How can states with legal weed avoid cannabis chaos?

Nearly half of Americans now live in states with legal marijuana, a dramatic shift in drug policy from the days of “devil’s weed” and “reefer madness.”

Over the past decade, 21 states and Washington, D.C., have fully legalized cannabis, promising fewer drug arrests and more tax dollars. Yet legalization has ignited fresh concerns about crime, corruption and public health. To understand different approaches to regulating this new industry and health implications of legalized cannabis, the USC Sol Price School of Public Policy and its partner, the USC Schaeffer Center for Health Policy & Economics, hosted a panel discussion with marijuana policy and law enforcement experts.

The webinar – titled “Avoiding Cannabis Chaos: Better Policies and Strategies for a Legal Market – was streamed through Zoom. A recording of the event can be watched here.

The online event at 10 a.m., Thursday, Feb. 2, featured Jim McDonnell, director of the USC Price School’s Safe Communities Institute and former Los Angeles County sheriff; Rosalie Pacula, the Elizabeth Garrett Endowed Chair in Health Policy, Economics and Law at the USC Price School; and Mona Zhang, the states cannabis reporter for Politico. Mireille Jacobson, co-director of the Aging and Cognition Program at the USC Schaeffer Center, moderated the panel. 

The discussion comes as states take different approaches to regulating marijuana, at times resulting in distinct policy outcomes. Take, for example, public corruption: States that limit the number of licenses or require approval from local officials may inadvertently encourage crooked politicians to accept bribes in exchange for lucrative licenses. By contrast, states that have largely avoided corruption controversies either do not have license caps or award licenses through a lottery system, Zhang noted. 

“It’s super interesting to see all of these various state markets develop and see how different policies affect things like public health, cannabis consumption patterns and the illicit market,” Zhang said. 

The illicit market is still thriving in states with legal marijuana. Drug cartels have undercut legal businesses with more potent products or lower prices, McDonnell said. Even when police do shut down illegal pot shops or seize their property, the illicit stores can often reopen quickly, he added.

“It’s hard to be competitive against the illicit market because their overhead is minimal,” McDonnell said. “They have the ability to adapt their business model to whatever the circumstances of the day are.”

Small legal weed farms have recently blamed California’s taxes and regulations for crushing their businesses.  The cost of compliance, they contend, has been too much to bear as pot prices plummet, all while illegal growers avoid these additional costs.

Pacula, an economist at the Schaeffer Center who has studied the cannabis industry for years, disagrees with this interpretation. She said state taxes and regulation have very little to do with the economic squeeze legal growers are experiencing. Cannabis prices have fallen in both the legal and illicit markets as the supply of marijuana grows, she noted. And gutting state oversight is a bad idea for public health.

“Growers who are staying in the illicit market may have lower costs because they avoid taxes, but they still face the expense of staying hidden from the authorities – unless, of course, we gut the financial resources needed to pay authorities to go after the illegal suppliers,” Pacula wrote in a recent Evidence Base blog post. “The way to make it easier to compete with the illicit market is through aggressive law enforcement, and by guaranteeing consumers of legal weed that they are buying safe, tested and quality-controlled  goods.”