Marijuana Cannabis legalization black market California Marijuana legalization was expected to bring the industry out of the shadows. But in some states, the black market is alive and well.

Black market cannabis thrives in California despite legalization

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MICHEL MARTIN, HOST:

Recreational cannabis is now legal in about half the country. That's 24 states and the District of Columbia. And efforts to legalize medical or recreational use are underway in half a dozen other states, including Florida, where legalization is on the ballot in November. But in some places, the process has not gone smoothly. What surprised many people is that legal cannabis did not eliminate the black market. In California, local law enforcement is often not equipped to crack down on illegal operations. NPR's Martin Kaste has this report.

(SOUNDBITE OF SIRENS)

MARTIN KASTE, BYLINE: Police cars block a street to the city of Long Beach as green-uniformed officers in tactical gear take up their positions for a midday raid.

UNIDENTIFIED POLICE OFFICER #1: This is the police department. We have a search warrant for the premises.

KASTE: The target of the search warrant is a shabby storefront with security grates over mirrored windows. The sign says Flores Cabinets. The reinforced metal door happens to be open, so the police walk in and find what they expected, black market edibles and jars full of cannabis buds. The raid commander, Wilson Linares, says this kind of setup is common.

WILSON LINARES: They'll occupy buildings that the business itself has either moved or went out of business, and they're not going to make any changes. But one of the biggest things that you can see is you see the cameras. The building itself is old, but those cameras are pretty new, so that's always a big indicator for us.

KASTE: The store is not licensed by the state nor permitted by the city, especially not here, close to a school. The penalty for running this kind of store is usually a fine, a few hundred dollars, and officers find themselves raiding some addresses over and over again.

BILL JONES: The black market is very pervasive, and it's definitely larger than the legal market.

KASTE: This is Bill Jones, head of enforcement for the Department of Cannabis Control. It's a state entity. He says in the first few years after legalization, there was something of a free-for-all in California.

JONES: Most jurisdictions, local jurisdictions, police or sheriff's departments and district attorney's offices were very reluctant to do any kind of enforcement on cannabis. So it really created an air of impunity, and the unlicensed activity really just skyrocketed.

KASTE: The state's been playing catch-up ever since. To an economist, none of this comes as much of a surprise. Tiffanie Perrault is a postdoctoral researcher at McGill University, where she studies cannabis markets. She explains why legalizing marijuana can stimulate illegal sales.

TIFFANIE PERRAULT: You remove risk because, like, you know, like, it's legal, so you have more consumers, and at the same time, your black market is going to react strategically by adjusting prices and levels of quality.

KASTE: Or to put it in layman's terms...

PERRAULT: The black market becomes more competitive (laughter).

KASTE: And in California, illegal pot had more time to go mainstream - more time than in, say, Washington state, which kept up the enforcement pressure on unlicensed pot sellers while the legal system got up and running. So California consumers tend to be less aware of whether a cannabis seller is legal. But what they do pick up on is price. Depending on the city, the taxes on licensed cannabis can reach almost 40%. Outside a licensed shop in Riverside, Cameron Remington (ph) shows off his purchases.

CAMERON REMINGTON: I got a disposable and some edibles, and it was, like, almost 60 bucks for two items when it's only, like - it's a little more expensive here.

KASTE: Remington does like the fact that the licensed products are tested, but legality for its own sake is not a concern for him. After all, he himself grew illegal pot during the boom years right after legalization. He says he grew it on his property until the police finally showed up about a year and a half ago.

REMINGTON: We got ticketed for it for having, like, a couple processed plants, but they didn't catch the bulk of anything, so we only got hit for, like, a couple of small things.

KASTE: Those raids on the growers are still happening.

(SOUNDBITE OF POLICE RADIO)

UNIDENTIFIED POLICE OFFICER #2: (Inaudible).

KASTE: On this Tuesday morning, the Riverside County Sheriff's Department's Marijuana Enforcement Team leads a 10-vehicle convoy through the semi-rural outskirts of the town of Paris. They're following up on a tip about a house hidden at the end of a private drive. They check it out, and Sergeant Jeremy Parsons comes back to the main road to report.

JEREMY PARSONS: When we went up to the house, we could smell marijuana. We found a greenhouse in the backyard, which contained a few hundred small marijuana plants.

KASTE: It's a modest haul, given how many officers and support personnel have spent at least half their day on this. And Parsons says they can't get to all the tips they receive.

PARSONS: We could do this every day.

KASTE: But why do it? If it's legal for adults to consume cannabis, why put all this effort into fighting the unlicensed producers? Well, one argument is environmental. Unlicensed farms often contaminate the land and poison the water. Riverside's conservative sheriff, Chad Bianco, says those problems give him a good enforcement tool for going after illegal marijuana.

CHAD BIANCO: So the beauty of California is environmentalists. I despise them. They're the downfall of California. But we're charging these people with water contamination, pesticides that are illegal, the fertilizers that are illegal. That's where we're getting people.

KASTE: But for Bianco, the real problem is legalization itself, and the effect he says it's had on illegal grows.

BIANCO: It made it worse. One hundred percent it made it worse because it increased all of the illegal activity.

KASTE: A lot of this is about exports. California has become a supplier of cannabis to states where it's still illegal. And you can see the same thing now happening in some other pot-producing states, from Oregon to Maine. This is despite the warning from the Justice Department, back when legalization got started, that the states that legalized pot should make sure to keep it inside their borders. Bianco says in the rural parts of Southern California, these export-oriented farms have been breeding violent crime.

BIANCO: I mean, we've had multiple homicides, we've had multiple kidnappings, we've had multiple reports of human trafficking and rapes and the punishments that go with not doing your job, and it's all related to this.

KASTE: Back at the statewide agency, the DCC, Bill Jones says he thinks legalization was, as he puts it, imperative. But he also believes it should be possible eventually to curb the black market.

JONES: I think it is doable, but it's going to take a lot of resources and consistent enforcement over years to really get our arms around this.

KASTE: It may no longer be the old war on drugs, but there's still a kind of conflict going on in California over marijuana, perhaps more of a long-term war of attrition.

Martin Kaste, NPR News, Riverside, Calif.

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