Canada is on the cusp of becoming the second country in the world to legalize cannabis. On Wednesday, the United States’ neighbor to the north will open recreational cannabis sales, allowing adults to purchase bud like alcohol.
The move is expected to generate billions of dollars in economic activity and create new tax revenue for the wealthy country. But the primary goal of this reform, according to Prime Minister Justin Trudeau, is to combat organized crime and keep cannabis out of the hands of minors.
“Right now, young people have far too easy access in Canada to marijuana. Criminal organizations make billions of dollars a year in profits on the sale of marijuana,” Trudeau told the Canadian Press. “We need to move forward on a system that controls and regulates while protecting our kids and our communities.”
What effects will legalization have on Canada’s economy and culture? A recent New York Times piece points to several lessons that Canada should learn from California’s recreational cannabis marketplace, now more than 10 months old.
Sources close to the situation, including Hezekiah Allen, the executive director of the California Growers Association, told the Times that “the black market is still dominant.” Allen says the underground market continues to succeed because the state’s patchwork cannabis regulations are confusing and burdensome.
“It’s hard to persuade pot farmers who have been producing in the shadows for decades to fill out voluminous paperwork, pay taxes and comply with reams of environmental regulations,” he said.
What Canada may learn during its first year of legal cannabis sales is that consumers won’t always come running to legal dispensaries. California launched its recreational cannabis market on Jan. 1, 2018, and it’s still not generating the tax revenue analysts had predicted.
“As long as there is onerous regulation and taxation imposed on the legal market, you can forget about getting rid of the illicit market,” said Tom Adams of BDS Analytics.
Wiping out the black market was one of the primary selling points for ending cannabis prohibition in California. It was a page taken from the book on alcohol prohibition. Sure, there are still pockets of people making moonshine in parts of the country. But for the most part, illegal alcohol operations ended after prohibition laws were repealed.
That has not been the case for cannabis, in large part because the U.S. government has refused to get on board. There are too many conflicting laws and threats of federal intervention for cannabis to get a proper showing in the states.
It’s likely that Canada will experience growing pains. But the country is in a better position to embrace legalization as local leaders and law enforcement officials work through the hiccups. Canada’s provinces have the right to broaden sales to adults age 18 and older.
Canada has created strict penalties for those who break the rules of its taxed and regulated cannabis system. California has all but eliminated harsh penalties for cannabis offenders, which some argue has emboldened black market growers.
There will likely come a time when California and the rest of the U.S. have lessons to learn from Canada. But it could take a year or more before those lessons become clear.
By Mike Adams
The Fresh Toast