Tag: black market

Lawmakers Debate Whether Marijuana Legalization Helps Or Hurts Organized Crime At Hearing On Chinese-Linked Illicit Grows

A GOP-led House committee held a hearing on Thursday focused on Chinese criminal organizations behind large-scale illicit marijuana grows, taking testimony from a group of law enforcement officials and a researcher who each attempted to link the issue to state-level legalization.

But one Democratic lawmaker took the opportunity to make the case for cannabis rescheduling and broader federal reform to mitigate the issue.

The House Homeland Security Subcommittee on Oversight, Investigations, & Accountability hearing was titled “Invasion of the Homeland: How China is Using Illegal Marijuana to Build a Criminal Network Across America.”

While there was some talk among experts and lawmakers about differentiating state-sanctioned cannabis cultivation from the illicit market, the conversation largely skewed prohibitionist. Witnesses included a former Drug Enforcement Administration (DEA) agent, top Oklahoma law enforcement official and a researcher with the conservative Heritage Foundation think tank.

The subcommittee chairman, Rep. Josh Brecheen (R-OK) said in his opening remarks that “we’ve enabled these foreign organizations with potential links to the [Chinese Community Party, or CCP] to build up a sophisticated network throughout the United States, which facilitates a wide range of other criminal activity and presents a national security threat.”

“This is a convergence of organized crime, human drug trafficking, public health risks—all operating at scale and sophistication crossing the state national lines beyond the normal capabilities of state and local law enforcement to combat,” he said. “These agencies need the help of federal law enforcement to unravel these criminal networks.”

Rep. Troy Carter (D-LA), however, spoke about the collateral consequences of prohibition, saying the “federal government’s decision to criminalize marijuana has been nothing short of disastrous for our communities, for our economy and for justice in America.”

“The failed war against cannabis has especially devastated Black and brown communities. Arrest and incarceration rates for marijuana offenses have been wildly disproportionate,” he said. “Today, with most Americans supporting legalization, it is past time that we acknowledge the truth: Marijuana prohibition has failed.”

“If we want to dismantle foreign criminal networks and protect American communities, then we need to strengthen, not weaken, regulated markets,” Carter said.

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With Cigarette Taxes Sky High, More New Yorkers Than Ever Turn to the Black Market

In 2023, New York raised its cigarette excise tax by $1.00 to $5.35 per pack. New York City imposes its own tax of $1.50 per pack, and that’s before you include federal and sales taxes, making for the most expensive smokes in the country. That is, cigarettes are expensive in New York for those who pay those taxes. But state officials were warned that such a high rate would drive consumers to the black market, and that’s exactly what happened. According to recent research, more New Yorkers than ever are turning to tax-evading illicit sources for their nicotine needs.

Taxes Into Good Health—or Not

When the New York excise tax was hiked, the Albany Times-Union noted, “it’s the nation’s highest and brings a pack of cigarettes at many retailers to about $12….Health advocates hailed the increase, saying it will lead to fewer smokers and cancer deaths. Anti-tax groups, though, predicted it will increase trafficking in illicit untaxed cigarettes in the state.”

Health advocates like taxing vices on the theory that raising taxes simultaneously generates government revenue while escalating prices for allegedly bad things—like cigarettes—out of reach of many consumers. What they rarely consider is that there are other options, such as buying cigarettes smuggled from jurisdictions with lower levies.

“New York has created a cigarette-smuggling empire, and the worst is yet to come,” Todd Nesbit, an economics professor at Ball State University, and Michael LaFaive, of the Mackinac Center for Public Policy, warned even before the 2023 tax increase. “It’s the unavoidable consequence of the state’s decadeslong history of raising the cigarette tax.”

“If enacted, consumers will go across borders to do their shopping or rely on black-market suppliers,” agreed the Tax Foundation’s Adam Hoffer. “Tax revenues will fall, illicit activities will thrive, and law enforcement spending will need to increase.”

In fact, as Nesbit, LaFaive, and Hoffer emphasized, even before the dollar-per-pack tax hike, more than half of cigarettes sold in the state of New York lacked local tax stamps and were smuggled from elsewhere. Since 2023, illicit dealers appear to have claimed even more market share.

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Minnesota Marijuana Businesses Say Tax Increase Could Drive Consumers To The Illegal Market

A last-minute tax hike on cannabis products passed as part of Minnesota lawmakers’ special session budget compromise may prove to be a boon to illicit dealers.

That’s according to cannabis industry experts, business owners, and at least one prominent DFL lawmaker who say the state’s relatively high cannabis tax will give consumers reason to avoid regulated, legal dispensaries in favor of informal sources on the black market.

Minnesota’s 15 percent state tax on marijuana and other cannabis products is among the highest in the country, trailing only Arizona (16 percent), Oregon (17 percent), California (19 percent), and Washington (37 percent).

“I thought it was the wrong thing to do, increasing the tax,” said Sen. Ann Rest, DFL-New Hope, chair of the Senate Tax Committee. “What we saw in California is that the high tax on legitimate cannabis leads straight to the black market. And I’m very concerned that that’s going to have the same or similar impact here.”

How do Minnesota taxes compare to other states?

Minnesota’s cannabis tax was initially set at 10 percent. The increase was a product of bipartisan budget negotiations between Gov. Tim Walz, Senate Majority Leader Erin Murphy, DFL-St. Paul, House Speaker Lisa Demuth, R-Cold Spring, and the late Speaker Emeritus Melissa Hortman, DFL-Brooklyn Park. The leaders stepped in to try to forge a compromise on the state’s budget after months of gridlock in the Legislature due to a tied House and a one-seat DFL majority in the Senate.

At the time, Demuth said the tax increase was simply “rightsizing” the tax rate to be more in line with other states’ rates. But, research by the Tax Foundation shows that the new rate puts Minnesota above the median tax rate for states that have legalized the sale of recreational marijuana.

Of those 23 states, 14 have a lower cannabis tax than Minnesota. There are nuances, like Illinois’ higher tax on edibles and concentrates compared to marijuana flowers, as well as two states that tax by weight rather than price.

This doesn’t account for Minnesota’s sales tax of 6.875 percent, and any local taxes. In Minneapolis, state, county, and city sales taxes are 9.03 percent. Add that to the cannabis tax and you end up with an effective tax rate of over 24 percent on cannabis products sold in the city.

“I’ve had people pick out their products, ring them up, and then when they hear the final price, they just walk out the door,” said Mark Eide, owner of In-Dispensary, the first recreational dispensary licensed in Minneapolis.

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Only One European Country’s Cannabis Policy Is Actually Undermining The Illicit Market

In the last several decades, Europe has made significant strides in its approach to legalized cannabis use, moving from strict criminalization and prohibition to decriminalization and legalized medical and adult-use models. In addition to expanding healthcare and adult-use access to cannabis use, it’s also important to discuss what impact these varying policies have in counteracting the foothold of illicit cannabis markets throughout the European Union.

Under E.U. law, many countries encounter hurdles in legalizing adult-use commercial cannabis, as they likely would be subject to penalties under the European Court of Justice. For this reason, several countries—including the Netherlands, Malta, Luxembourg, Switzerland and Germany—have taken unique approaches to cannabis policy.

Germany, however, stands out in terms of producing a measurable impact to push back against the illicit cannabis market.

The Netherlands: A Tolerance Model Without Market Control

Long seen as a pioneer, the Netherlands’ approach to cannabis is based on tolerance rather than legalization. Adults can purchase small quantities of cannabis from Dutch “coffee shops,” which are tolerated but not fully legalized. These shops are forced to source products from an illegal supply chain due to a lack of legal production.

In terms of impact, the tolerated model might seem like a considerable way to go, as every adult in the Netherlands can access coffee shops. However, in terms of control, product safety and regulation, the Dutch cannabis system is vulnerable, as the whole value chain is not regulated and the products are produced illegally for the coffee shops.

Due to the drawbacks of the tolerance model, the Netherlands has just initiated its Weed Experiment. The experiment will allow coffee shops in 10 municipalities to sell legally produced and supplied cannabis. A report on the results of the closed-loop experiment is expected for 2028.

Malta: Liberal on Paper, Constrained in Practice

Malta decriminalized cannabis use in 2015 and, in 2021, became the first European Union country to allow the cultivation and private personal use of cannabis. However, the market remains heavily restricted.

The government permits adult cultivation of cannabis (up to four plants) and personal possession of seven grams when away from home and 50 grams at home. The country also legalized nonprofit cannabis associations that can distribute cannabis to their members. These clubs are limited to 500 people, and membership is only available to residents. However, the public consumption, transportation and sale of cannabis are still banned and can result in fines.

With club membership strictly limited, public consumption outlawed and no other options for adults to legally purchase cannabis outside of the nonprofit associations, the market remains very limited. As of May 2025, no public information is available detailing the exact amount of cannabis provided by these associations to their members.

Luxembourg: Legalization Without Access

In 2021, Luxembourg legalized cannabis cultivation for adult use. However, it wasn’t until two years later, in 2023, that the country defined its legal cultivation and possession rules for personal use. Under the law, adults can grow up to four plants and possess three grams. However, consumption, transportation, and sale in public spaces are still banned and can result in fines.

As reported by the Luxembourg Times, 46.3 percent of the country’s residents have tried cannabis at least once in their lives, including 14.2 percent who have used the plant within the last year and 7.8 percent in the past month, according to an ILRES poll. Just under seven out of ten people who grow cannabis at home said they started cultivation after the government legalized home grow, amounting to just 11.5 percent of recent users.

Despite homegrow gaining moderate interest from residents after legalization, there has not been a significant growth in users, and this has not resulted in an explosion in the market. For now, the market remains stagnant and limited in counteracting illicit sellers due to the country’s lack of legalized sales marketplaces as well as restrictions on public consumption.

Switzerland: Research-Oriented but Limited in Scope

Switzerland has taken a scientific approach through pilot programs across seven major cities to determine the viability of cannabis legalization and controlled distribution within the country over 10 years.

While the pilot programs are set up to allow recreational cannabis commerce at a local level, in terms of true societal impact, this initial rollout does not serve as a solution to counteract the illicit cannabis market. This is mainly due to the limited availability of the majority of Swiss residents. Only Swiss residents who have previously established histories of using cannabis can purchase through the pilot program entities. These pilot programs are also limited to a maximum of a few hundred or a few thousand participants.

Germany: A Functional, Scalable Legal Medical Market

Germany’s cannabis market is widely hailed as one of Europe’s most progressive. On April 1, 2024, the country passed The Cannabis Act (CanG), reclassifying cannabis as a non-narcotic. Through this, administrative burdens were eased for medical cannabis patients and prescribing doctors. CanG also allows possession of up to 25 grams of cannabis and cultivation of up to 3 plants, and it permits the rollout of not-for-profit cannabis clubs.

In January 2025, my medical cannabis company, Bloomwell Group, released its “Cannabis 2024 in Germany: A new era for patients in Germany” report. According to the report, in December 2024, the number of prescriptions issued increased by a little less than 1,000 percent compared to March 2024, following the reclassification of cannabis. The rise of patients who are now able to access cannabis for various medical conditions signals a shift in the perception of cannabis being used for its wellness properties in the medical space.

Telemedical technology in the sector has also positively impacted growth and counteracted the illicit market. Telemedical platforms offer convenience for patients and the physicians who prescribe their treatment. This is extremely helpful to patients who are located in rural or isolated areas of Germany and have geographic limitations in accessing healthcare professionals for their medical needs.

The Bloomwell report also revealed that medical cannabis prices dropped to an all-time low by the end of 2024. During October and November 2024, select strains were available for just €3.99 per gram, a stark contrast to previous pricing models. These decreases are due to a steady supply and increased demand for medical cannabis as the number of self-paying patients continues to soar.

Such demand continues to open doors for international imports of medical cannabis to supply the growing market. Just in the first quarter of 2025, more than 37 tonnes of cannabis for medical or scientific purposes have been imported to Germany, according to the Federal Institute for Drugs and Medical Devices (BfArM).

Unlike other legalized markets, like California in the U.S., which fell victim to being dwarfed by a behemoth illicit market, the passage of CanG served as a catalyst to boom the German medical market, and with more patients able to access cannabis, prices of the plant actually decreased. This allowed the legalized medical market to stay competitive with the illicit market.

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New Jersey Lawmakers Consider Recriminalizing Some Marijuana Purchases And Sales

Lawmakers mulled Thursday whether New Jersey should ramp up enforcement against unlicensed cannabis sellers by passing a bill that would criminalize the purchase of unlicensed marijuana.

The bill riled cannabis activists, who say it would bring back the criminalization of weed that New Jersey’s marijuana legalization law was supposed to end. 

Under the bill, sponsored by Senate President Nick Scutari (D-Union), it would be a third-degree crime to operate an unlicensed marijuana business and a disorderly persons offense to knowingly purchase from one. A person who leads an “illegal marijuana business network” would be charged with a second-degree crime. 

“We have a problem where people are opening up brick-and-mortar stores, small stores, unlicensed to sell these products, and quite frankly, they’re just selling them and this state is doing nothing about it,” Scutari told the Senate Judiciary Committee Thursday. “We need to do something more about those brick-and-mortar stores, but we also need to continue to fight back against drug dealers because those are alive and well.” 

Scutari spearheaded legalizing recreational cannabis, first introducing legislation to regulate it for adult use in 2014. After bills languished in the Legislature, recreational cannabis was legalized in 2020 by voters, and Scutari was the primary sponsor of the bill to launch the legal marijuana industry.

Scutari said the new legislation would be a corrective measure in response to the “black and gray market” that has flourished even though hundreds of cannabis dispensaries have opened statewide.

New Jersey has some of the most expensive cannabis in the nation for both medical and recreational users. The industry has raked in over $1 billion since sales launched in April 2022. 

The committee did not vote on the bill, which does not yet have a companion in the Assembly.

Lawmakers generally voiced support for Scutari’s proposal to address the unlicensed THC products that they say undermine the regulated industry. Sen. Joe Lagana (D-Bergen) said he’s seen questionable cannabis products in “every single gas station I walk into, every convenience store, every corner store.”

But senators also repeatedly placed blame on the Attorney General’s Office, accusing it of not enforcing the state’s cannabis laws.

Sen. Mike Testa (R) blasted Attorney General Matt Platkin (D) for what he called “absentee” leadership. And Sen. Jon Bramnick (R-Union) said that once certain laws aren’t enforced, the community “loses respect for government.” Bramnick suggested the committee should call on Platkin to appear before them on the issue and said ignoring the law is “disrespectful to this body.”

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If California’s Marijuana Tax Hike Takes Effect Next Month, Consumers And Businesses Will Suffer—But There’s A Solution

A critical inflection point threatening the world’s largest legal cannabis market currently looms over California’s industry: A scheduled excise tax raise from the current rate of 15 percent to an unprecedented rate of 19 percent is set to take effect on July 1.

When California voters approved adult-use cannabis in 2016, they envisioned a thriving—and equitable—regulated industry. Unfortunately, the reality is that licensed operators are being strangled by regulations that push consumers straight to the illicit market. And despite the legal market generating approximately $7 billion in tax revenue since 2018, this hike would be a devastating blow.

The Reality of California’s Cannabis Market

On the ground in California, the illicit market continues to dominate cannabis sales. According to recent data from the Department of Cannabis Control (DCC), approximately 63 percent of the 3.8 million pounds of cannabis consumed by Californians in 2024 came from unlicensed production—unsurprising when considering the price differential consumers face.

When a consumer purchases cannabis from a licensed retailer, they’re not just paying for the product. They’re paying layers of taxes that can increase the final price by nearly 44 percent in some jurisdictions.

The California Department of Tax and Fee Administration’s (CDTFA) own example shows how a $35 purchase quickly balloons to over $50 due to combined taxes—and that’s before this tax increase. With the planned hike, that same purchase would approach $60.

Not only will consumers feel this increase in each purchase, many small businesses—particularly social equity operators and independent retailers already operating on razor-thin margins—simply won’t survive another tax increase of this magnitude.

Meanwhile, states like Michigan and Missouri are demonstrating steady sales growth thanks to lower taxes and fewer barriers to entry, and they are already exceeding the average per capita cannabis sales of California.

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A New Study Adds to the Evidence That Drug Busts Result in More Overdose Deaths

Prohibition makes drug use more dangerous by creating a black market in which quality and potency are highly variable and unpredictable. Ramped-up enforcement of prohibition magnifies that problem, as dramatically demonstrated by the deadly impact of restricting access to pain medication at the same time that illicit fentanyl was proliferating as a heroin booster and substitute. That sort of perverse effect pervades drug law enforcement, as illustrated by a new study that found drug seizures in San Francisco were associated with a substantial increase in overdose risk.

The study included 2,653 drug seizures and 1,833 opioid-related deaths from 2020 to 2023. “Within the surrounding 100, 250, and 500 meters,” RTI International researcher Alex H. Kral and his two co-authors reported in JAMA Network Open on Wednesday, “drug seizures were associated with a statistically significant increase in the relative risk for fatal opioid overdoses.”

That is not the result that local authorities expected. “Since fentanyl entered the unregulated drug supply in San Francisco, California, around 2019, overdose mortality rates have reached record highs,” Kral et al. note. “This has sparked increased enforcement of drug laws.”

In December 2021, then-Mayor London Breed “declared a state of emergency in the Tenderloin neighborhood of San Francisco to enable ‘more coordinated enforcement and disruption of illegal activities.'” District Attorney Brooke Jenkins, who took office in July 2022, “made combatting open-air drug markets and holding drug dealers accountable a top priority of her administration,” her office brags. In May 2023, Kral et al. note, Gov. Gavin Newsom “authorized the assignment of California Highway Patrol and California National Guard personnel to a new multiagency operation with the San Francisco Police Department aimed at ‘targeting fentanyl trafficking, disrupting the supply of the deadly drug in the city, and holding the operators of drug trafficking rings accountable.'”

How did all of that work out? The day after cops busted drug dealers, Kral et al. found, the risk of fatal overdoses rose by 74 percent, on average, within 100 meters. The increase in risk persisted for as long as a week, falling to 55 percent after two days, 45 percent after three days, and 27 percent after seven days. That pattern reinforces the conclusion that these police interventions, which aimed to reduce drug-related deaths, had the opposite effect.

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Governor Youngkin’s expected cannabis veto: A $3.5 billion gift to Mexican cartels and Chinese gangs

As Governor Glenn Youngkin once again faces a bipartisan bill that would establish a regulated cannabis distribution platform in Virginia, it is widely anticipated that he will act against the public’s interest just as he did in March 2024. In the twelve months since his last veto, the only certainty is that Mexican cartels and Chinese gangs have benefited from $3.5 billion in untaxed, unregulated cannabis sales while the proliferation of hemp-based THC products has skyrocketed. We anticipate that Youngkin will once again roll out his prohibitionist arguments but will fail to point to any tangible decrease in illegal cannabis sales the over the last 12-month— further proving that gifting Mexican cartels and Chinese drug dealers $3.5 billion and allowing the proliferation of illegal stores from Arlington to the Tennessee state line has only benefited organized crime at the expense of Virginians.

Youngkin’s argument hinges on a fundamental contradiction. He acknowledges that Virginia’s current system is “pervasive and dangerous,” yet refuses to implement the one policy proven to reduce illegal markets — regulation. Instead, he clings to outdated scare tactics, misrepresenting data from other states while ignoring the realities of his own.

Prohibitionists once used the same flawed logic to keep whiskey illegal, relying on bootleggers to supply demand while enriching organized crime. The parallels to cannabis today are undeniable. By refusing to regulate cannabis, Youngkin is ensuring that the only suppliers are Mexican cartels and Chinese gangs, just as Prohibition once empowered the Mafia. This policy failure is not just historical irony — it is a $3.5 billion mistake.

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Federal Ban On Interstate Marijuana Commerce Helps The Illicit Market While Hurting Legal Businesses, California Report Finds

California officials have unveiled a new report on the current status and future of the state’s marijuana market—with independent analysts hired by regulators concluding that the federal prohibition on cannabis that prevents interstate commerce is meaningfully bolstering the illicit market.

The California Cannabis Market Outlook 2024 report—commissioned by the state Department of Cannabis Control (DCC) and carried out by ERA Economics—looked at consumer trends, industry data, regulatory enforcement actions and more.

Marketing conditions for licensed businesses “have been challenging since 2021,” the report says, noting declining wholesale cannabis prices and stagnation in transitioning adults to the regulated market. Just about 40 percent of consumers are buying from legal operators years into the implementation of legalization.

“Competition from the illicit market contributes to lower prices in the licensed market,” it says. “Some consumers still purchase cannabis from illicit operations and illicit cannabis production moves across state lines into different markets.”

“[C]annabis consumption has modestly increased and many of those consumers are purchasing cannabis from licensed cannabis businesses, but there is still a substantial illicit market in California,” it says. “Careful analysis of the data does not show an explosion of illicit market production.”

A key part of the problem is ongoing federal prohibition, according to the analysis.

“Federal legalization of cannabis and facilitation of trade between different states with licensed markets would reduce trade of illicit cannabis and could lead to more stable prices in California and other states,” it says.

The report says “wholesale prices showed that prices in the licensed markets in California, Colorado, Oregon, and Washington are related,” and this “link between the licensed cannabis markets in California, Colorado, Oregon, and Washington has increased over time.”

“The link is the unlicensed market,” it says.

“Prices in these states have converged, and statistical analysis confirms these markets are co-integrated. Market co-integration generally occurs as a result of trade between nations (or in this case, states). However, without any legal interstate trade, this result indicates that the illicit market is a driving factor that connects prices across states.”

That’s not to say that the lack of interstate commerce is the sole factor stymieing the industry, of course. The report also identifies the unregulated market for intoxicating hemp products—as well as local bans on marijuana businesses—as contributing factors.

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Feds Arrest Nine People in Massive $200 Million Smuggling Operation Linked to China

Federal authorities have arrested nine individuals linked to a massive smuggling operation that funneled counterfeit and illegal goods worth at least $200 million into America through the bustling Ports of Los Angeles and Long Beach.

This intricate operation exploited logistics companies, warehouse operators, and corrupt truck drivers to import vast quantities of illegal merchandise, including counterfeit goods and harmful chemicals, thus bypassing U.S. customs regulations.

The defendants now face severe charges, including conspiracy, smuggling, and breaking customs seals.

Acting U.S. Attorney Joseph T. McNally described the operation as a significant breach of national security during a press conference.

According to McNally, the criminals exploited the security system by obtaining advanced knowledge of the unique serial numbers of seals assigned to shipments.

They produced identical counterfeit seals in China, which were then shipped to accomplices in the U.S. These duplicate fake seals were designed to circumvent the normal inspection process.

Instead of transporting containers to designated secondary inspection sites, corrupt truck drivers were directed by the members of the conspiracy to take them to nearby warehouses. There, the seals were cut, the illegal goods removed, and new counterfeit seals applied before being sent back for Customs inspection.

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