Colorado's Marijuana Black Market is Alive and Well

Posted: Apr 04, 2014 1:42 PM

Despite legalizing the recreational use of marijuana, Colorado continues to struggle with a black market, the Associated Press reports.

“[Legalization] has done nothing more than enhance the opportunity for the black market, Lt. Mark Comte of the Colorado Springs Police Vice and Narcotics Unit, told the AP. “If you can get it tax-free on the corner, you’re going to get it on the corner.”

The problem was to be expected, however, as Jacob Sullum wrote in a January Forbes article:

The stores [in Colorado] are charging as much as $70 for an eighth of an ounce, compared to $20 or $25 per eighth for medical marijuana before recreational sales became legal. […]

The high prices are exacerbated by new taxes: a 15 percent excise tax, plus a special 10 percent sales tax. Denver, which is where three-quarters of the marijuana stores are located, is imposing its own special sales tax of 3.5 percent. All of that is in addition to standard sales taxes, which in Denver total 8 percent.

Black-market dealers do not collect any of those taxes, of course. Nor are they burdened by Colorado’s regulations or cultivation limits. The upshot is that prices for legal marijuana are, counterintuitively, higher than prices for black-market marijuana—a situation that critics of the hefty taxes imposed by Colorado and Washington have been predicting for months. One black-market dealer tells The Pueblo Chieftan he sells high-quality marijuana for $225 to $300 an ounce, compared to $400 or more charged by state-licensed stores. “People will get real tired of paying the taxes real fast,” he says. “When you can buy an ounce from me for $225 to $300, the state adds as much as $90 just for the tax.”

Recent violence has some police, marijuana advocates and prosecutors in Colorado still worried about the black market, however.

A 25-year-old is shot dead trying to sell marijuana the old-fashioned, illegal way. Two men from Texas set up a warehouse to grow more than they would ever need. And three people buying pot in a grocery store parking lot are robbed at gunpoint. […]

It's difficult to measure whether there has been an increase in pot-related crimes beyond anecdotal reports because no one at either the federal or state levels is keeping track of the numbers of killings, robberies and other crimes linked directly to marijuana. […]

Arapahoe County, outside Denver, has seen "a growing number of drug rips and outright burglaries and robberies of people who have large amounts of marijuana or cash on them," said District Attorney George Brauchler.

His district has seen at least three homicides linked to pot in recent months and a rising number of robberies and home invasions.

Marijuana legalization advocates say that what the state is experiencing is simply a transitional period, and the problem will get better as more stores open and prices in the legal market are reduced. Sullum also agreed with this assessment, but also cautioned that the “extra cost imposed by regulation and taxes will remain a problem.”

Washington, another state that has legalized the recreational use of marijuana, will begin sales in June.

"There's going to be a black market here," said Washington state Cmdr. Pat Slack of the Snohomish Regional Drug/Gang Task Force, reports AP. "There will be drug rip-offs and drug debts that haven't been paid. All of that is going to stay."