Fully Legal Pot = Less Cannabis Use By Teens

• Fully legalizing cannabis is leading to a marked decrease in teenage cannabis consumption
• This is true even though (to date) governments have generally done a terrible job in eliminating the cannabis black market
• Merely legalizing cannabis for medicinal use does nothing to lower use among teens
• Important public policy argument for full cannabis legalization, minimum cannabis regulation, and minimum cannabis taxation 

Follow the bouncing ball.

Cannabis is non-toxic and non-addictive. It’s now being used to improve people’s health in the treatment of thousands of different medical conditions.

Cannabinoids, the active ingredients in the cannabis plant, are produced naturally within the human body. We now know they help to promote and maintain human health. Mothers pass cannabinoids to their infants in mother’s milk to promote infant health.

In short, there was never the slightest legitimate reason to criminalize cannabis.

Now, finally, cannabis is being legalized. Governments in North America lead the way.

Are the politicians saying that cannabis is being legalized to correct a 100-year old mistake? Some are saying this – as an afterthought.

However, the primary reason always given by governments when announcing any legalization initiative is “to put an end to the cannabis black market”. And when they announce why this is their top priority, the explanation given is to “keep cannabis out of the hands of minors”.

This is far less than the mea culpa we should be expecting from governments after 100 years of pointless Prohibition. However, it is a valid public policy objective.

Of note, many anti-cannabis obstructionists have argued the opposite. They claim (with no evidence) that legalizing cannabis would somehow lead to increased cannabis usage by teenagers.

Now evidence is emerging that, in fact, legalizing cannabis does lead to a decrease in cannabis use by teens.

Study: Teen Use of Marijuana Drops in States Where It Is Legal
 

That’s strike one against the Obstructionists.  Burrowing further into the details provides even more interesting data.

Recreational marijuana laws were associated with a 8% decrease in the likelihood of teens trying marijuana as well as a 9% reduction in the odds of frequent marijuana use, the study found. Meanwhile, medical marijuana laws had no noticeable effect on marijuana use among teens. [emphasis mine]

In other words, just legalizing cannabis for medicinal use has no impact on decreasing usage by minors. It’s only full legalization – medicinal and recreational use – that produces this desired public policy goal.

Merely legalizing medicinal usage leaves the cannabis black market vibrant/intact. This means teens continue to have plentiful access to cannabis.

These are the measured improvements in reducing teenage cannabis consumption with governments that have generally done a lousy job of putting an end to the cannabis black market. Imagine how much larger the drops would be if states (and Canadian provinces) had done a competent job in rolling out legalized cannabis.

In the state of Massachusetts, a dual-use market, 75% of all cannabis sales this year are projected to go to the black market. In Canada as a whole, 72% of all recreational cannabis sales this year are still expected to take place on the black market (or gray market).

(three strains of cannabis for sale in a Denver dispensary)

There are several messages here for governments, the cannabis industry, and cannabis investors.

Government:

Even in states/provinces with fully legal dual-use markets, virtually the only jurisdictions that have done an effective job in displacing the black market with a legal cannabis industry are the state of Colorado (United States) and the province of Alberta (Canada).

With respect to virtually all other jurisdictions, the effectiveness of these governments in achieving their #1 priority (ending the black market for cannabis) has ranged from bad to terrible.

Some governments have simply dragged their heels to a ridiculous degree, even after legalization. It took the province of Ontario – Canada’s largest province – six months to open its first retail cannabis store. In the state of Maine, cannabis was legalized in 2016. Yet the state just announced that its first retail outlets will begin to open in 2020.

Are these governments really serious about putting an end to the cannabis black market? The evidence doesn’t seem to support this.

But let’s assume this is true. And the poor job governments are doing in eliminating the black market is entirely due to ignorance and incompetence. That means they could use advice – lots of it.

Here are some public policy recommendations for governments that really want to put an end to the cannabis black market.
 

• Don’t over-regulate the legal industry.
• Don’t over-tax the legal industry.
• Do provide plenty of retail storefronts to satisfy consumer demand.

A glance at the minority of jurisdictions that have been successful in launching a legal cannabis industry shows that these governments have been following these “do’s” and “don’ts”.

Cannabis industry:

1) Target dual-use markets as being able to capture (by far) the most black market dollars for the legal cannabis industry.
2) Lobby governments aggressively for full legalization. Partial legalization is inadequate both for public safety and for the health of the (legal) cannabis industry.
3) Lobby governments aggressively for reduced regulation and reduced taxation for the reasons above. Also, a previous TSI Exclusive has pointed out that there is an enormous incentive (and opportunity) to encourage consumers to migrate from alcohol to cannabis use for health/safety reasons – and $100’s of billion in potential cannabis revenues.
4) Do seek to maximize retail storefronts. As also reported at The Seed Investor, the province of Ontario (population 14+ million) more than doubled retail cannabis sales in a single month with just “a handful of stores”.

Cannabis investors:

a) If you live in a dual-use cannabis market, contact your elected representative. Give them the facts on cannabis legalization. And (if necessary) explain to them what they need to do to achieve their own stated public policy goals. Vote out governments that can’t execute here.
b) Target your investments on companies with particularly strong exposure to dual-use markets.
c) Look for cannabis retailers that focus on storefronts over online sales.

Cannabis should never have been illegal. Fully legalizing cannabis reduces teenage consumption. It’s pretty simple.

And done right, full legalization is a big opportunity for investors.