Promoting Medical Cannabis: Free Markets or Tight State Controls?

Crafting marijuana laws at the state level is interesting. It pits the needs of the state against those of the entrepreneur. Likewise, both state and entrepreneurial needs are pitted against those of the consumer. Here is the big question: is it better for states to embrace free-market principles or maintain tight control over the marijuana market?

My question is a direct result of what is now going on in Oregon. The Beaver State is one of the most marijuana-friendly states in the nation. Oregon growers produce a ton of marijuana biomass and there are dispensaries just about everywhere you turn. And yet, marijuana-related crime is skyrocketing. It is getting so bad that business owners are shutting down because they fear for their safety and cannot make enough money to keep going. So what gives?

Closing Down in Portland

Portland’s KGW8 recently reported on a local business forced to shut its doors due to crime and financial concerns. The business provided transportation services between growing operations and retailers. Its owner started the business after working for nine years elsewhere in the industry. But after less than a year, he is calling it quits. His two biggest challenges are:

Finances – Oregon’s market is so saturated that retail prices have fallen through the floor. According to the business owner, Portland has some of the cheapest marijuana prices in the nation. That’s great for consumers, but entrepreneurs cannot turn a decent profit.

Crime – In recent months, crimes perpetrated against marijuana entrepreneurs have spiked. The business owner interviewed by KGW8 has been robbed twice since he opened his business. He personally knows dispensary workers who have been attacked and pistol whipped by thieves.

This particular business owner is not alone. Portland’s largest dispensary closed this past January after being robbed multiple times. Its former owner told KGW8 that his total product losses were in the neighborhood of $1.5 million.

It is curious that theft would be such a big problem in a state where marijuana is so cheap. But the reality is that black market operators can still make more money than legal dispensaries because they don’t pay taxes, maintain retail locations with huge overhead costs, etc. They can make more money by stealing marijuana from retailers and selling it on the street.

Humming Right Along in Salt Lake City

The antithesis to Portland is Salt Lake City, Utah. There, the Beehive Farmacy is humming right along. Beehive operates a second medical cannabis pharmacy in Brigham City. Interestingly enough, Utah’s market is regulated much more tightly.

First off, Utah is a medical-only state. That means there is likely a black market still supplying recreational users. Yet the medical market seems to be doing just fine despite tight regulations.

State law allows only fifteen dispensaries to serve the entire state. That’s not enough, especially given the fact that Utah is largely rural. Medical cannabis patients in outlying areas either need to drive a long distance to visit a Utah dispensary or cross state lines to where cannabis is more accessible.

Utah lawmakers will insist that their tightly regulated market protects entrepreneurs against falling prices and rising crime. Entrepreneurs might agree. But how much of what is observed in Utah is the direct result of the state’s regulations as opposed to a significantly lower demand in a more conservative state?

The Debate Rages On

The debate over free-market principles vs. tight state controls will continue forever. You could make either case for the cannabis industry. At the end of the day, we know that some states are hurting while others are flourishing. Good luck figuring out why.