Tag: black market

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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Biden admin working to effectively ban cigarettes in 11th hour proposal a ‘gift’ to cartels, expert says

The Food and Drug Administration (FDA) is moving forward with a regulatory rule in the final days of the Biden administration that would effectively ban cigarettes currently on the market in favor of products with lower nicotine levels, which could end up boosting business for cartels operating on the black market, an expert tells Fox News Digital.

“Biden’s ban is a gift with a bow and balloons to organized crime cartels with it, whether it’s cartels, Chinese organized crime, or Russian mafia. It’s going to keep America smoking, and it’s going to make the streets more violent,” Rich Marianos, former assistant director of the U.S. Bureau of Alcohol, Tobacco, Firearms and Explosives and the current chair of the Tobacco Law Enforcement Network, told Fox News Digital of the proposal. 

The FDA confirmed to Fox Digital on Monday that as of Jan. 3, the Tobacco Product Standard for Nicotine Level of Certain Tobacco Products had completed a regulatory review, but that the proposed rule has not yet been finalized. 

“The proposed rule, ‘Tobacco Product Standard for Nicotine Level of Certain Tobacco Products,’ is displaying in the Office of Management and Budget’s (OMB) ROCIS system as having completed regulatory review on January 3,” an FDA spokesman told Fox Digital. “As the FDA has previously said, a proposed product standard to establish a maximum nicotine level to reduce the addictiveness of cigarettes and certain other combusted tobacco products, when finalized, is estimated to be among the most impactful population-level actions in the history of U.S. tobacco product regulation. At this time, the FDA cannot provide any further comment until it is published.”

Fox New Digital reached out to the White House regarding concerns over the proposal if it were to take effect but did not receive a response. 

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NYC law used to shutter unlicensed weed bodegas is unconstitutional, judge rules

A Queens judge ruled Tuesday that the local law that let New York City rapidly shut down more than 1,000 businesses accused of selling cannabis without licenses is unconstitutional because it denies shop owners their rights to due process.

The decision calls the legality of the closures into question and has the potential to halt the city’s enforcement effort, known as Operation Padlock to Protect, which Mayor Eric Adams has repeatedly hailed as a success.

Liz Garcia, a spokesperson for the mayor, said Tuesday the city will appeal the ruling.

“Illegal smoke shops and their dangerous products endanger young New Yorkers and our quality of life, and we continue to padlock illicit storefronts and protect communities from the health and safety dangers posed by illegal operators,” she said.

The city updated its administrative code earlier this year to make it easier to shut down stores suspected of selling cannabis without licenses. But New York Supreme Court Justice Kevin Kerrigan has ruled that the portions of the city’s law that allow the sheriff to unilaterally decide whether to keep a store closed for up to a year are unconstitutional.

Under the law, the owner of a business that has been padlocked for allegedly selling cannabis without a license is entitled to a hearing with the Office of Administrative Trials and Hearings, or OATH. After listening to the facts of the case, the hearing officer makes a recommendation as to whether the store should remain closed.

But the ultimate decision is up to the sheriff — and lawyers representing businesses that have been shut down say it’s not uncommon for the sheriff to ignore OATH’s recommendations.

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JD Vance Says ‘Bags Of Marijuana’ And Candy Laced With THC And Fentanyl Are Coming Across The Border, Blaming Biden-Harris Immigration Policy

Former President Donald Trump’s 2024 running mate, Sen. JD Vance (R-OH), is accusing Vice President Kamala Harris of failing to stop marijuana and fentanyl disguised as Nerds candy and other popular brands that appeal to children from coming across the border.

At a Faith & Freedom Coalition event in Atlanta last month, the senator talked about being invited to the evidence room of a sheriffs department where he says he saw “every drug you can possibly imagine,” including “bags and bags of marijuana,” pressed fentanyl pills and meth.

“I say, ‘Guys, what is going on here? You’ve got all these drugs here that looks to me just like a box of candy—a box of Nerds candy,” Vance said. “And they say, ‘Well, sir, that’s actually THC and fentanyl.’ But I say, ‘Wait a second, the cartels have disguised deadly fentanyl to look like child’s candy so that they can make it easier to get into our country?’”

“Yet we know that one of those packets of fentanyl is going to end up in one of our neighborhood streets,” he said. “One of those packets of fentanyl is going to end up in a child’s playground. One of those packets of what looks like Nerds candy, but is actually a deadly substance, is going to end up in our schools, and a kid’s going to open up a packet of candy, take a piece of candy out and lose their life because of it.”

“Now that is a sick and deranged human being that would do anything like that. But it’s a sick and deranged human being who would give that person power over the United States of America, and that’s exactly what Kamala Harris has done,” he said. “She has given these drug cartels free reign over our country, and now they’re smuggling in deadly drugs that look like child candy.”

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Nebraska Attorney General Announces Crackdown On Illegal THC Product Sales

Saying he was stepping up Nebraska’s fight against “mislabeled” and “dangerous” delta-8 products, Attorney General Mike Hilgers (R) on Wednesday announced the start of citywide crackdowns on retailers who sell the items.

He said that while his escalated effort started in Norfolk, other cities should expect similar blanket investigations.

“We are ramping up our efforts to clean up Nebraska,” Hilgers said. “For the first time, we have sued every store in a community. The stores are misleading Nebraskans.”

Four new lawsuits

Flanked at a media event by U.S. Rep. Mike Flood (R-NE) of Norfolk, Hilgers told reporters of four new lawsuits covering five Norfolk stores. Filed Wednesday in Madison County District Court, they allege violations of the Consumer Protection Act, Uniform Deceptive Trade Practices Act and Nebraska’s Pure Food Act.

The latest suits joined legal actions filed since last year against a dozen other vape shops and businesses across the state. Some cases have been settled, with retailers agreeing not to sell prohibited hemp products that contain or have been modified with synthetic THC.

THC is the compound in the cannabis plant most commonly associated with getting a person high. Some of the THC-containing products in question were packaged and made to look like candy and snacks.

A spokesperson for two of the Norfolk stores said, however, they were unaware there was any problem with the products they buy from a wholesaler distributor.

Tiffany Colsden, general manager of NP Mart stores in Norfolk, said her team learned of the investigation Wednesday, when a reporter came knocking.

By noon, she said, the two stores had pulled the items in question off the shelves.

“All they had to do was tell us,” Colsden said. “If Nebraska doesn’t want us to sell it, we won’t. It’s that simple.”

She described NP Mart, which has two locations in Norfolk, as a convenience store that sells gas.

Lawsuits also were filed against Smokin’ Deals, Smokes R. Less and Vapor Hutt.

A person at Smokes R. Less hung up the phone when a reporter called.

Vapor Hutt officials could not be reached.

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Illegal Weed Growing Operation Found In House Owned By Oakland Police Officer

A illegal weed growing operation was found – of all places – in a home owned by an Oakland police officer this spring. 

State Department of Cannabis Control officers discovered about $1 million worth of illegal marijuana in a Bay Area neighborhood in Antioch. One of the three raided houses was owned by Oakland Police Officer Samson Liu, 38, who was placed on administrative leave on April 30.

The Oakland Police Department, citing an ongoing investigation, did not disclose the officer’s name, but CNN identified him. Records show Liu bought a 2,800-square-foot house in Antioch in 2020 for $608,000.

The department said it “is aware of the allegations made against one of our members and is cooperating with outside law enforcement agencies on the case”, according to the LA Times.

The LA Times report says that the raid underscores the scale of illegal marijuana operations in California and the involvement of Chinese organized crime since legalization in 2016, according to the cannabis control agency.

Law enforcement described these operations as sophisticated and linked to “Chinese criminal syndicates” but provided no further details due to ongoing investigations. 

A Los Angeles Times investigation recently revealed that contraband pesticide use has spread across California’s cannabis farms, both illegal and licensed, over the past three years.

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