How to beat the illicit cannabis market?

The biggest headwind plaguing the Canadian cannabis sector is the illicit market. The competitive IM is believed to own up 40%-60% of total cannabis purchases – money which should be flowing to the legal industry.   

Battling the IM is a ‘whack a mole’ exercise, consuming valuable resources and being a distraction for police i.e. they often have better things to do.  Like contraband cigarettes, governments want to eliminate the IM but lack the stones and wherewithal to finish the job.  The reality is that greater punishments of offenders don’t work against organized crime or people financially incentivized to flout the rules.
 
There is a better approach:  bring the IM into the legal economy, create a more liberal regulatory framework and let market forces determine the ultimate winners.  This would require an un-Canadian bureaucratic/political mind shift plus some pragmatic and meaningful regulatory changes, such as:

- Reduce onerous taxes & regulations that hamstring the profitability of legal operators and dissuade illicit producers from going legit;

- Give illicit players a faster, less expensive path to joining the legal market;

- Walk back many product restrictions, putting all competitors on the same playing field; 

- Allow for a better consumer experience that supports better messaging, sampling, online commerce and display;

- Liberalize the trade in genetics as well as importation of products.

New policies should be based on an acceptance of the 'true' market, untethered by stigma or ‘nanny state’ thinking.  One wholly reasonable standard would be the approach taken with legal products like tobacco and alcohol.   Naturally, reforms should not compromise the objectives of safe and responsible usage.  

I am not naïve to think liberalization would proceed quickly or be politically expedient, let alone be enacted. But as a start, Health Canada should be pressured to accelerate and include industry representatives in their current academic/bureaucrat heavy deliberations over the Cannabis Act.  Their brief public consultation period is nowhere near enough time; it says a lot about the sincerity and value of their effort.  

Bringing the IM into the legal economy is in everyone’s best interests, though many policymakers would likely disagree. The role of government is to support (at a minimum, not penalize) industry and not overly infringe on the freedom of its citizens.  Reform would bring higher tax revenues, germinate more lawful economic activity and remove an unnecessary burden on law enforcement. LPs would no longer need to compete with one arm tied behind their backs.  And, consumers always benefit from highly competitive markets through improved product quality, greater choice and lower prices.

If you can’t beat them join them.

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