The black market for marijuana in Colorado isn’t what it used to be.
Nine or 10 years ago, the narrative of illicit cannabis in the state focused on illegally grown product filtering in from Mexico, California and elsewhere. Now it seems officials and experts are more concerned about Colorado-grown marijuana infiltrating other states, a trend that is seeing a significant upward trajectory, according to data obtained by The Denver Post.
“In a lot of ways, our legal industry has become the black market for other states,” said Tom Gorman, director of the Rocky Mountain High Intensity Drug Trafficking Area.
Although some facets of Colorado pot are simple to quantify — taxes, sales, demand — the black and gray markets are by definition difficult to track, especially in the first year of legal recreational sales. It doesn’t help that the underground market is a complex, multi-headed beast.
“There are four black markets,” said Mark Kleiman, a professor of public policy at the University of California Los Angeles. “There’s people growing it in Colorado to sell in Colorado. People bringing stuff up from Mexico to sell in Colorado. People with medical cards reselling their marijuana in state and out of state, including sales to minors. And there may be some diversion from the commercial market: People buying it retail in Denver and selling it in Chicago or somewhere else.”
For example: The black market is straight up illegal. The gray market represents gray areas of the law among unlicensed, unregulated caregivers.
So what do the local black and gray markets for marijuana look like almost a year after recreational sales started on Jan. 1?
“We say this with regard to everything on these societal impact-type questions: It’s too early to tell,” said Ashley Kilroy, the city of Denver’s executive director of marijuana policy.
Some industry experts agree with Kilroy on that point.
“It’s absurd that a system that has grown over 80 years would end in a week or a year,” said Mason Tvert, communications director for the Marijuana Policy Project and a director on Colorado’s pot-legalizing “Yes on 64” campaign. “This is an issue that cannot be addressed in a year.”
Ripple effect
With the pot coming into Colorado, the situation looks to be improving. Some Mexican marijuana growers have abandoned the crop entirely because stateside legalization has cut wholesale costs in half. “I wish the Americans would stop with this legalization,” 50-year-old lifelong pot farmer Rodrigo Silla told The Washington Post in April. Another Mexican farmer, identified only as Nabor, told NPR in November: “If the U.S. continues to legalize pot, they’ll run us into the ground.”
But with the pot leaving Colorado, a sticking point for the U.S. Justice Department is that it must prevent “the diversion of marijuana from states where it is legal … to other states.” The situation is getting worse. There is substantial data pointing toward an increase in the amount of legal and illegal pot being seized on its way out of Colorado to other states.
The number of Postal Service-mailed packages containing pot intercepted in Colorado increased by 1,280 percent from 2010, when there were 15 seizures, to 2013, when there were 207, according to HIDTA, a federally-funded drug task force. (The data did not include FedEx, UPS or other carriers.) The agency said the pounds of marijuana in those packages increased by 762 percent in the same time period, from 57.2 pounds in 2010 to 493 pounds in 2013.
“Some of the pot is out of dispensaries,” said Gorman, who spent 30 years with California’s Bureau of Narcotic Enforcement. “Some is out of retail stores, some is out of home grows, some is from co-ops, some is from patients and caregivers — you take that whole segment, and that to me is what the black market looks like now in Colorado.”
HIDTA’s August report also shows a 397 percent rise in highway interdiction seizures of Colorado marijuana bound for other states from 2008, when there were 58, to 2013, when there were 288. When the organization informally polled 100 law officers on how much of the pot leaving Colorado actually is being seized, they estimated less than 10 percent, Gorman said.
“Nebraska, Kansas, Missouri, Oklahoma — it’s Colorado dope going into those states,” Gorman said. “It’s very high-quality, very desirable pot, and you can get twice the amount of money for it in Iowa or Missouri.”
The amount of illegal marijuana seized by the Denver Police Department increased 959 percent from the first quarter of 2013, when it took in 275 pounds of pot, to the first quarter of 2014, which it seized 2,912 pounds of cannabis — a result of the department’s marijuana team, which “focuses on these bigger operations, the illegal marijuana grows,” said Kilroy.
Meanwhile Kilroy also points to a recent report from public policy research organization the Cato Institute that says legalization hasn’t brought on any significant changes to how much taxpayers are spending on state costs involving police, courts and jails.
“The overall impact on our criminal justice system … the current statewide data shows no meaningful change in criminal justice activity costs,” Kilroy said.
Marijuana policy
While some pot activists point at recreational marijuana’s higher-than-average taxes as a reason for an illegal grower-rooted black market, there are bigger factors to some of the issues plaguing Colorado, according to Jeffrey Miron, a senior lecturer on economics and director of undergraduate studies at Harvard University.
“Compared to the rate of taxation for alcohol and cigarettes in many states and countries, (Colorado’s) marijuana taxes are not excessive,” said Miron, who is also the director of economic studies at the Cato Institute, which published his “Marijuana Policy in Colorado” working paper in October. “The magnitude of taxation for marijuana in Colorado isn’t enough to create a black market. But I think if it were fully legal under federal law we would see the vast majority of the market become legal if not gray.”
One of the next major milestones for black markets in Colorado, Washington and beyond: the 2016 election, when at least five U.S. states will vote on recreational pot within their borders and the whole country will elect a new president.
“Will he or she continue this hands-off, benign approach to marijuana?” asked Miron of the next U.S. president. “Then I think we’ve hit the tipping point. Without knowing the results of that, we can’t quite know.
“Federal policy can be changed with the stroke of a pen. The new president can say to his or her attorney general: ‘We should enforce the marijuana laws in all of the states.’ That would be perfectly legal under the existing paradigm of federal law trumping state law, even in states like Colorado and others.
“The federal government in 1920 enforced alcohol prohibition in a whole bunch of states that had not criminalized alcohol.”
Miron’s working paper used data predating the 2000 introduction of Colorado’s medical marijuana system to determine that “neither judicial and legal employment nor corrections employment shows any meaningful change after a marijuana policy change.”
The finding discredits activists’ theories that legalization would severely increase or reduce expenditures on criminal justice activities.
The Denver Police Department, however, is spending more money on marijuana enforcement in 2014 than before. But its additionally budgeted $410,005 is being used primarily for new hires (a sergeant, detective and crime lab scientist) and is funded by the 3.5 percent special sales tax on recreational pot — and not taxpayers as a whole, according to Kilroy’s office, which also added that an additional $175,000 has been appropriated for 2015 to hire more park rangers to enforce public consumption laws.
Merits of legal purchase
Tvert points toward one number when he discusses the old school black market of customers buying from illegal growers and dealers: More than $550 million has been spent on legal medical and recreational pot in Colorado from January to October 2014, according to Department of Revenue data.
“The fact remains that hundreds of millions of dollars in marijuana sales are taking place in licensed businesses instead of the underground market,” Tvert said. “It cannot be argued that the underground market is anywhere near where it was previously. In fact, it’s probably a fraction of what it was.”
Tvert attributes the success of Colorado’s legal market to four factors: convenience, variety, safety and cost.
“And for the most part, all of those things will be found in a regulated market,” Tvert said. “You’d be hard-pressed to find adults who would rather call around to people to find out who has illegal marijuana and hope it’s the kind they want and hope that the person is able to meet them and hope that the whole transaction goes according to plan — as opposed to stopping at the store on the way home.
“If you think about how real life works, it’s not a reasonable notion.”
Ricardo Baca: 303-954-1394, rbaca@denverpost.com or twitter.com/bruvs
