Medical Cannabis Companies May be the First Casualty of Washington’s Cannabis Legalization

Washington’s legalization of Cannabis has been seen as a boon for many liberty minded folks. Unfortunately the legalization of cannabis has opened the door for the Washington state government to tax sales of the plant and license sellers. This leaves an interesting question unanswered, how will state controlled cannabis compete with mostly unregulated medical cannabis:

As Washington moves to legalize marijuana, there are fresh concerns that a parallel market for pot will continue to flourish. It’s not quite a black market. Let’s call it a “grey” market – for medical marijuana. The question now: how will highly taxed and regulated pot compete with largely unregulated medical marijuana?

In all likelihood it won’t:

In Washington, medical marijuana – or MMJ as it’s often called — is loosely regulated. That won’t change when Washington’s new pot legalization law is fully implemented. Initiative 502 was silent on medical marijuana.

You might think a hands-off approach would please the industry – who likes regulations? But medical marijuana growers worry about operating in the grey.

“Without any change you’re going to see the medical marijuana community produce and sell a large quantity of cannabis, because possessing it is no longer illegal,” says the Washington Cannabis Association’s Chris Kealy.

And, he says, they’ll sell it for less. He points to government estimates that predict legal pot under I-502 will go for about $12 a gram.

“The current marketplace in MMJ world is between $8 to $10 — and that is likely to go down.”

This will create an interesting conundrum. The state wants tax money and licensing fees for cannabis but face competition from medical cannabis growers. Whenever the state encountered competition is moves to squash it, meaning the days of medical cannabis growers in Washington may be numbered. In a rather sad but ironic twist medical cannabis companies may become the first casualty of Washington state’s legalization of cannabis. This is also why I prefer decriminalization over legalization, when something is decriminalized it still prevents the state from turning it into a taxable good and therefore prevents the state from making anything more than half-hearted moves against producers.