Keeping Corporate America Out Of Legal Weed: Good Luck with That

Beehive Farmacy is a Utah dispensary. One of their locations is in Salt Lake City, the other in Brigham City. As long as no major changes come to Utah’s medical cannabis program in the near future, Beehive Farmacy should do fine. But what if Washington legalizes weed? Small businesses like Beehive Farmacy will have corporate America to contend with.

Corporate America inserting itself into the marijuana business is an existential threat to small companies all over the country. Allowing companies like Beehive Farmacy to thrive has been one of the less touted benefits of keeping marijuana illegal at the federal level. Leaving legalization to the states while still preventing cross-border transactions has created an environment in which companies like Beehive Farmacy can thrive.

All that goes out the door with federal legalization. Like it or not, even the most valiant attempts by politicians like Elizabeth Warren aren’t going to stop corporate America from overtaking the industry. Lawmakers might be able to keep Amazon and Big Tobacco out of legal weed, but other corporate entities will stand up and take their place.

Social Equity Is a Myth

Federal lawmakers intent on legalizing marijuana don’t just want to remove the plant from the Schedule I list of controlled substances. They do not want to merely legalize marijuana and allow Americans to get on with their lives. Rather, they want to exercise control over the industry in order to make it more socially equitable. But there is a problem: social equity is a myth.

There are winners and losers in every industry. Like it or not, some companies do better business than their rivals. They meet customer needs better; they find innovative ways to do what they do; they manage to keep prices as low as possible. No two businesses are equal in every way. No two ever will be.

Forcing social equity on the legal weed industry is not going to accomplish anything meaningful. But it will artificially inflate prices to the detriment of every small business trying to compete against the black market. Need proof? Just look at California.

California’s Black Market Thrives

California legislators have done everything in their power to tightly control the legal marijuana market there. All their efforts have helped no one except the people who collect tax dollars and the lawmakers who spend those dollars. Your average Joe and Jane on the street have only been hurt by state interference. Meanwhile, California’s black-market thrives.

Much of the mess in California is directly linked to high taxation onerous regulation. Injecting social equity would only make California’s problems worse. Forced social equity introduces more regulation. It creates more market manipulation. In the end, it makes the legal market anti-competitive while boosting the black market at the same time.

People Ultimately Care About Price

What does this have to do with corporate America inserting itself into legal marijuana? It can be encapsulated in a single word: price. When push comes to shove, that is what consumers care about. They are going to buy their marijuana from the cheapest supplier.

Corporate America has a decided advantage in the economics of scale. Corporate interests can effectively compete against the black market through much more efficient production, transport, marketing, and delivery. Individual small businesses cannot.

Should Washington eventually legalize marijuana across the country, a corporate takeover of the industry is inevitable. Corporate America will be the only player capable of dealing with government regulation and simultaneously competing with the black market. Like it or not, that is just the way it is.

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