products, too.

RELATED: Can Marijuana Help Ease Coronavirus Anxiety?

“It’s understandable that people may be more hesitant to get their products from sources that are unregulated,” Kris Krane, CEO of multi-state operator 4Front Ventures, told Politico. “They may not want to go to their dealer’s house, or they may not want to have their dealer come into their house, at a time when people are social distancing and not supposed to be interacting with people that they don’t know.”

The numbers on this remain murky, because again black market operators aren’t exactly sharing losing profits caused by a global pandemic. But the rising legal cannabis industry, which is expected to employ more workers than there are computer programmers in the near future, should provide some indication.


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