The many potholes in marijuana legalization

Gary Mason

About a year ago, I visited Seattle to see how pot legalization was going. Not well, as it turned out.

A few years earlier, Washington State became one of the first U.S. jurisdictions to vote in favour of legalizing and regulating the sale of marijuana for recreational use. In 2014, the system designed to manage the commercialization process was operational – and it didn’t take long for some early grumbling to become a nascent revolt.

Growers complained there were too many of them to make any money. Store owners protested that the government taxes on pot were so onerous it left them little financial gain. Meantime, medical marijuana remained so cheap and easy to get few saw any impetus to go to the more expensive government-regulated outlets. Police and others echoed this sentiment, saying the black market was alive and well thanks to the overpriced weed being sold in state-sanctioned outlets.

Needless to say, Washington State’s system underwent some serious tweaking. Taxes on pot had to be lowered (they now sit at 37 per cent). Also, legislators voted to fold the medical marijuana system into the same one designed for recreational use – and tax it at the identical rate. This eliminated the incentive to purchase medicinal pot instead.

There are also far more stores where you can now buy weed, which helped clear the glut that made growers unhappy. The system isn’t perfect, but it’s far better than the one initially introduced.

These are all important lessons for Canada as it prepares to launch its own version of Washington State’s regulatory regime. A report tabled in Ottawa this week that made dozens of recommendations on how it might best be done generally received high marks, and from all points of the partisan spectrum. It highlighted some of the problems Washington State and others encountered in the design of their regulatory scheme.

There is lots still to figure out, not the least of which is: Where will the stuff be sold? Government liquor stores seem to be out as an idea – which is a good thing. But will you be able to get it from your neighbourhood corner store or at the pharmacy stationed in the back of your supermarket? 

The pot panel recommends a centralized distribution system. But what impact would a government monopoly on distribution create? Will it cater to just big producers, who can supply in bulk, or will thresholds be low enough to accommodate smaller, craft growers?

How long will it be before we see major players big-footing everyone, the way Tim Hortons and Starbucks have in coffee land? Would this even be a bad thing?

All of these issues, to some extent, take a back seat to the biggest question: How much will it cost?

If Ottawa and the provinces are looking at pot as one gigantic cash cow then we’re in trouble. 

There naturally will be a temptation to tax the stuff at a high level, as the government does cigarettes. 

But if that occurs, then those who were willing to use legitimate outlets for purchasing cannabis will quickly revert to getting it from a friend of a friend. The black market will barely flinch as users turn their backs on high-priced government outlets. Therefore, there is a huge imperative for governments to find that price-point “sweet spot” that can both entice consumers and allow those along the supply chain to make some money.

It would appear that the government has no plans to tamper with the medical marijuana regime as it exists now, including the cost. So people who can convince a doctor they need weed for their headaches will still be able to get it mailed to them at a far cheaper rate than they would pay at a store. Whether that creates the problem it did for Washington State remains to be seen.

Pot is a multibillion-dollar enterprise. And until now, it was mostly bad guys who were reaping its rewards. Pushing them out of the market will have its own consequences; they will find other things to traffic, stuff that is more dangerous and even more lucrative, such as fentanyl or heroin. While solving one problem we may have just created another, more deadly one.