Five years after Parliament legalized marijuana, a third of the market is still controlled by drug dealers, according to the Department of Public Safety. Federally licensed retailers had trouble competing with organized criminals.
“One of the main goals of legalization of cannabis was to reduce criminal activity by keeping profits out of the pockets of criminals,” the department wrote in an October 17 briefing note. “The illicit drug trade provides organized crime with one of its most financially lucrative criminal markets.”
According to Blacklock’s Reporter, Parliament in 2018 repealed a 95-year criminal ban on recreational cannabis. “A well regulated legal cannabis industry is in place and is significantly displacing the black market,” said the note.
“Today, the legal cannabis market accounts for approximately 67% of market shares,” wrote staff. “However, there continues to be a well entrenched illegal market in place.”
Drug dealers typically sold marijuana at a 55% discount compared to licensed retailers, who have “higher prices” and “limited selection” after paying excise tax, GST, license fees, insurance and security charges. “Consumers are turning to the illegal market for a variety of reasons,” wrote staff.
Federal research by the Department of Justice and others noted that drug dealers continued to flourish in jurisdictions like Washington State and Colorado for years after marijuana was legalized. The Parliamentary Budget Office (PBO) in a 2016 report also warned the black market would persist.
“As the legal market matures there will be downward pressure on wholesale prices as producers’ costs decline,” wrote the PBO. “However long term prices are less predictable as consumer tastes and product offerings including value-added products evolve.”
“One has to be careful not to move above the illegal price,” Mostafa Askari, then-assistant budget officer, told reporters at the time. “As soon you move above the illegal market price, based on our estimates, you lose a lot of market share to the illegal market so that defeats the purpose.”
The Department of Public Safety memo confirmed a 2022 report by a federal money-laundering monitor, the Financial Transactions and Reports Analysis Centre, that about 37% of marijuana users bought on the black market. “There still exists a flourishing and illegal cannabis market in Canada,” said the report.
“Such illegal markets contribute to increased risk of harm to Canada’s financial system and its citizens through significant loss of tax revenue and increased funding of criminal activity by organized crime groups,” wrote the Analysis Centre. The report advised banks to be on the lookout for drug dealers based on suspiciously high volumes of electronic bank transfers from “unrelated parties,” depositors’ opening and closure of multiple accounts in a short period of time and unusually high purchases of shipping materials.
H/T: www.westernstandard.news
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