• April 14, 2021

Col.’s Marijuana Black Market Shrinking but Might Never Leave

 Col.’s Marijuana Black Market Shrinking but Might Never Leave

By Matteo Paganelli

DENVER, CO. —When you get down to it, nobody knows exactly how much illegal marijuana is in Colorado. But it’s out there somewhere – in that nebulous place we call the “black market.” 

Colorado was the first state to legalize recreational marijuana in the US. There were many reasons (consumer safety and restricting sales to children through 100% ID check) but a major one was to eradicate the black market – that illegal marketplace that serves millions of Americans the “illicit” substances the federal government hates, but that many people love. 

Colorado is a great national test case for the resilience of the black market, because – after voters approved it in 2012 – it was the first state to open retail stores in 2014. Before then, unless they grew it themselves, Colorado users, like most Americans, bought marijuana from an illegal source. 

Some of that was smuggled into the country by drug cartels and some was transported from other states—especially California, which supplied much of the country before legalization took root elsewhere. A kind of “gray market” began in Colorado in the years after cannabis was legalized for medical purposes in 2002, as many growers and caregivers, who at the time were able to grow 100 plants legally for medical patients, sold their leftovers to eager buyers.

The Regulated Market

Recent research from New Frontier Data, which monitors industry numbers, suggests that most regular consumers have moved on to the regulated market, whether as a medical patient or recreational user. Its figures indicate that about 80 percent of cannabis sales are now legal. Colorado sold more than 435,000 pounds of recreational and medical pot in 2019—and the other 20 percent mostly consists of people who grow their own plants or are getting it from a private grower and don’t trust or want to be involved in the legal market.

“Nobody will ever really know,” Adam Orens, of the Marijuana Policy Group,  told The News Station. 

He thinks that 80 percent number might even be low. 

 “There’s a certain connoisseur class that grows its own cannabis, with various levels of organization and degrees of coordination,” he explained. “A bunch of people get together, put a person in charge, and they agree to pool resources and share in what they grow. It’s like a community garden. Some of that is going on. But I think that’s so small a group, compared to Colorado residents in the legal market.”  

The “Other” Market

Legalization in a state completely boxed in by other states where cannabis remains illegal has created a black market of its own. Instead of smuggling it into the state, well-heeled drug cartels are growing and processing it in Colorado, then shipping and selling it where it’s still illegal. 

When Colorado first legalized marijuana, the neighboring states of Nebraska and Oklahoma sued the state because – they  claimed – they were wasting resources and energy arresting people going to Colorado to buy small amounts of cannabis to bring back home. That lawsuit was dropped, and Oklahoma voters, including many Republicans, –  legalized medical cannabis in 2018 and today has more than three times as many patients as Colorado

It’s not just pesky neighbors. Not all state officials are happy about the legality of cannabis in Colorado. George Brauchler is the outspoken district attorney for the 18th Judicial District, which includes Arapahoe, Douglas, Elbert and Lincoln counties. He feels the passage of legal marijuana – under the 2012 ballot measure Amendment 64 – practically invited outside crime interests to set up shop in Colorado. 

“As a cure for the black market, Amendment 64  has utterly failed,” he told The News Station.

What the amendment did is to professionalize the black market

George Bracuchler

In 2019, Brauchler was part of a two-year operation that’s still considered the largest cannabis bust in the state’s history. More than 80,000 plants, $2.2 million dollars in cash and an array of luxury vehicles, including a Porsche,  were seized. 42 people were arrested, and large weed operations dismantled in dozens of suburban homes. He says some organized operations are American groups, but he found some that were based in China and South America.

Colorado’s medical and recreational cannabis markets are highly regulated and heavily taxed, which has created an opportunity for criminal organizations to grow and export it to sell at much higher prices elsewhere, Brauchler says.

Today’s Illegal Grows  

The unregulated nature of the illegal grows are troubling to Dan Volz, the deputy director of the Colorado Bureau of Investigation (or CBI). There’s a special squad housed in CBI, the Black Market Marijuana Team (BMMT), which assists rural agencies that lack either the resources or manpower – or both – to investigate illicit cannabis grows. 

“We work in partnership with agencies most of the time,” Volz told The News Station. “Other times we might get information on sites based on other investigations.”

Though BMMT isn’t involved in who runs the operations, Volz says that they find individual people growing plants illegally, “but the majority are more organized in nature.”

Illegal grows can cause serious problems for rural communities. Many operations use pesticides, which Volz explains are often hazardous and can create ecological damage that can impact the quality of life of anyone living near them. And these kinds of operations are unfair to legal growers and processors who follow detailed rules and regulations. 

“We’re looking for better outcomes that result in a kind of protection for the regulated market,” Volz said. “Those chemicals are really harmful.”

The 12-person BMMT squad was busy last year, working 36 cases and dismantling 82 grow sites. In the spring, the team received numerous reports from rural, southwest jurisdictions, mostly from citizens who lived near the suspected grows. BMMT confiscated more than $6 million worth of illegally grown cannabis from more than 40 southwest grow sites over a four-month period, destroying almost 8,000 plants worth $5.75 million.

“The grow operations do severe damage to buildings and homes,” Volz explained. “We find trash and tubing and other stuff that keeps plants viable.” 

An important goal, he contended, is to protect legal market operations whose growers live under imposing state rules and regulations. 

In its latest report, the High Intensity Drug Trafficking Area program (HIDTA), a drug-prohibition enforcement organization run by the United States Office of National Drug Control Policy, reports a rise in the number of completed investigations, felony arrests and pounds of Colorado cannabis seized that was destined for 25 states. The number of marijuana case filings associated with the Colorado Organized Crime Control Act has risen from 40 in 2015 to 119 in 2017. 

The cartels are taking advantage. That is a legitimate thing

Adam Oren

“Organized crime is growing it here and selling it elsewhere. Colorado cannabis has a brand value in places where it’s illegal. There are profits to be made in transport and growing. It’s an unfortunate side effect of the patchwork way legalization is happening, and an indication that the federal government needs to act” Oren told The News Station.

Former Democratic Colorado state representative Jonathan Singer has great sympathy for district attorneys like Brauchler who have to deal with large, black market operations. But the state’s location – with two major interstates (I-70 and I-25) that intersect in the capital city of Denver – also plays a part. 

“If I know I can buy marijuana for $100 an ounce and drive to Kansas City and sell it for $200 an ounce, I’ve already paid for my gas,” Singer told the News Station. “If I take 16 ounces, I’ve got a nice margin of profit.” 

The Future

The publicized busts sound impressive and make big headlines, but they represent only a tiny fraction of the market. The Rocky Mountain HIDTA report says it confiscated 14,000 pounds of illegal cannabis product in 2017 and 12,000 pounds more in 2018. Those are imposing numbers, but in comparison to the hundreds of thousands of pounds of cannabis sold legally that year – which only continues to rise annually – it’s a drop in the bucket.

District Attorney Brauchler admits that the coronavirus quarantine has meant less proactive policing this year, including attempts to battle black market cannabis. 

“It’s not because the interest isn’t there,” he explained. “Jails have changed policies, and right now it benefits spending resources somewhere else. If you know you’re only going to get a summons, that’s not much of an incentive to stop what you’re doing,” even if it’s illegal. 

Whether the organized part of the illegal market will ever be stopped is still an open to question. Federal legalization across the board might help the situation, but Brauchler doesn’t see the black market going completely away anytime soon.

“The harder it is for people to grow and tax it,” Brauchler said, “means you will always have a black market.”

Leland Rucker

Leland Rucker is a journalist who has been covering the cannabis industry culture since Amendment 64 legalized adult-use in Colorado, for Boulder Weekly, Sensi and now TheNewsStation.com. He covered the popular music industry for years, worked extensively in internet and cable news, and co-authored The Toy Book, a history of OK Boomer playthings. Sweet Lunacy, his documentary film co-written and produced with Don Chapman, is a history of the Boulder music scene from the 1950s through the 1980s. He is author and editor of Dimensional Cannabis, the first pop-up book of marijuana.

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