Canada legalized pot in October. But its black market is still going strong.
By Selena Ross
January 5, 2019 at 6:00 AM EST
MONTREAL — The legal cannabis stores that opened here last fall still look pristine. Curious customers file in, but the shelves they peruse are often bare. Supplies are so short the stores are shuttered three days a week.
A few blocks from one outlet, though, a longtime pot dealer was receiving a stream of text alerts one afternoon this winter, a sign of booming business.
When the government launched Canada’s official recreational-pot market on Oct. 17, it was banking on the idea that many users would prefer to buy legally and that the black market would quickly begin to fade. It says things seem on track, with “early reports of a 65 percent reduction for illegally sourced products,” according to a spokeswoman for the minister in charge of the cannabis file.
But there are also signs things aren’t going as expected.
In a national poll Ipsos conducted for Global News a month after legalization, more than a third of Canadian cannabis users said they were still buying from their regular dealers and hadn’t even tried the legal system. Five illegal sellers in Quebec told The Washington Post their sales are slightly up.
To the black marketeers, the bare-bones legal supplies are “pretty much a running joke,” said David, the busy Montreal dealer, who spoke on the condition that his last name not be used to avoid police attention.
He finally saw one of the colorful boxes used as packaging in Quebec’s government-run cannabis stores when a customer showed it to him during a purchase.
“People are buying the containers so they can put their black-market weed in it,” David said.
Many researchers, politicians and investors see the state of the black market as an important gauge of the new policy’s success. But if it doesn’t shrink naturally, Canadian authorities face some tricky questions: Can they force it to shrink? And if their approach proves to have been flawed, is it too late to change course?
“You’ve got to get the timing right,” said Mark Kleiman, a New York University professor and expert on cannabis legalization.
Illegal cannabis sales are notoriously hard to measure. In Washington state, for example, experts’ best estimate six years after legalization is that there’s still “a non-trivial black market,” Kleiman said. Still, he noted, “it’s clearly less than half the total market.”
Canada, however, is taking a different approach than Washington or states such as Colorado, which also legalized recreational pot in 2012 and has made similar progress in reducing illicit sales.
The government’s most jolting decision, illegal dealers here said, was to structure the new industry in a way that tended to bar them from it. In 2015, when the government first committed to legalization, many of them planned to apply to open private shops.
“All of us thought, ‘Okay . . . I’m going to be able to come out of the shadows and I’m going to be able to pay taxes,’ ” David said. “As time went on, it became clear that’s not what they were after.”
In Quebec and several other Canadian provinces, all cannabis stores are government-run, leaving no path to legality for people like David, who has worked in the underground industry for more than a decade, operating his business full time for several years.
Colorado and other U.S. jurisdictions, by contrast, gave many small-scale dealers a chance at a legal job.
“That’s a huge difference,” said Lewis Koski, former director of the Colorado Marijuana Enforcement Division and now a consultant on legalization. “I can’t think of a state here in the U.S. that has a government-control model similar to . . . Canada’s.”
Even in provinces that do allow private shops or dispensaries, including Alberta, Saskatchewan and Manitoba, small businesses face high barriers. It costs almost $5,000 just to apply for a license, and if approved, $23,000 each year thereafter in regulatory fees, with provinces often adding their own charges.
There’s also a strict security-clearance requirement that looks at applicants’ job history and associations. Even if David were willing to move to another province, and despite having no criminal record, he said, he would probably be disqualified.
Small-scale growers hoping to join the legal system complain of similar hurdles.
To some observers, these early decisions foreshadow long-term problems.
Shutting out many in the black market has already triggered a vicious cycle, said Dan Malleck, an expert in drug and alcohol regulation from Brock University in Ontario. It helped ensure the initial undersupply of legal pot by preventing a huge volume of illicit pot from being folded in. The shortage is now driving customers back to the black market, further reinforcing it.
“They should have not just stockpiled,” Malleck said of authorities. “They should have created a mechanism that allowed illegal producers to move quickly into the legal producing system.”
Canadian provincial governments have also emphasized another strategy that wasn’t popular south of the border: police crackdowns.
Cracking down when legal supplies are still low and demand is therefore high for black-market pot hasn’t generally been seen as useful, according to Kleiman. “There’s no point,” he said. Only after the first year or two, when legal supplies match market demand, should officials try “to vigorously drive the illicit guys out.”
In Quebec, police announced the creation of a 54-person anti-cannabis unit even before legalization.
Unlike U.S. states that have legalized cannabis, Canadian authorities have also framed the crackdown in moral terms, arguing that even as the drug is declared a legal substance, fighting it on the black market is a matter of public safety.
“Organized crime controls an important part of it,” said Dany Dufour, the captain of Quebec’s new cannabis unit.
The Royal Canadian Mounted Police have found that nearly half of national “high-threat” organized crime groups are still tied to black-market pot and that the revenue can fund other crime such as fraud and gun trafficking, a spokeswoman said. The force sees smaller dealers like David as part of the problem.
“We also know that individuals can’t sell without sanction from organized crime groups,” she said.
But David said he isn’t connected to these groups. While bikers and other groups with ties to organized crime may be a problem in rural Quebec, another Montreal pot dealer said that those who grow and sell in the cities are mostly independent. “They’re kind of, like, weed nerds,” he said, “creative types, musicians, artists, people like that.”
On Canada’s west coast, too, the crime-linked groups “pretty much pulled out a long time ago,” after nearby Washington, Oregon, Colorado and California legalized cannabis, said Rob Gordon, a criminologist at Simon Fraser University in Vancouver.
The government spokeswoman said that many of the key decisions affecting options for people like David are made at the provincial level, not the federal one. But in interviews in December, Canadian Prime Minister Justin Trudeau minimized the problems, saying that the supply shortage would be resolved within months.
David said he’s skeptical about that. He also said he’s not spooked by the police crackdown and predicts his black-market business will continue to thrive.
“I didn’t intend to end up in this industry, but I did, and I’m making the best of it,” he said. “And I’m really good at it.”