A study published in the Journal of Studies on Alcohol and Drugs found that price and convenience are the two main reasons why individuals continue to buy cannabis from the black market when they can now obtain legal cannabis in the US and Canada. A majority of study participants reported that cost and access are important considerations when buying cannabis. Living in a remote region with limited or no dispensaries was a significant barrier for many participants. These patterns indicate that the illegal cannabis market continues to thrive despite legalization trends and an increasing number of dispensary openings in legal American states and Canadian provinces.
Researchers analyzed data from the 2019 and 2020 International Cannabis Policy Study which included 11,659 male and female cannabis consumers between the ages of 16 to 65 in Canada and United States legal states. If participants self-reported illegal purchasing in the past 12 months, they were prompted to answer several questions about their rationale for seeking out cannabis on the black market instead of legal sources. Data indicated an association between reasons for illegal purchasing and objective data on cannabis prices and retail density.
These market conditions allow the black market to thrive and meet certain consumer demands. The illicit market in Colorado is a good example of how illegal cannabis operations are thriving despite more states and countries legalizing. Colorado is a major exporter of cannabis to other states. Many large-scale operations establish grow operations under home grow policy to avoid close scrutiny. They set up intricate grow operations often located in suburban properties and sell the product in other states. Colorado’s black-market activity is tied to distribution in 34 other states. There are conflicting opinions over whether federal legalization would weaken the illicit market, but it may reduce illegal demand from other states.
Cannabis legalization, and illegal and legal market trends, is an important metric to track. As study co-author, and the University of Waterloo’s School of Public Health Sciences university research chair, David Hammond explains, “Transitioning consumers from illegal to legal retail sources is a primary goal of legalization. Indeed, many of the potential benefits of legalization—including product standards, revenue for legitimate businesses, reducing burden on the criminal justice system—depend upon shifting consumers to legal cannabis sources. Given the importance of this issue, there is surprisingly little empirical evidence on the factors that determine where consumers source their products in a legal market.” Future research should follow changing perceptions of price and convenience as well as other consumer behavior trends as the market matures.
Factors determining the choice between sourcing cannabis products from illegal and legal markets will also take into consideration legal cannabis industry competition among large operators (who may also be multi-state operators), microbusinesses, and other supply chain issues.