In early June, inside the Empire Cannabis Club, a breeding shop Unlicensed shelves on Manhattan’s Eighth Avenue are filled with cannabis products from popular brands such as AbsoluteXtracts, Jeeter, Stiiizy, and Kiva. These products were produced legally in states such as California, Colorado, and Massachusetts. but without federal legalization, there is no legal way for these products to cross state lines.
Jonathan Elfand, the founder of Empire and cannabis products entrepreneur who spent 10 years in prison after being caught in 1998 for running one of the city’s largest cannabis farms in Brooklyn, says the products are legally produced and tested in labs elsewhere. When asked how they got to New York, a state that has legalized recreational marijuana but has yet to initiate state-approved sales, looks shy. “Hey, magic happens,” says Elfand in an interview at a bar near San Francisco airport last July.
In the $72 billion cannabis industry, which consists of a $25 billion legal industry and a $47 billion illegal economy, the market is generally governed by federal law. this breeding shop without obtaining a license from Elfand, which operates as a private club, It has been a pending issue for New York regulators. It believes it is operating legally according to the law. But above all the Empire, marketing for some of California’s biggest brands that hope to become famous brand companies.
“Everyone participates in the legal and illegal market” says Elfand. “There’s no way you can promote yourself or make enough money without it.”
Scott Palmer, who co-founded the Kiva brand in San Francisco with his wife, Kristi, says he doesn’t know how his (legally produced) products are being sold illegally in other states. He believes this is a sign that regulators are dividing the cannabis industry into two separate sectors. —one legal and one illegal— A distinction that doesn’t really exist in the market.
Saying that he has a lot to lose by diverting his products to the illegal market, Palmer explains, “I don’t think it’s a secret that a two-faced market exists.” “If there is still demand, the (illegal) market will find a way to keep functioning. This will continue to happen until we consolidate national regulations.”
When it comes to compliance, Palmer says he doesn’t want his products to be made in and out of California. (Kiva has legally expanded other states such as Massachusetts, but usually the product must be manufactured and sold in the same state.) But if you have the ambition to make Kiva one of the best-known cannabis-infused edibles companies in the country, you’re smart enough to know that getting your products into gray and illegal markets will also help.
“We have plans to expand to New York legally, but of course (the illegal sale of their products) is good disclosure and “It’s a good sign that the brand is spreading across the country,” he says.
For most cannabis industry workers, the fact that legal and illegal economies work together is an open secret. Jonathan Rubin, CEO of New Leaf Data Services, an enterprise-grade wholesale price tracker, says: It’s important to understand that illegal and “legal” markets are volatile.
“There is the illegal cannabis market that is successful in legal chains, and there is legal cannabis operating in illegal channels,” Rubin says.
There are many opportunities for the two markets to do business. First, with ultra-high taxes and burdensome regulationsLegal traders have a hard time making a profit, so straying on the black market is financially attractive. Second, there are too many “gaps” to shift from the legal market to the illegal market, thanks to gaps in the industry’s system of tracking seeds for sale, and a lack of compliance and control in testing, distribution and delivery, says Rubin. . parts of the supply chain.
Nicole Elliott, director of the California Department of Cannabis Control, is well aware of how the two sectors of the cannabis industry interact. “We historically consume about one-fifth of what we produce,” Elliott says. “California has historically fed the rest of the country when it comes to marijuana.And I don’t think a few years will change that. It’s a longer process.”
DCC (Cannabis Control Department) is trying to reduce the illegal market in California. Last year it seized more than half a million pounds of cannabis, destroyed 1.2 million plants and arrested nearly 200 people. Again, Elliott says California alone cannot solve the problem. He believes that for every pound of marijuana produced in the state, three pounds are sent to other states. In October 2021, California Governor Gavin Newsom appealed to Senate Majority Leader Chuck Schumer and Senators Cory Booker and Ron Wyden. they passed a law last month He regulated marijuana like alcohol and tobaccostresses the importance of allowing interstate commerce.
Two markets need each other for now. bernerrapper and cannabis entrepreneur who is the co-founder and CEO hemp design company CookiesHe says his trap days are over, but he still trusts the practices he perfected in his illegal days to market legal products. During a recent trip to New York, she brought in a new two-ounce “fire strain.” and he handed out a gram to everyone he met.
“You have to let the ‘streets’ test it first, you have to create that buzz, you have to create that buzz before it hits the white market,” Berner says. “That’s how you go on.”
Without tax and federal legalizations, the interaction between the two markets is unlikely to stop. Steve DeAngelo, a veteran cannabis activist and entrepreneur who opened one of the first cannabis breeding shoplicensed by the country, he says the only way to regulate an industry is basic economics, not law, especially one that has been operating without regulation for decades.
“You can’t build a system that the human mind doesn’t know how to avoid,” DeAngelo explains to FORBES in an interview at his home in Oakland, California. “If there’s one lesson the ‘ban’ teaches us You cannot rule the market by force. The only way to manage the (marijuana) market is to use the same market forces.”
The cannabis industry, like any other industry, is dominated by supply and demand. “The law of supply and demand is one you cannot break; sooner or later it will catch up with you,” says DeAngelo.
Regardless of what happens in Washington, cannabis users in the United States will purchase California marijuana legally or illegally. The law has not stopped the industry so far and probably never will.
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