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“Opt-out” Cities Encourage Illegal Cannabis Sales

A new economic study shows that towns that opt out of regulating legal marijuana sales create illicit cannabis markets.



According to The Opt-Out Report 2022, a project conducted in partnership between Leafly and Whitney Economics, many locally elected lawmakers are unwittingly fostering illegal marijuana sales in their communities.


In certain states where cannabis is legal to buy and consume for those 21 years and older, the laws governing marijuana sales enable local counties and cities to create specific regulations to govern those activities. However, many leaders, under the auspices of appearing “tough” on drugs, have decided to opt out of regulation.


Known as “Opt-out Cities,” these municipalities choose to forego regulation of cannabis in an effort to keep marijuana out of their borders. However, the study, in which analysts and economists examined sales, population, and adult market data from 14 states where adult-use marijuana is legal, found that the exact opposite of that desired goal is actually occurring.


What makes these findings even more perplexing to the experts is that this renewed effort at prohibition in local communities exists mainly in areas that voted overwhelmingly to approve legalized cannabis at the state level.


In California, for example, opt-out cities and counties have become a severe issue for local law enforcement. According to the study, with 62% of all municipalities opting to ban regulated marijuana sales in the state, the resulting impact is that 55% of cannabis demand is currently being met through the illegal market. A number made even more significant considering marijuana sales have been legal for nearly four years in the state.


Similar results are also occurring in states like New York and New Jersey. In the “Empire State,” nearly half of all municipalities have elected to forego regulation of marijuana, even before legal adult sales go into effect, providing economic safe havens for street-level dealers.


Likewise, in New Jersey, an astonishing 71% of local counties and cities have decided to opt out of legal sales. With adult-use cannabis only starting there earlier this year, this massive opposition to participation means that there is only a single store for every 358,000 residents of the “Garden State,” allowing the black market to dominate more than 80% of all marijuana sales.


As the report further details, along with propping up local dealers, when local lawmakers choose not to participate in a regulated market, the following also results:

  • Indirect encouragement for adult consumers to seek out illegal products

  • Public health is put at risk by allowing the circulation of untested products

  • Sustained illegal sales to minors

  • Loss of local jobs and tax revenue

  • A continued losing fight in the War on Drugs

This flawed hypothesis of thinking that opting out of regulation will make local communities safer by keeping marijuana out is wholly false and borders on blatant naivete. The data does not lie; experience should also show that cannabis has been everywhere for decades.


This primarily politically motivated attempt at somehow banning it by opting out only bolsters street dealers who do not check IDs or provide their buyers proof of safe and tested products.


State-licensed and regulated stores provide local communities with a protective border around the sale and consumption of cannabis products. It’s basic economics. When consumers receive a wide variety of lab-tested choices and a well-regulated and pleasant buying experience, they will forsake their local dealers, and the illegal market will quickly dry up. The result is a safer community where, for example, teens will be much less likely to get their hands on illicit marijuana.


The report concludes that opting out is not a vote against cannabis. Instead, it’s a shot in the arm for local dealers and an economic “gut punch” for local communities desperate for jobs and potential tax revenue.


The authors hope the study will provide a data-driven and fact-based guide for those in power positions to make informed decisions that will protect their municipalities and foster business and civic expansion.


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