Effects of Regulation Intensity on Marijuana Black Market After Legalization

Effects Of Regulation Intensity

Effects Of Regulation Intensity


Effects Of Regulation Intensity, Since 2012, many states and Canada have legalized the use and sale of recreational marijuana. One of the expected benefits of the legalization is that the establishment of a legal cannabis market would eliminate the black market which has been the main form of marijuana trade for decades.

Even though legal options are available for marijuana producers and consumers, the black market is still thriving in states where recreational marijuana has been legalized. The reasons behind the persistence of the marijuana black market are complex.

One of the main arguments is that the legalized states have failed to establish a regulatory framework which effectively keeps both producers and consumers in the legal market. Instead, strict regulations and high cost of compliance have created an environment in favor of big players while driving small-scale businesses into the black market.

The current research attempts to study this issue by answering the research question of whether overregulation is pushing some marijuana businesses back to the black market or preventing them from entering the legal market.

This thesis employs a mix-method design to analyze qualitative data of news articles reporting the reasons that marijuana businesses decide to stay in the black market and a quasi-experimental time series analysis of National Incident-Based Reporting System (NIBRS) data regarding marijuana offenses in Colorado and Washington between 2014 and 2017.

The qualitative analysis of news reports reveals that regulation is one of the main reasons that people stay in the illicit market. The comparison of marijuana crime trends in Colorado and Washington shows mixed findings. While marijuana offense rates in Colorado largely remained steady over the years, those in Washington increased dramatically after the implementation of more intensive regulations.

The results of this study have several policy implications for the marijuana legalization as well as implications for future research on the black-market issue.