Leafly
Published on September 22, 2022
A new Leafly / Whitney Economics report finds that ‘opting out’ of legal, regulated cannabis sales creates economic protection zones for illegal marijuana sellers in local communities. (AdobeStock image)
In many of America’s legal cannabis states, local elected officials are supporting their community’s illegal marijuana dealers. And most of those officials don’t realize they’re doing it.
Opt-out towns are opting in to illegal sales. And most don’t realize it.
That’s the conclusion of new research published today in The Opt-Out Report 2022, a project done in partnership between Leafly and Whitney Economics. In the new report, analysts and economists examined a variety of sales, population, and adult market data from the 14 states with operating adult-use retail markets.
Data shows: The more legal stores, the fewer street sellers
By overlaying those statistics, the Leafly/Whitney team found a strong correlation between per-capita cannabis store licenses and illicit marijuana sales. In short: The more per-capita cannabis stores, the fewer street dealers.
Chart: Legal regulated states lead to fewer illegal street sales
Data indicates that adult consumers will choose legal stores over illicit dealers, but only if there’s a store nearby. (Sasha Beck / Leafly)
States with more legal, licensed, and regulated stores exhibit far more success in putting illegal marijuana sellers out of business. States with fewer stores tended to harbor the most robust illicit marijuana markets.
Download the full report below:
Click on the image to download the full Opt-Out Report 2022.
What’s an ‘opt-out town’?
Some states’ cannabis legalization laws allow local municipalities to establish specific regulations within cities and counties. But instead of regulating legal sales in ways appropriate for their community, it is increasingly common for local leaders to opt-out of local regulation, effectively creating an economic protection zone for illegal street sellers to continue business.
Illicit markets thrive in communities where legal state-regulated stores aren’t allowed.
This revival of prohibition at the local level exists even in communities that overwhelmingly voted in favor of legal cannabis at the statewide level.
Opt-out towns and counties have become a serious problem in California, where 62% of all municipalities prohibit regulated cannabis sales–and the illegal market still supplies 55% of cannabis demand, even after nearly four years of legal sales.
In New York, half of all municipalities have already chosen not to regulate cannabis within their borders, even before adult-use sales begin. Those civic leaders have effectively created economic protection zones for street dealers in their communities.
In New Jersey, where adult-use cannabis began earlier this year, 71 percent of local municipalities have opted out of legal sales. That has left the state’s adult consumers with few legal options. With only one store for every 358,000 residents, illegal street sellers command more than 80 percent of the Garden State’s marijuana market.
The erroneous assumption
In many of these opt-out towns, local leaders vote to leave cannabis unregulated based on the assumption that doing so will keep marijuana out of their community.
That’s an erroneous assumption. Decades of experience and data show that cannabis is already circulating in every community in America. Pretending marijuana doesn’t exist doesn’t make it magically disappear. It simply gives a boost to local street sellers–and those sellers don’t demand to see proof of age. State-licensed stores do.
By zoning and regulating state-licensed cannabis stores, local communities effectively create age gates around marijuana. Drawn by a state-licensed store’s wide product selection, lab-tested goods, and pleasant shopping experience, adult consumers over time abandon their local illicit seller in favor of regulated shops. That dries up the market for illicit sellers. Fewer illicit sellers results in fewer opportunities for minors to obtain marijuana.
Illicit products put public health at risk
In addition to unintentionally protecting their town’s illegal marijuana dealers, the report found that when local leaders opt out, they also:
Indirectly encourage adult consumers to purchase illegal products Put public health at risk by allowing the circulation of untested products Sustain illegal sales to local teens Turn away local jobs and tax revenue Continue fighting a losing War on Drugs
Today, nearly 45 percent of Americans live in a legal, adult-use state. If pending legalization measures gain approval on the November ballot, half of all Americans could live in a legal cannabis state by 2023.
In every newly legal state, local officials will be called upon to regulate cannabis in ways appropriate for their community.
Opting out isn’t a vote against marijuana–it’s a vote in favor of illegal dealers. This report provides a critical guide for those policymakers to make local regulatory decisions with research and data-supported facts.
