In a Rochester Beacon post last week, I argued that cannabis legalization in New York would collapse under the weight of our collective hopes and dreams. The state’s 2021 Cannabis Law seeks to promote capital formation in disadvantaged communities, eliminate mass incarceration for marijuana offenses, redress the harm done to individuals and groups by prior convictions, capture a new source of revenue to address social problems like drug addiction, reduce criminal activity associated with the drug trade, redirect law enforcement’s resources from marijuana to more pressing problems (like fentanyl), ensure the safety of a widely-used but unregulated recreational drug, and open access to marijuana by the general public.
That’s a long list—and unachievable. The law should be revised to reflect a hierarchy of goals, with provisions that are consistent with market reality.
That’s unlikely. The political consensus mustered to pass this law demanded that legislators be actors in a Kabuki drama. Some may be naïve and don’t recognize the law’s inconsistencies. Most hope, I suspect, that the provisions they need politically will work yet are protected by plausible deniability if they do not. A big law is like a game of Jenga—pull one piece and the tower collapses. In this post I will explore what is likely to happen if the law remains unchanged and how to revise it.
Let’s consider how regulating marijuana compares to similar legislative challenges.
The social impact of consuming marijuana is a bit like drinking beer, wine and spirits. We know the many risks and tragic consequences associated with drinking. But we like it and have developed ways to address the problems. Oh, and we know what happened when we tried to quit.
The health effects of marijuana resemble tobacco. Smoking tobacco is really, really unhealthy. We would like people to smoke less and be freed from addiction to nicotine. Regulation, taxation and enforcement allow society to monitor what goes into tobacco products, manage access to tobacco by children and capture significant revenues we can channel to good ends, like research and smoking cessation.
Growing marijuana is a bit like brewing beer at home. The Cannabis Law legalizes possession of small quantities of weed and eliminates or reduces the penalties for small-scale cultivation. Anyone with a grow light and a bit of coaching can grow pot for family and friends. Similarly, we don’t look about furtively when someone offers a growler of their newest IPA or porter. Selling your brew without a license is illegal (and rare at scale).
Criminality surrounding marijuana resembles the production and sale of substances like cocaine, heroin and fentanyl. As reported by veteran reporter Gary Craig of the Democrat and Chronicle, cannabis-related crime continues to be significant problem in Rochester. The killing of police officer Anthony Mazurkiewicz in July has been attributed to a turf war between two rival groups involved in the marijuana trade. Even with possession largely decriminalized, there’s enough money to be made to keep criminal enterprises fighting for turf.
The worst of all possible worlds?
Riddled with inconsistencies, New York’s Cannabis Law ”Christmas Tree” seems guaranteed to achieve few of its objectives. The illegal market will prosper, propelled by lesser penalties and expanded demand. Taxes and fees will struggle to pay for the public-sector cannabis bureaucracy, leaving crumbs for public education and treatment. Legal possession will open marijuana use to youthful consumers.
A paper published in the Canadian Medical Association Journal in 2015—before legalization took off in the United States (currently, 22 states and the District of Columbia have legalized recreational use)—argues that public health considerations should take precedence over other objectives. The authors list the positive impacts of legalization as “delayed onset of use by youth; reduced demand; reduced risky use (e.g., reduced impaired driving); decreased rates of problematic use, addiction and concurrent risky use of other substances; reduced consumption of products with contaminants and uncertain potency; increased public safety (e.g., reduced drug-related crime); reduced discrimination, stigmatization and marginalization of users; and realization of therapeutic benefits.”
These objectives can only be achieved if the new legal market throws off enough money to fund new programs. Suppressing the illegal trade is key to generating that revenue.
In addition to high levels of taxation that put a significant wedge between the legal and illegal price, the cost of complying with regulation and administration established in the Cannabis Law will impose a significant operational burden on market participants.
■ The testing and documentation regime dictated by the law will require the creation and maintenance of numerous systems and outside contracts (e.g. with testing firms).
■ The regulatory and compliance bureaucracy being created at the Office of Cannabis Management will also be costly to build and maintain. Fees on market participants will be set to pay these costs.
Yet the law’s supporters also hope to direct a substantial share of the business to new and small firms. Even with the $200 million fund set aside to support the creation of these new firms, the cost of regulation and compliance will be a millstone that will make them wildly uncompetitive with a continuing illegal market.
Fears of “Big Cannabis” abound
Yet a rigorously regulated market of established firms would be much better able to generate the tax and fee revenue needed to address the public health challenges listed above. Big Pharma has the systems and expertise to navigate the law.
There are other models. Uruguay’s 2013 legalization reserved a monopoly for state-run pharmacies that were intended to set prices below the illegal market. The country also began exporting marijuana in 2019—not a model likely to embraced here in New York. Despite optimistic forecasts at passage, only a third of marijuana users in Uruguay buy from the legal market, which hints at how difficult it is to displace an entrenched illicit market for cannabis.
What seems likely to emerge from New York’s Cannabis Law is a small network of legal sellers, none of whom make a lot of money, bolted to marginally profitable cultivation and processing industry and operating along side a vibrant and still-violent illicit market. This is an outcome that accomplishes little but legalization—which may be popular with the general public but achieves little else.
Bold leadership from Gov. Kathy Hochul and members of the Legislature could spur a revision to the law that creates a viable legal market for marijuana. Let established firms take on the challenge of health and safety regulation. Cut the tax burden to levels that don’t confer an overwhelming advantage to criminal sellers. With ALL tax revenue earmarked for education and treatment, we can hope to address the public health challenge.