Regulations Drive Marijuana Sales Back onto the Streets

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Buyers browse samples at Shango Cannabis shop on the first day of legal recreational marijuana sales beginning at midnight in Portland, Oregon, on October 1, 2015. Christian Britschgi writes that because of new pesticide regulations, 80 percent of marijuana dispensaries in Oregon could be closed by next year. Steve Dipaola/reuters

This article first appeared on Reason.com.

Oregon's recreational marijuana market is rapidly approaching collapse thanks to new state regulations, as supply shortages and price increases hit dispensaries across the state.

The Oregonian ran a long piece on December 1 documenting the struggle of many of these businesses, who have been forced to lay off staff and watch their store shelves stripped bare for want of product.

One such dispensary—Human Collective in Southeast Portland—has experienced a severe decline in the amount of marijuana flower buds it could get its hands on, while its inventory of marijuana concentrates is down to about 10 percent of normal. Owner Don Morse has responded by raising his prices and running with half the normal amount of staff.

Another cannabusiness owner told The Oregonian that he expects 70 to 80 percent of the dispensaries operating today to be closed by next year.

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These problems are the natural consequence of the onerous and unworkable pesticide testing regulations that went into effect in October. As Reason has reported, these new regulations have massively increased the time and costs it takes to comply, while also severely restricting the number of labs that are permitted to carry out testing.

The predictable result has been many marijuana growers and processors either increasing their prices dramatically or shutting down their operations altogether due to a lack of labs available to test their products.

And now dispensaries are starting to feel this pain.

A survey of cannabusinesses conducted by Golden Leaf Holdings—a marijuana business in Lake Oswego, Oregon—has found that 22 percent of respondents report that they are going out of business or in danger of doing so.

A further 80 percent say that the new testing requirements have "severely impacted" their bottom line. Almost all have said they either have raised or will raise their prices substantially just to stay afloat. Yet even with price hikes, about half of the businesses surveyed reported losing $20,000 or more a month thanks to new regulations.

Despite this slow-rolling disaster, the Oregon Public Health Authority (OHA)—the agency responsible for crafting the pesticide regulations—is standing firm. Johnathan Modie, a spokesman for the OHA, told The Oregonian that the ruination of so many businesses is just "the price of public safety."

Anthony Johnson, a longtime legalization advocate and blogger at MarijuanaPolitics.com, disagrees, instead calling over-regulation "the new prohibition," with potential to push producers and consumers into black markets where there are no public safety checks.

Indeed, there are already reports of this happening, as many smaller grow operations—unable to bear the costs of sitting on their hands while they wait—have returned to selling on the streets.

This is all a far cry from the hopes of marijuana advocates and users, who expected to find a bit of normalcy in the post-prohibition environment.

Christian Britschgi is the fall 2016 Burton C. Grey memorial intern at Reason.com.

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