12 Illicit Marijuana Grows with Colorado Legalization

-by Hunter Haines

Many people were ecstatic when news broke out in 2014 that Colorado would be the first state in the United States to legalize recreational marijuana. Some call the historic legislation one of the greatest social experiments in the past one hundred years. Unfortunately, research shows not every aspect of the policy positively affected the stat, as the cannabis black market increased in the geographical area in and around Colorado. This after-effect of legalizing recreational marijuana stunned lawmakers in the state where the original intent of the law was to eliminate the marijuana black market.[i] The problem itself, however, does not lie in the legalization, but rather in the regulation and taxation of the Schedule 1 drug. The legalization of recreational marijuana in Colorado led to an increase in black market activity, marijuana trafficking, drug cartel presence, and criminal violence rates.

Due to unforeseen problems since legalization of marijuana use, Colorado has had to redraft its regulations. In 2012, the people of Colorado voted on a constitutional amendment and approved the legalization of recreational marijuana with the first dispensaries opening in 2014.[ii] Currently, the basic laws surrounding marijuana in Colorado are:

• The legal age to buy or possess marijuana is 21
• Marijuana can be bought only from licensed retail stores
• Adults over the age of 21 can buy and process up to 1 ounce of marijuana at a time
• Only licensed dealers can sell marijuana products
• Adults over the age of 21 can give up to 1 ounce of marijuana to another adult over the age of 21, but cannot sell any marijuana products
• Public use is illegal
• Use on federal land is illegal
• Under state law, retail marijuana stores can only be open between the hours of 8 am and midnight, allowing municipalities to tighten hours of operation [iii]

Originally, the implementing regulations were loose. Jason Mikesell, the sheriff of Teller County, CO., stated that “Colorado was the test subject for legal weed in the U.S., and the state regulations made enforcement difficult because people could grow so much of their own marijuana.”[iv] Those who wanted to could grow six marijuana plants on personal property with a provision allowing for two people to come together and grow up to twelve plants for recreational use. Those approved to grow medical marijuana for health reasons could grow up to 99 plants and appoint a caregiver to take care of them. Since then, new laws have placed restrictions on the number of plants citizens can grow to twelve. The originally lenient regulations served as a welcome banner for those willing to take part in the marijuana black market.

Anti-drug organizations and law enforcement agencies at the state and federal level recorded a drastic increase in black market activity due to an increase in demand for marijuana. The Rocky Mountain High Intensity Drug Trafficking Area, an anti-drug group consisting of police divisions, reported there has been a tenfold increase in the confiscation of illegal marijuana by law enforcement since the legalization in 2014. The same report issued by the organization states that 1,400 pounds of marijuana was confiscated in 2013 compared to 14,000 pounds being confiscated in 2017.[v] In addition, the number of illegally grown and seized marijuana plants is up 600 percent over the same four-year period. [vi] Colorado state Senator Kent Lambert speaks on the black market stating that “somewhere between forty and sixty percent of the marijuana that’s sold [in the state] is illegal”. [vii] Another top official familiar with the black market problem and Drug Enforcement Administration supervisor, Paul Roach, states that his team now shifted their efforts towards the illegal drug activity in Colorado. They now spend fifteen percent of their time with marijuana trafficking cases. This is an increase of 300 percent since 2014. [viii] The demand of black market marijuana is strong in the state.

Illegal drug traders are willing to risk arrest and product confiscation because demand is so high. [ix] Colorado Politics reports that arrests for illegal marijuana has increased by 380 percent between 2014 and 2016 and the number of marijuana plants grown illegally on U.S. federal forests increased by 95% between the years 2014 and 2017.[x] In like manner, a study by the Colorado Department of Revenue estimates that total demand for marijuana in 2014 was 130 metric tons. Of that demand, legally licensed dispensaries and retail stores were estimated to supply just 77 metric tons. This means that approximately 53 metric tons of demand was not met legally, but by black market growing based on increased interest in the drug.[xi] Colorado citizens, however, are not the only ones demanding marijuana as the illicit trade scope widens.

Since the legalization of recreational marijuana in 2014, demand for the drug in states across the country increased allowing for black marketers to enjoy greater profits from across state lines. In Teller County Co., a quiet area close to Denver and home to 24,000 people, criminal organizations set up illegal marijuana operations with the sole purpose of trafficking the drugs over the state border, and the Teller County sheriff’s office claims it has 400 kilograms of marijuana from busted bootleg operations in its evidence locker with Texas, Florida, and Illinois being the largest consumer states. [xii] Another official at the DEA initially reported by NBC explains that “In Colorado, marijuana legalization has magnified the black market. The standard price per pound here is $2,000, but they can get $3,500 to $4,500 by shipping it back East. The profits are great there.” [xiii] Similarly, another report by The Washington Post solidifies the large profit claim stating that the same $2000 price per pound in Colorado can bring up to $3,200 in states like Oklahoma or even raise the price to $5,500 in states like New York City.[xiv]

Drug smuggling to other states makes simple economic sense when profits are so high. In El Paso, another Colorado County, a sheriff’s office claims its county is “by far” the worst illegal marijuana distribution hub in Colorado. Law enforcement officials in other states, especially on the east coast, discovered that 95 percent of marijuana stemming from Colorado is traced back to El Paso County. [xv] Coincidentally, in Denver and Castle Rock, not far from El Paso County, police discovered the largest marijuana trafficking ring since legalization. The smuggling operation claimed to grow marijuana for the sick, but instead continuously shipped around 100 pounds of marijuana to states around the country. Sixty-two individuals and 12 businesses were indicted by the state when the operation was discovered. [xvi] Not only did demand signal local people to start smuggling operations, but it invited international players into Colorado in hopes of exploiting the large profit margins.

As the legalization of marijuana opened the gateway for the illicit marijuana trade, along came international drug cartels willing to go anywhere they can make money. Cartels from around the world have brought violence and set up shop in Colorado with Mexican and Cuban criminal organizations being the most prominent players. These cartels operate under the radar by renting homes, warehouses, and even federal forest land where they pose as regular everyday people because the profit is too good to pass up. [xvii] From here, they build operations and send the low-cost drugs back to their home countries, internationally, or smuggle them around the United States with less risk for enormous profits. It is easier for them to process and ship it in the United States than it is to transport it over international borders. [xviii] Sheriff’s deputies in Pueblo County, Colorado, discovered the second largest plant growing operation with 7,400 plants connected back to a Mexican cartel.

International drug cartels aren’t targeting and destroying only large cities, but small communities as well. Just in quaint Teller County, over the past year, law enforcement officers seized $3.5 million worth of Colorado marijuana and arrested twenty cartel members. [xix] Doug Lamborn, a state representative from Colorado Springs spoke on the terrors of how quickly international drug cartels invaded the state. He says “cartels have rushed into Colorado, resulting in 19 cartel operation busts in the last 18 months. We have cartels from around the world. You name any South American country, we have it here.” [xx] Although Central and South American cartels play a consistent roll in the drug trafficking problem, the largest cartel bust so far has connections to a Chinese cartel. The operation was a network from Colorado to Texas where “securities fraud, millions of dollars of laundered cash, 2,600 ‘illegally cultivated’ marijuana plants and 4,000 pounds of harvested cannabis” were discovered in 18 warehouses and 33 homes in Denver. Another DEA agent stated that the drug operation was only one aspect of the problem as the cartel was paying for the Chinese immigrants travel to America where they would work in the grow houses in a form of “indentured servitude” and “human trafficking.” [xxi] Similarly, forms of criminal activities have increased in Colorado in the past few years.

The flood of black-market activity from recreational marijuana is the cause of abnormal rises in crime rates in Colorado. Since black markets operate illegally and link to drugs, differences cannot be settled in court. This leads to criminals taking matters into their own hands when conflict arises, and crime rates rise. The DEA states that illicit marijuana drug traders have been linked to “kidnapping[s], torture[s], home burglaries, and armed robberies” in Colorado. In addition, The Colorado Bureau of Investigation (CBI) reported that violent crime, homicide, rape, and robbery has been climbing since the year recreational marijuana was instituted in Colorado. The Bureau cited “15 of the 484 reported robberies in 2017 as directly motivated by marijuana” with a significant amount believed to be indirectly related. Equally important to note, the CBI also reported that domestic violence in the state increased by 10 percent with 18,501 total cases since legalization in 2014.[xxii] Colorado is not following United States trends in crime rates as Colorado saw an increase of 12.5 percent whereas the country itself saw less than a 5 percent increase between 2013 and 2016. Due to the rising amount of problems of crime which arose since the legalization of recreational marijuana, John Hickenlooper, the Colorado Governor to sign the legislation into law, told CNN he wasn’t going to “rule out re-criminalizing recreational marijuana”. [xxiii] The Governor might be able to bypass abolishing legalization if the Colorado legislature could reform a different problem.

The high taxes associated with the legal recreational marijuana are a prodigious reason as to why the illicit market for marijuana in Colorado exists. Currently, marijuana is taxed as follows:

• 15% state marijuana (excise) sales tax
• 2.9% state sales tax
• Plus any local sales tax[xxiv]

The minimum amount taxed on recreational marijuana is a steep 17.9%. In Denver, a $30 cannabis purchase can carry over $7 in taxes which equates to around a 33% tax. Larisa Bolivar, a veteran marijuana advocate puts it simply why people choose to buy from the black market. She explains “That seven bucks buys someone lunch. It’s simple. A high tax rate drives black market growth. It’s an incentive for risky behavior.”[xxv]  Basic economics and knowledge of black markets solve the illicit market Colorado faces.

When prices are too high, and demand is also high, black markets exploit and undercut legal markets to profit. Taxes and fees on legal marijuana raised over $250 million in revenue for the state in 2017.[xxvi] People are opting out of the additional fees and high taxes and take their money to the black market. Colorado is losing tax revenue because with a lower tax there is a lower price of goods, so more people will buy from legal retailers rather than not getting any part of the tax from a black market deal. Similarly, Sabrina Fendrick, a dispensary operator explains that legal retailers cannot compete with the low black market pricing and worries her business could be at risk. She states that “Everybody wants to generate revenue, we all want to serve our communities, but if everyone is going to the illicit market then nobody is generating revenue, and nobody is being helped.” To continue, a legal buyer said he noticed all his friends not going to marijuana clubs anymore because they reverted back to the black market. The black market is easy to find, and a quick search on Craigslist can get you an ounce of marijuana for $20 less than in a high taxed dispensary.[xxvii] Even though the excessive taxes created a thriving illicit marijuana market, the state benefited from the extra tax revenue.

Flaws in the implementation, regulation, and taxation of legalized recreational marijuana are the reason for an influx of illicit market activity. With the poor beginning has come increases in cross-border drug smuggling, dangerous international drug cartels, increases in violent crime rates, and losses in tax revenue. If Colorado wants to do anything about the problems it faces with black markets, legislatures need to pass marijuana tax reform to lower the price of legal marijuana. This will increase the amount of people who partake in the legal markets and ultimately increase tax revenues. In addition, the state should be advocating for other states to legalize recreational marijuana. This would help counter international drug cartels from setting up operations in Colorado as well as reduce their violent effects. In addition, this would decrease demand from other states currently relying on Colorado for illegal products, lower the profit margin for bootleggers, and decrease the black-market presence. If the state of Colorado does not act soon, the progress towards creating a legal marijuana market will go up in flames.

[i] Durbin, Kaitlin and Roeder Tom. 2018. “Cover Story: The mystery of Colorado black     market pot.” Colorado Politics. June 5, 2018.