Is The Underground Cannabis Industry Over?
As the market opens its arms to the world of cannabis, long-time users started wondering about dealers legitimizing their business. When people think about buying weed, images of dark alleyways and secret locations to avoid cops come to mind. Now fast forward to 2022, buying cannabis is similar to going into a grocery store and having your pick (depending on the state). But with this new wave of cannabis being accepted and somewhat “cool”, what’s going to happen to the underground cannabis market? Will it disappear forever? Or are long-time dealers transitioning to becoming corporate CEOs?
What does legalization mean to the underground cannabis industry?
For the first time in history, cannabis dealers are now given a choice: legitimizing their business or selling illegally. The choice sounds simple but for a long time cannabis sellers who’ve worked in the underground market for years, it’s not so simple. In fact, to them, there are pros and cons on both ends. For a business with the license to sell, owners can expand their company and take on investors. And as the industry thrives, newly legalize businesses are paving the way to help other underground sellers to do the same. Tabitha Fritz began her business Fritz’ Cannabis Company in the underground market back in 2016. Her business transitioned to legalization a year ago and for her, it’s had positive changes:
“We’re now launching hash rosin gummies, the first of their kind in Canada. And we learned many lessons from working in the legacy market. We’re even working to help underground sellers that we know who want to make the transition too.”
How has legalization affected the underground industry?
Fritz’s business is located in Canada, where the cannabis laws are different compared to companies located in the US. When a cannabis business is legitimized, there required to pay taxes. And since cannabis is still considered a Schedule 1 substance, the US government applies Section 280E tax code (making businesses pay upwards of 80 to-100 percent in federal tax rates). This means that legal cannabis could cost more than cannabis bought illegally. “To me as a seller, there’s no point,” says a New York cannabis seller working in the underground who asked to remain anonymous: “The way I handle my business, I do it on my terms which has always been this way. Now that it’s getting popular that’s when the government comes in and tells us ‘Hey you have to do this legally now because I want a piece of your profit’ yet they’re still going to arrest you if you have it? It makes no sense for me to legitimize my business.”
In the US, arrests based on weed possession are still present to this day and it’s taking the government longer than expected to remove cannabis from the Schedule 1 category. And with the recent laws being viewed as counterproductive, it’s making underground sellers question whether legalizing their business is really in their favor.
Will the underground market fade away?
Although there are a few states who have legalized cannabis medically and recreationally, owners who are now operating their business and paying their taxes to the government see that the underground cannabis industry will never go away. In fact, the underground market has been booming in certain states even with legalization. In the end, it’s come down to the sellers and what they feel comfortable doing for the future of their business. Legitimizing means expansion with higher fees (and having government-approved cannabis) while underground selling means keeping profits with the risk of criminal charges. And for sellers, they also run the risk of buying legal weed without repercussions to sticking to dark alleyways. In the end, we all have a choice. So make sure you choose wisely.