Weed is legal in California, and regulations have made it so that cannabis companies can legally get their products out to the world.
However, with taxes and regulations making products a lot more expensive than consumers are used to, a black market still exists, where edibles and weed sellers get around the legal regulations and taxes.
The hosts of the Foodbeast Katchup found this out first hand, accidentally finding themselves in an underground cannabis swap meet.
The swap meet was very secretive in nature, so much so that Katchup host Elie Ayrouth was under the impression that he was being invited to a secret dinner, as Foodbeast often is.
The two hosts didn’t linger, but not being exposed often to that type of event, they took it in, documenting their experience on the podcast.
“That day we were recording a podcast and I was like, ‘Yo Geoff, you want to go to a pop-up dinner,’ because that’s what I thought it was,” Katchup co-host Elie Ayrouth detailed. “As I asked (the inviting party) he started unveiling a little more information, and that’s when I realized that this was like a cannabis swap meet.”
Ask a stoner about these meetups, and you’ll likely get a chuckle. These are their spots if they don’t want to burn a hole in their wallet. It’s like a night market for cannabis products, and several vendors set up to sell at a secretly disclosed location.
The same risks remain from before the California laws were passed, as the dosages are not regulated, the seller isn’t adhering to any type of government regulation, and the risk of a raid still remains for vendors there.
According to CNBC, the illegal weed market is still a $70 billion industry nationwide, and undercutting the companies that are doing it the legal way.
The same CNBC article reports that while California estimated to make $1 billion from cannabis taxes, which was one of the leading forces in driving the vote for legalization, the state only made about $345 million from the legal dispensaries.
As we learned from a previous podcast with Kristi Knoblich-Palmer, co-founder of Kiva Confectionery edibles, the price points are some of the biggest differences between the legal and illegal markets, and she detailed why the prices for legal products can often be so high:
“There are the most extreme requirements that we have as a brand. We don’t like frustrating our consumers, that’s not our first choice. Regulation requires us to put our products into a child-resistant box. That box has increased in price from this year to last year by 5x. The state requires that we test absolutely every batch for food safety and potency, to make sure that it meets state standards. The way that the state has testing happening right now, it is extremely expensive, and we also have to do it twice. You’re paying thousands of dollars per batch in testing. The last one and most impactful, is taxes. Because cannabis is a little bit fringe… everybody has their hands in our pocket. The state has a pretty high excise tax, which ends up being 15% to the consumer. Then we have a local tax. Our taxes are getting marked up, and marked up, all throughout the supply chain.”
So there’s a reason that $18 for their chocolate bar is so expensive, and also a reason that consumers flock to the underground industry.
Even as the LA Times has reported that the city has been cracking down on illegal cannabis sales, there are reportedly hundreds of illegal dispensaries across Los Angeles alone.
These black market shops are still thriving, and it might take time before there’s a shift in that culture.