Countdown to legalization. A special report.
Even with legalization of recreational cannabis, black market players plan to stay put
Who gets to sell legal recreational cannabis and where they get to sell it is about to change, but it won’t be like flipping a switch.
Established cannabis growers and retailers have no intention of simply disappearing when provincially licensed retailers open for business, said cannabis activist and retailer Dana Larsen.
“We are going to have a lot of confusion, chaos and civil disobedience,” he said. “You will see continued operation of unlicensed dispensaries for years, if not decades to come.”
A coalition of black market retailers is already using the court to fight 53 injunctions sought by the City of Vancouver to close illegal dispensaries.
The city and the dispensaries have agreed to a test case — scheduled to start Sept. 4 — to set a precedent for the city’s power to enforce its own regulations.
Those efforts will get a boost from the Ministry of Public Safety and Solicitor General, which is hiring a director of cannabis control tasked with “regulatory and/or criminal enforcement action against unlicensed illegal dispensaries and other illegal sellers.” The lucky applicant must have experience “conducting complex criminal investigations and prosecutions.”
On Thursday, the government tabled legislation to create new cannabis-related offences with fines ranging from $2,000 to $100,000 and jail time of three to 12 months.
All of this is dependent on federal legislation that will officially legalize the sale of recreational cannabis by August.
Municipalities are feverishly drafting regulations to control how and where, and the provincial government will tweak more than 20 pieces of legislation related to legalization.
The B.C. Liquor Distribution Branch will have total control of the supply of legal cannabis and plans to sell it from governmentrun stores and through licensed private retailers, as it does with alcohol. Anyone over the age of 19 will be able to purchase and possess up to 30 grams of cannabis and smoke it anywhere tobacco can be used, except beaches, parks and playgrounds.
Liquor stores will not be allowed to sell cannabis, but the private sector is already salivating, including the well-moneyed chain Second Cup, which is seeking cannabis licences for its established coffee shop locations. Hello, Amsterdam.
Competition will be fierce. Legal cannabis is entering an established, profitable multibillion-dollar marketplace with well-established — if clandestine — supply chains.
Established black market cannabis retailers risk alienating their customers if they choose to license, which would compel them to drop familiar strains of bud, and unapproved products such as vaping liquid and edibles from their stores, said Larsen, whose two storefronts gross about $6 million a year.
“There will be shortages in the legal supply chain and in any case, legalizing raw bud is just a small step,” he said. “It will be at least a year before (licensees) will be able to sell edibles.”
Adding uncertainty to the cannabis landscape is the potential for a change in government federally and municipally.
A swing to the right in either theatre could change how and when currently unapproved products become available to licensees and how cities — including Vancouver — approach stamping out the black market trade.
“The (Non-Partisan Association) has called for more enforcement and for dispensaries to be shut down,” said Larsen. “They could argue that dispensaries are no longer needed.”
Most so-called dispensaries have shed all pretence of selling cannabis only for medical purposes.
Licensed retailers will be forbidden to use any word in the name of the business that suggests their product is medicinal, including “pharmacy,” “apothecary” and “dispensary” under provincial guidelines.
While there is no guarantee that any existing black market stores will make it through the hoops required of legitimate cannabis retailers under new provincial guidelines, past efforts to stamp out the illegal trade have been mostly unsuccessful.
There are perhaps 100 pot retailers in the City of Vancouver and 32 have met the city’s permitting requirements.
Another 77 are subject to enforcement, according to the city.
More than 2,900 tickets have been issued — in addition to the aforementioned injunctions — and 45 stores have closed in the past two years.
Police raids on dispensaries have failed to deter new entrants to the market, but the resulting criminal convictions might be an impediment to obtaining a provincial retail licence.
A criminal record won’t necessarily disqualify an applicant — which will be considered “case by case” — while an association with organized crime “will exclude a person from becoming a licensee,” under the new rules.
The province is about to open the application process and anticipates plenty of interest, which further dilutes the chances of established retailers winning a licence.
The province is leaving regulations about where retailers can locate up to municipalities and many of them are leaning toward using the same rules applied to private liquor stores. That should confine retailers to commercial areas and keep them away from schools and youth-oriented community services.
A handful — such as Richmond — have said they will not welcome the legal recreational cannabis trade at all.
None of the new rules affect Canada’s 70,000 federally permitted users of “marihuana for medical purposes” who buy directly from federally licensed producers.
But some of those licensed medical cannabis producers are investing now for the recreational bud bonanza.
Canopy Growth — which received its recreational supply licence earlier this year — has struck a deal with hothouse vegetable grower B.C. Tweed to operate a 1.3 million square foot complex capable of growing 350,000 plants in Langley. A second 1.7 million square foot greenhouse in Delta will also be converted to cannabis this year.
B.C.’s smaller licensed suppliers may be forced to claw out a niche with specialized products.
“I see an industry with two or three major, relevant players and a bunch of craft producers,” said Canopy founder Bruce Linton in an interview with Ernst and Young researchers.
Linton expects a slow transition for the legal trade in B.C., where the black market is so deeply entrenched.
“West of Alberta I suspect we will see a very slow, very different evolution, especially given that British Columbia is the principal generator of most of the illegal product and has the most dispensaries,” he said.
Linton is already positioning his product as a safer alternative and likens buying black market weed from criminals to buying moonshine or meat from an unsupervised producer.
“People don’t yet understand that illegal products often have contaminants like fecal coliform,” he said.
We are going to have a lot of confusion, chaos and civil disobedience. You will see continued operation of unlicensed dispensaries for years, if not decades to come. Dana Larsen, cannabis activist and retailer