‘Grey’ Market Concerns Grow As Washington Legalizes Pot

By Austin Jenkins

As Washington moves to legalize marijuana, there are fresh concerns that a parallel market for pot will continue to flourish. It’s not quite a black market. Let’s call it a “grey” market – for medical marijuana. The question now: how will highly taxed and regulated pot compete with largely unregulated medical marijuana?

Green SolutionGreen Solution is a medical marijuana dispensary southeast of Tacoma. The first thing you notice is the reflective blackout film on the doors and windows. Step inside and you’re in a secure waiting room - surveillance cameras, bulletproof glass. Beyond that – through two secure doors – is the dispensary.

The dispensary features glass display cases. One with jars of various strains of marijuana buds. At another glass-topped counter, Claiborne shows off his supply of marijuana edibles.

Ricardo Claiborne: “Gosh man everything from cheddar munchies, hash snacks, peanut butter and jelly, pho, medicated marinara sauce.”

But Claiborne is most proud of something else. He leads me through two more doors into a brightly lit concrete and steel reinforced room full of marijuana plants.

Ricardo Claiborne: “We’re looking at plants that are about, gosh, 6 feet high, we have about 23 different strains in here.”

Large industrial fans keep the air circulating. Thousand watt lights help the plants grow. A head gardener with a pair of shears tends the crop. This high-tech operation has all the feel of a business. But it’s actually unlicensed. In Washington, medical marijuana – or MMJ as it’s often called - is loosely regulated. That won’t change when Washington’s new pot legalization law is fully implemented. Initiative 502 was silent on medical marijuana. You might think a hands-off approach would please the industry – who likes regulations? But medical marijuana growers worry about operating in the grey. Chris Kealy is with the Washington Cannabis Association.

Ricardo Claiborne is a co-owner of Green Solution.Chris Kealy: “Without any change you’re going to see the medical marijuana community produce and sell a large quantity of cannabis, because possessing it is no longer illegal.”

And they’ll sell it for less says Kealy. He points to government estimates that predict legal pot under I-502 will go for about $12 a gram.

Chris Kealy: “And the current marketplace in MMJ world is between $8 to $10 dollars and that is likely to go down.”

And that, says Kealy, could create a “grey” market for marijuana that competes with the state of Washington. That’s not a comfortable position for a business like Green Solution. So Kealy wants state regulators to incorporate medical marijuana as they write the rules to implement I-502. That’s the job of the state’s Liquor Control Board. Deputy Director Rick Garza agrees that if there’s a price disparity that’s a problem.

Rick Garza: “Obviously the legal market is always going to have to begin lower than the illicit or the medical marijuana or why would I participate in a legal market. So that’s something that I think has to be examined and looked at.”

Theoretically medical marijuana is only for patients with a health care provider’s authorization. But most people I talked to say there are ways to get that permission even if you don’t truly qualify. That’s problematic says Pat Oglesby who’s written extensively about marijuana legalization. The North Carolina attorney served as chief tax counsel to the U-S Senate’s finance committee.

Pat Oglesby: “If folks can get a medical card and not pay tax and there are no questions asked, then a lot of folks will do that.”

On the other hand, Oglesby doesn’t worry too much about unscrupulous medical marijuana providers entering the true black market – and selling pot to recreational users without a medical card. Why? Because of something he calls:

Pat Oglesby: “The prohibition premium. You gotta charge more if you are engaged in illegal activity to compensate you for the risk of getting caught and going to jail.”

For now, there’s a lot speculation about what will happen when I-502 takes full effect. State Senator Jeanne Kohl-Welles is one of the Washington legislature’s leading experts on medical marijuana. The Seattle Democrat won’t propose fixes until she sees what happens.

Jeanne Kohl-Welles: “Where there’s a vacuum people are going to step in and do so in incredibly imaginative ways but I’m not that imaginative or creative myself in my thinking I suppose so I don’t know what’s going to happen.”

In the end, the chief sponsor of I-502 hopes medical marijuana patients gravitate to the state regulated stores and away from unlicensed dispensaries like Green Solution. Alison Holcomb of the ACLU of Washington says she doesn’t’ think it’s workable to have a parallel medical marijuana system.

Alison Holcomb: “Medical marijuana can remain in place for the patients, not for people who want to make money off of patients.”

She adds, if ultimately the price of taxed, legal pot is too high, then the legislature can always step in and make adjustments.

Photos:
Green Solution is a highly secure medical marijuana dispensary and garden in Washington’s Pierce County
Ricardo Claiborne is a co-owner of Green Solution. He believes there’s room for a regulated medical and recreational marijuana market in Washington

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