Here’s a hint: The Legal (i.e. Taxed & Regulated) Market better hope so, because the streets aren’t going anywhere anytime soon.
It has been estimated that the “appetite”, so to speak, for legal weed in California is around 2.3 million pounds per year. Oooof, that’s a lotta boof!
It has also been estimated that licensed cultivators in the state are on pace to produce roughly 3x that much and massive greenhouses are still being built as we type and as you read. Supply literally outweighing demand to such an extent can only lead to one thing – the anticipated plummeting of wholesale prices come Crop-tober.
The suits in Sacramento don’t seem to see why folks like us have been screaming about corporate cannabis and license-stacking since Prop64 was just a bad idea but now many of the so-called “legacy operators”, the men and women who risked it all for years or decades prior to “legalization”, are calling it quits and exiting the regulated market unable to ever get profitable against high taxes and fees and low prices and demand.
Do you think a lot of those jettisoned farmers, and the thousands more who never even tried to go “legal”, are taking desk jobs now? Maybe driving a bus? Right… we don’t think so either.
In 2019, the street (or “Traditional”) market for cannabis was estimated to be $8.7 billion. We think that was a conservative guess back then and anyone who thinks it has gone down since then clearly hasn’t spent much time in those streets.
The taxed and regulated market in Cali is on pace to do $5 billionish in sales over the next year. That is a LOT of money. If the right people were making all of those sales, and all of that money, it might even be enough. But in capitalism, it’s never enough. It’s safe to say that if the legal side is doing $5B, the street side is doing double that, and that is where the conflict lies.
As legal operators struggle (trust us, we know the struggle) many are looking for someone to blame, and blaming a flawed system is rarely satisfying.
From seed to sale, growers and dispensary operators have started looking at the thriving traditional/street market with more contempt than ever and even though some of them came from those very streets themselves, they seem to have forgotten the #1 rule – no snitching.
RICO ACT – AN UNTRADITIONAL WAY TO GO AFTER THE TRADITIONAL CANNABIS MARKET
This week we got news of a legal/licensed cannabis dispensary in San Diego called March & Ash filing a civil lawsuit under the Racketeer Influenced and Corrupt Organizations Act – also known as the RICO Act.
If you watch enough mafia movies or follow enough midsy rappers you’ll probably recognize the term, but let’s break it down real quicklike, capiche?
Passed by Congress in 1970, the RICO Act was designed to target criminal enterprises and organized crime.
Essentially, the law criminalized three activities:
- using illegal income to acquire, establish, or operate an enterprise;
- acquiring an interest in such an enterprise; and
- using an enterprise to collect a debt.
More importantly, it makes it a criminal act to conspire with others to engage in any of those activities. That’s how they hem up whole crews.
The March & Ash case is a civil suit that mimics the structure of a federal RICO case as they are going after a loosely affiliated group of individuals and business entities that they say have conspired to aid and abet the existence of illegal dispensaries. Named in their suit is former San Diego County Sheriff’s Captain Marco Garmo, the San Diego Reader, an unlicensed edibles company, ATM operators, and landlords who rent to these outlets. Six defendants total. Because it is a civil case, March & Ash is seeking financial retribution and hoping that their action will send a ripple of fear across a fully entrenched and well-fed traditional market.
Indeed, their lawyer told a local news outlet, “The purpose of the lawsuit is to put an end to the illegal competition that the legitimate dispensaries are having to face.”
A noble cause.
Never gonna happen.
Competition is competition, dude.
The best way to eliminate illegal cannabis shops would be to make it much, much easier to open a LEGAL cannabis shop, right?
Even then, your boof better be better than their boof. That’s the American way.
Either that or just have everyone sue everyone and see how that goes.
According to relevant reporting from John Schroyer over at MJBizDaily, it is estimated that “600-900 RICO cases are filed annually across the U.S. Of those, about 85% get dismissed while only a small fraction either settle out of court or end with flat-out victories for the plaintiffs.”
You can look at it like some boogie man is taking a phantom $5B from you every year or you can look at it like there is at least $5B a year up for grabs so let’s focus on gettin’ it.
The tighter you squeeze that “legal” market with rules, regs, and litigation, the more juice they sell on the streets.