Canada’s black market for weed is thriving—even after legalization

Some dudes are happy.
Some dudes are happy.
Image: Reuters/Chris Wattie
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The consumption and sale of cannabis was legalized in Canada, the first rich country to do so, in October. But a little more than six months after the historic step, the black market isn’t just alive—it’s also well, and towering over the legal stuff.

The overwhelming majority of cannabis sales across Canada during the fourth quarter of last year were done on the black market, some 79%, according to the latest Statistics Canada data. That’s better than the 90% tally in the previous quarter, but legal pot still has a long way to go before it outsells its illicit counterpart.

Part of the reason is price. Statistics Canada has carried out an anonymous online survey on Canadian cannabis prices, and found the average cost is $10.91C ($8.13) per gram when buying an eighth of an ounce (3.5 grams), the most commonly purchased amount, through government-licensed retailers. That’s more than 40% higher than what the same amount fetches on the black market.

But the larger issue appears to be supply-related. Though there’s already enough land earmarked for licensed cultivators to produce 1 million kilograms (2.2 million pounds) of weed a year, enough to meet the total national demand for cannabis, Health Canada acknowledges shortages in parts of the country.

“The overall supply of cannabis is not the issue. In fact, the data reported by federal licence holders and provincial and territorial public bodies via the national Cannabis Tracking System indicate that total inventories of cannabis far exceed reported sales,” wrote Tammy Jarbeau, a spokeswoman for Health Canada, in an email to Quartz. “The issue is the operation of the supply chain.”

Jarbeau provided a summary of the relative size of the cannabis black market in the US, which showed Colorado and Washington State capturing a much larger share of the total market within the first year of legalization. That represents lost tax receipts for the provincial and federal governments at a time when cannabis’ contribution to GDP is rising.

To be sure, thinning out the black market would be a challenge under even the best price and supply circumstances. But the model of distribution pursued in Canada across the country’s provinces and territories might be fueling the issue. In some parts of the country, only government-run shops are authorized to sell cannabis. In other provinces, it costs thousands of dollars in licensing and regulatory fees to set up shop.

Health Canada told Quartz that it streamlined the application process to approve licenses, as well as issuing amendments to allow cultivators to expand production. There are now 175 sites across Canada that are licensed to produce or sell marijuana—but this varies across the country. In Ontario, the most populous province, the provincial government has issued just 25 licenses, and cited national supply problems.

Experts say more could have been done to address these issues, including bringing black market cultivators into the fold. “When it gets to the retail side of it, the government seems to forget that prohibition doesn’t work. And that creating laws simply to… put more strict prohibitions on illegal selling isn’t the way to go. If that were effective, then prohibition itself would have been effective,” said Dan Malleck, an associate professor at Brock University in St. Catharines, Ontario, and an expert in drug and alcohol regulation.

Still, there’s one undeniable gain so far from legalization. Consumers can avoid getting hit with legal troubles for lighting up—even if cannabis possession charges had been declining steeply in the years prior to legalization.

That’s one reason many Canadians are celebrating—whether they’re occasional or habitual consumers. Thousands did just that earlier this month on April 20 at 4:20pm, when hordes turned up in Vancouver and other cities across Canada for the annual smoke-in, even though consuming cannabis in public is still a no-no.