Guest Contribution

In the chaos of trying to sort out the regulation and taxation of the new cannabis industries, it is important to reflect upon market dynamics.

Some legislators fear that parallel cannabis licensing systems for medical and general use cannabis could cause a massive loss in tax revenue. The theory is that if medical is not taxed and costs less than general use cannabis in a parallel industry, users would have financial incentive to secure false medical authorizations in order to obtain cheaper cannabis with little to no tax revenue coming to the state.

This fear has some merit, but only to a point, determined largely by price and whether we license and regulate dispensaries.

We can already see how people behave towards parallel markets, since medical cannabis and illegal recreational sales have co-existed for years.

Black market cannabis is typically 20 percent more expensive on average, yet is still widely available and the black market is likely many times larger than the medical cannabis market. So why hasn’t the black market gone away? A key factor here is that the price difference between medical and general black market cannabis is low enough to discourage too much fraud in medical authorizations. Plus, the cost of obtaining an authorization can be prohibitive for more casual users.

People simply don’t line up en masse to commit fraud unless they have a much greater financial incentive than saving a few dollars here and there.
Additionally, “recreational” users don’t need high amounts of cannabis to maintain their quality of life. For many recreational smokers, $40 – $100 a month worth of cannabis is plenty for the occasional evening at home. Medical users on the other hand may need this much per day to manage their pain or other issues and they are more likely to have financial problems stemming from their medical conditions. They deserve different taxation and lower prices.

Plus, all cannabis is not created equal. The future of medical cannabis is in the CBD compounds which provide pain relief and other medical benefits and not as much in the THC, which is the main compound that gives the “high” sought after for general use. The goals for medical vs. recreational cannabis production can be quite divergent. CBD compounds present some of the most promising innovations in non-toxic herbal pain management and we have only scratched the surface in research and development.

The Legislature needs to ensure that a licensing system is created for medical cannabis providers to secure new tax revenues for the state while simultaneously bringing prices down for medical patients and increasing medicinal safety. Until the laws are changed, medical cannabis providers will continue operating as they are now, for better or worse, and I-502 does nothing to change this. At the same time, I-502 needs to be altered to ensure that prices are not so high as to empower a black market.

The target should be for medical cannabis to sell at $7-$9 per gram and general use cannabis at $10-$13. At these rates, the black market should all but disappear and the incentive for non-medical users to obtain false medical authorizations will be lower than it is today. This is achievable with the right laws in place.
An all-around win is available if lawmakers will only seize the moment to create a medical licensing system. If not, medical cannabis providers will continue to operate under vague laws while providing little tax revenue to the State. Medical patients will continue having no real safety protocols in place to ensure they are not using products with mold or other contaminants.

Instead, the Legislature could choose to license medical cannabis providers, gain new tax revenues, create greater integrity in the system and virtually eliminate all black market sales. If anyone deserves a better system, it is vulnerable medical patients whose quality of life depends upon affordable access to properly produced cannabis.

Ezra Eickmeyer
Political Director
Washington Cannabis Association
360-301-1842

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