Alternative Options to the Commercial Supply Chain Model for the Legalization of Marijuana by the States

he prohibition on marijuana in the United States has proven to be a complete failure. Over decades, the U.S. government has wasted billions of dollars enforcing marijuana laws even for minor offenses, imprisoning and disciplining non-violent users of the substance, and denying seriously ill patients the right to beneficial treatment. Prohibition of the substance has led to billions of dollars in gains for criminal enterprises on the black market, and has significantly increased levels of crime, violence, and corruption in connection with the trafficking of the product into and throughout the United States. Nonetheless, marijuana continues to be widely used and enjoyed by citizens nationwide and is almost universally available for purchase illegally in nearly every corner of the country. Due to these trends, the American public opinion has shifted in favor of marijuana law reform.

In 1969, when random participants of the public were asked “Do you think the use of marijuana should be legal?” only 12 percent answered in support of legal marijuana. In 2014 when the same question was presented to random participants of the general public, 51 percent answered in support of marijuana legalization. Thus, in correlation of this finding, a large portion of the American public in 2016 advocate for the elimination of criminal penalties for the adult use of marijuana, the creation of a legal regulatory market for the production and distribution of marijuana, and the establishment of laws that provide and protect access to medical marijuana by approved patients.

Today in 2016, although still directly in violation of the Federal Controlled Substance Act, Alaska, Colorado, Oregon, Washington, and the District of Columbia have passed legislation which allows for the use of marijuana recreationally within the jurisdiction. Additionally, twenty three other states have legislated to allow for the use of marijuana for medicinal purposes within the state, each with varying medical requirements.  In the states of Alaska, Colorado, Oregon, and Washington the new emerging standard legal regime and regulatory initiative are based around a brick-and-mortar store called a dispensary where users can go to shop for the marijuana of their choosing. In the 23 states which allow medical patients to use marijuana, many states opt for a similar type of dispensary system where patients or their care-givers can go to obtain the desired medicine. However, many of these pro medical marijuana states have alternative methods for patients to obtain the substance, like Maine for example, which allows a patient or their care givers to grow up to six plants on their private property provided the plantation is under lock and key. Further, in Washington, D.C., where the recreational use has also been legalized by the district, only the home growing and giving away of the substance for no monetary gain is permissible.

The bottom line is that with developing legal marijuana culture in the United States, there is a wide range of different and novel legal regimes which are distinguished along a multitude of dimensions in regards to the needs and wants of the people of each region. Legalization is not simply a binary choice between on the one hand, legalizing the commercial production, sale, and possession of the substance, or on the other hand, continuing existing prohibitions. There are many options (other than the standard commercial model) which a government can analyze when considering regulation, taxation, and how the marijuana will be supplied. These options and their potential for success could have profound consequences and outcomes in terms of citizen health and social well-being, as well as for job creation and government revenue.

The for-profit commercial dispensary model adopted by the States which have legalized marijuana for recreational use, as discussed above, is only one of many options available for jurisdictions seeking to change their marijuana supply laws. Although it seems natural to associate the distribution of a psychoactive chemical with the traditional commercial scheme used for alcohol, it is important to remember that marijuana is new substance emerging on the market legally and the regulatory schemes of controlled substances in the past, like that of alcohol, may be inappropriate, unnecessary, and outdated when it comes to marijuana.  There are eight commonly discussed alternative and intermediate options which provide a fresh look at the supply side of marijuana, and each may be have different values to different jurisdictions who plan to legalize marijuana for their own individual policy reasons. Some states may be focused on high taxation revenues, where others may be largely concerned with the libertarian value provided to its citizens. Moreover, some jurisdictions may be looking to eliminate crime and the black market influence, while other jurisdictions may be concerned with for-profit companies targeting heavy users of the substance for monetary gain. Each jurisdiction must analyze and conclude what type of distribution system will work best in line with their policies.

The eight contemporary options are: (1) allow adults to grow and cultivate their own marijuana, (2) allow distribution within small co-ops or buyer’s clubs, (3) the Dutch coffee shop model: only allowing for local retail sales and no legally commercialized production, (4) have a government monopoly of the supply chain, (5) have a public or local body control the supply chain, (6) permit only nonprofit organizations sell the substance, (7)  allow only for-benefit companies to sell the substance, or (8) have very closely monitored for-profit licensees.

Indeed, policy makers have largely ignored many of these alternative options. This is largely due to the allure of the money to be generated from taxation within the jurisdiction after the success seen by Colorado after drawing in nearly $70 million dollars in tax revenues last year alone. This is evidence that large-scale production options create the potential for even a small state to raise tens of millions of dollars annually by taxing the consumption of its residents in one way or another.  However, two problems with this model arise. One is that demand from out-of-state users and competition from suppliers in nearby states that legalize but impose lower taxes or lower regulatory burdens would undercut the states initiative. The second is the concern that profit-maximizing marijuana companies will target heavy users, since 80 percent of legal marijuana consumption in Colorado is by daily or near-daily users.

In terms of each of the eight alternative supply options, several have their own distinct benefits which the commercial model seen in Colorado and other legal recreational States does not provide. For example, allowing adults to grown their own marijuana, like the law allows in Washington D.C., shows no evidence of large increases in use and some reduction in black-market activity. The co-op model on the other hand allows small numbers of people to pool their own-grow operations and share or sell at cost to other members of the club. Those economies of scale make co-ops threatening to the black markets without creating the risks of commercialization, and still providing modest profits to growers. A Dutch coffee-shop model may allow retail sales only, and a fixed number of outlets could be licensed to retail marijuana while production and trafficking are still prohibited, allowing access and taxation but avoid promotion by producers. A state monopoly of the whole production and distribution chain would prevent diversion to the black market and it could set the price it thinks best serves the public interest and ensure no promotion at all.  Another option is to license only nonprofit enterprises. They are not profit maximizers, and thus, they are less likely than private enterprise to promote the drug to heavy in state users or out of state users. Again, each State or territory must decide which option fits their policy reasons for legalization the best.

These are just a few of the many alternative regulatory schemes for the legal supply of marijuana to the public. Each brings with it distinct benefits which may be more in tune with each particular jurisdictions needs and wants as it begins to lift its prohibition on the drug within its borders. With a developing legal marijuana culture in the United States, there is a wide range of different and novel legal regimes which are distinguished based on the needs and wants of the people of each region. Legalization can no longer be seen as a simple choice between legalizing the commercial production, sale of the substance, or simply continuing existing prohibitions. There is plenty of room here for the legal minds and policy makers of the world to continue to innovate new systems of legalizing marijuana.


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