No matter how hard I think about it, I can’t dream up a plausible public health or safety rationale for dividing the market between tobacco sellers, alcohol sellers, and weed sellers. Instead, I keep landing on the opposite: that it’s safer to have weed sold by people who are already selling tobacco — and also beer. These hard-nosed merchants are trained in ID carding, they run tight ships, and they’re used to complying with strict laws and handling close oversight by regulators and law enforcement.
When voters vote to legalize weed, their intent is to legalize weed. And yet, in states across America, devils lurk in the details of how weed is regulated. Some of these devils have turned out to be so monstrous that they have frustrated the very purpose of legalization, kept most weed sales in the illegal market, and negated the will of the citizens who voted to legalize.
At their worst, these unworkable systems for the production, distribution, and sale of legal weed — often written by lawmakers who don’t know the first thing about weed — have included nonsensical legal-weed rules that impose huge costs on producers, sellers, buyers, and society as a whole, without any clear corresponding public safety benefits. Beyond making it difficult for any legal weed business to survive, these unworkable laws have turned whole groups of left-wing activists into disillusioned libertarians who are increasingly cynical about the ability of government to govern.
This was a central topic of my 2022 book, “Can Legal Weed Win? The Blunt Realities of Cannabis Economics,” where my University of California Davis colleague Dan Sumner and I analyzed the effects of heavy legal weed regulations and taxes and concluded that most U.S. systems of recreational legalization are economically unworkable. By treating weed (which has never killed anyone from an overdose) like plutonium — instead of like kale, oregano, or any other normal agricultural product — legalization laws have often served to illegalize more weed than they’ve legalized.
There is one sleeping giant of counterproductive legal weed rules that almost nobody talks about, but everybody should: in every U.S. state that has legalized recreational weed, retail stores that sell tobacco, nicotine, or alcohol — like smoke shops, convenience stores, and gas stations — are ineligible to apply for licenses to sell legal weed.
This rule that has been imposed almost everywhere in the world that has legalized weed, and it’s a doozy.
The idea that a weed store — or “dispensary” in the old medical-marijuana lingo — can only sell weed, but not other intoxicating consumer products, is a truly strange and archaic idea. In 2024, there aren’t many stores around that sell only one type of thing, and for good reason: you can’t survive in retail by doing that. Imagine a supermarket that sold only milk, or a sports store that sold only tennis racquets. Even an Apple Store might be a money-losing business if it sold only iPhones. For better or worse, single-purpose retail is an 1800s business model.
Today’s neighborhood retailers, who make up the majority of all American small business owners, know that for their businesses to thrive, they must offer a diverse array of products that serve a diverse group of customers, each of whom need different things at different times of the day.
In New York City, for half a century or more, thousands of small business owner-operators, most of them immigrants, have run an informal, unaffiliated network of independent, successful, amazingly well-stocked, and efficiently operated convenience stores, known informally as “bodegas” and, more recently, “smoke shops.” These stores typically sell not only cigarettes, cigars, papers, lighters, and vapes, but also beers, wines, sodas, waters, Red Bull, painkillers, tampons, condoms, and other emergency necessities. Most of them stay open into the wee hours, and many operate all night.
These days, an increasing percent of all the smoke shops in America — the hub is New York, but I’m talking about Texas and Georgia, too — also sell unlicensed weed, or “THCA” weed that’s nothing but normal weed with an explanation that it’s technically legal.
Most of this smoke-shop weed comes from California or Colorado. It is unlicensed by necessity, because the smoke-shop owners are not legally allowed to buy or sell licensed weed. They do not have the choice to sell legal weed. Even if they could afford a legal weed license, using it would mean suddenly giving up all the legal beer and cigarette sales that sustain their small business and keep their families fed.
Smoke shops are the most natural and efficient possible sales outlets for legal weed. They’re already built out, and they are perfectly set up to sell legal cannabis products. They are strategically located in the places where people demand the most weed. It is clear from the current situation that the smoke shops have been able to adapt their businesses to selling weed with almost no capital investment.
Many of them already know the product well: after all, for decades, they’ve been selling every size and shape of pipe or bong you’ve ever seen. Increasingly, with the complicit look-the-other-way attitude of law enforcement, they also sell illegal weed. This weed is generally reasonably priced and of reasonably high quality. The smoke-shop weed market is highly competitive, with plenty of repeat neighborhood customers, and competitors know they won’t win if they overcharge you or sell you schwag. So excellent smoke-shop weed is currently available on almost every block in thickly settled areas of Manhattan and Brooklyn. Still, since it’s often not tested or labeled for potency, and you’re never sure where it comes from, the quality varies and safety concerns arise.
New York’s system, like those in so many other states, makes it perfectly impossible for smoke shops to sell legal, tested, labeled weed. To make matters worse, the few legally licensed weed stores tend to cluster in rich neighborhoods where people can afford to pay their high prices, leaving poor neighborhoods to be completely controlled by the illegal market.
No matter how hard I think about it, I can’t dream up a plausible public health or safety rationale for dividing the market between tobacco sellers, alcohol sellers, and weed sellers. Instead, I keep landing on the opposite: that it’s safer to have weed sold by people who are already selling tobacco — and also beer. These hard-nosed merchants are trained in ID carding, they run tight ships, and they’re used to complying with strict laws and handling close oversight by regulators and law enforcement.
But if they wanted to sell legal weed, they’d have to empty their shelves of everything else. No matter how easy it were to get a license, this is a deal-breaker for the smoke shops. In 2024, you need to sell more than one thing in a retail store. If they converted to legal weed retailer, as it’s currently set up, these small business owners would lose their businesses and livelihoods.
State regulators know about these illegal weed shops, of course — and lately, their approach has been to announce, with increasing fervor, that they are ramping up efforts to shut down or even imprison these unlicensed weed sellers for their crime of not obtaining a license for which they are not eligible to apply. To those of us who have supported legalization since we were in school, who subscribed to the newsletters and went to the rallies and fought for the social justice aims of legalization, the news sounds a little bit different. Throwing more working-class minorities and immigrants in jail for something we overwhelmingly voted to legalize sounds like the opposite of what we have been fighting for for so long.
The alternative is to embrace the natural development of the legal weed economy, and allow any store — smoke shop, convenience store, grocery store — to apply for a license to sell legal weed, whether or not they also sell tobacco or alcohol. And this licensing process should be cheap, easy, fast, and not limited by any local quotas, approvals, community host agreements, and so on. Sellers would be required, of course, to comply with taxation, testing, potency labeling, and age-ID requirements, just as they already do, successfully, with alcohol and tobacco: there is relatively little illegal alcohol or tobacco on the U.S. market, in spite of taxation, labeling, age minimums, and other safety requirements.
One problem with this solution is that the legal weed businesses that invested millions in complying with the complex licensing and regulatory process, applied for and obtained retail licenses, have huge sunk costs. For them and their investors, it seems unfair that law enforcement should allow a whole breed of new competitors into the market that don’t have to invest large amounts in meeting the onerous licensing and compliance costs that they did.
But life is tough, and progress happens. Like the owners of expensive taxi medallions in a technologically advancing economy that opens to ridesharing, legal weed license-holders make up a small interest group in a population of millions. If the market opened, they would be eligible for tobacco or alcohol licenses. They could even be compensated by the state for their initial investment losses if legal weed retailing becomes available to regular stores. But even if not, the purpose of our laws is not to protect the old guard. What’s going on right now with single-purpose legal weed retail is harming the vast majority of consumers, limiting state tax collections, keeping unsafe unlabeled weed in the market, holding us all back, and enabling illegal weed to continue to thrive.
For legal weed to win, we must look forward to a future where weed is just a normal product, easier and more convenient to find than illegal weed. This will only happen if it can be sold easily and conveniently in the smoke shops and other retail locations that are best positioned to sell it and give convenient legal access to our whole population. This may eventually happen naturally with federal legalization, but nobody knows when that will come or what form it will take. Here’s hoping that in the meantime, state lawmakers will embrace progress and realism, open the legal weed market to all, and honor the intent of the voters they claim to represent.
Robin Goldstein is a research economist and director of the Cannabis Economics Group at the University of California, Davis. He is also a 1% shareholder of Cambium Analytica, a cannabis testing lab.
H/T: valleyadvocate.com
