AuthorKochan, Donald J.


The framing of the move by governments to change the legal status of marijuana and cannabis products is fundamentally imprecise, with negative consequences for a nuanced understanding of the legal move at issue. With the change in legal status, marijuana is not really being legalized or even just decriminalized. It is being made regulatable or, to coin a phrase, regulatabilized. (1) Markets in illegal goods--along with the goods' creation, cultivation, distribution, taxation, sale, etc.--are controlled by criminal law but not regulated per se. Indeed, they are not regulatable because to do so would acknowledge the legitimacy of the activity. Thus, for example, illegal marijuana grow operations are not subject to water allocation rules, and the types or amounts of pesticides used are not regulated by the environmental agencies. In the illicit markets, every aspect of the production and supply chain events for marijuana happens underground. If an inspector shows up, you are not looking at a National Pollutant Discharge Elimination System permit violation under the Clean Water Act. (2) Your problems are much bigger and different from the application of regulatory law. Similarly, if you are running an illicit drug house, zoning violations are not front of mind. Now, remove the illegality. Suddenly, marijuana markets are operating in the great wide regulatory open. You must dance with the regulatory labyrinth if you want to dance with legal, and hence regulatable, Mary Jane, (3) and must comply with every last petty demand of the government and the costs associated with it. Illicit drugs do not go through Food and Drug Administration (FDA) approval, nor are they subject to labeling laws. Remove illicitness, and suddenly regulatability brings with it layers upon layers of compliance obligations.

From an economics perspective, the regulatabilization framing is key because it puts front and center that we are not looking at the functional dynamics between an illicit market and one that simply removes illicitness. It is a move that introduces regulatableness. And with that, regulatory costs are passed onto consumers through price. If regulatory costs are too high, then illicit markets with lower-cost alternative goods emerge--or sustain themselves to the extent they are pre-existing. Many of the public health, safety, taxation, and other benefits touted to flow from legalization or decriminalization can be called into question when it is recognized that we are dealing with regulatabilization and the concomitant effects on price. That is, the continuation of an illicit market is almost guaranteed even with the introduction of a legitimate market in marijuana cultivation, distribution, use, and the like.

If illicit markets are attractive for both suppliers and consumers, they will exist. Substantial economics research demonstrates this fact. (4) Yet, the pervasiveness of markets for illicit activity even in the face of a legal market for the same activity is a regularly underappreciated and misunderstood phenomena. (5) As Jens Beckert, Professor of Sociology and Director at the Max Planck Institute for the Study of Societies, and Matias Dewey, a Senior Researcher at the same institute, explain: "Illegal markets [including for drugs] have great economic significance, have relevant social and political consequences, and shape economic and political structures." (6) They continue by identifying the risk of blindness to these facts: "Despite the importance of illegality in the economy, the field of economic sociology unquestioningly accepts the premise that the institutional structures and exchanges taking place in markets are law-abiding in nature." (7) Urban planners and other policymakers cannot pretend or believe that simply making an industry like cannabis legal will automatically make all cannabis activity law-abiding in nature, especially if the costs of operating within the legal market are higher than the illicit alternative.

This is all the more reason that an imprecise frame risks obscuring the real costs and market limitations of an effective legalization or decriminalization strategy. Understanding these facts and drawing attention to them with a regulatabilization frame will allow the discussion to more realistically evaluate whether the legal move of opening the door to legal markets in marijuana can accomplish its goals. It also allows the policy debate to focus on how governments might encourage suppliers, distributors, and consumers of marijuana by better explaining the benefits of operating in the lawful open and why they are worth the potentially increased cost of doing business or purchasing product.

Part I gives a general background on the move away from illegality in the states and the continuing prohibition at the federal level. Part II explains the importance of framing to understanding the nature of any problem, and it compares and contrasts traditional framing in terms of legalization and decriminalization with the more accurate framing of regulatabilization. Part III describes the differences between illicit activities operating under a cover of darkness and open activities under the umbrella of the regulatory state. It includes an analysis of types of regulations that will apply to cannabis operations as a result of becoming legal--including from the fields of land use, environmental regulation, and pharmaceutical regulation, among others. Part IV explains price systems in illicit versus legal markets and how this affects the incentives to choose whether to engage in one or the other. Part IV also explains the implications that regulatability, therefore, has on the likelihood of success of a variety of claimed positive outcomes--claims which, to varying degrees, rely on assumptions of little or no regulation of marijuana to reach their conclusions regarding the benefits of eliminating illicitness. While this Article does not conclude that these revelations necessarily counsel against changing the legal status of marijuana, it does attempt to introduce a greater level of realistic expectations of the regulatory landscape after changing the legal status of marijuana and industries related to it, as well as contributing a level of nuance and sophisticated understanding of what it means to change that status.


    Political jurisdictions across the United States are moving to relax their criminal treatment of cannabis and cannabis-related activities. (8) Cannabis law reform is occurring at some level in almost every state. (9) No doubt, these changes have also required the adaptation of state and local regulatory regimes now faced with the reality that, rather than treating cannabis-related activities as criminal and outside the regulatory space, they must find new ways to either fit existing regulations to now legitimate activities (10) or create new regulatory regimes for those no-longer-criminal activities. (11)

    Of course, at the federal level, cannabis products, their uses, and the industries supporting them are still largely illegal, at least formally. (12) The Controlled Substances Act (13) still considers marijuana a Schedule I drug, and, therefore, federal law still prohibits the possession, importation, distribution, and sale of marijuana. (14) Nonetheless, the current U.S. Department of Justice (DOJ) policy favors exercising discretionary power against federal enforcement of federal law in states that have relaxed marijuana laws. (15) However, that DOJ policy does not change the statutory determination of federal "illegality." (16) Beyond the simple federal criminality, the fact that marijuana is still a Schedule I drug affects the operation of all kinds of other federal laws. Notable examples have been the inability for cannabis operations to contract with federally approved banks (17) and the failure to recognize federally protected intellectual property rights for cannabis trademarks or plant patents. (18) Recent years have seen a variety of bills introduced in Congress to relax cannabis laws at the federal level. (19) Nonetheless, there is not yet strong optimism that federal reform will be passed into federal law anytime soon. (20)

    This Article will not focus on this schism between federal and state law. (21) Federal descheduling is on the menu of the current democratically controlled Congress, with many allies from the Republican side yet with a cool reception from the Biden Administration, (22) and the analysis in this Article will be a useful aid to that discussion. But this Article's insights also have independent relevance in the state debates as well. The point of this Article is that legal status changes are important but must be viewed as ushering in a new regulatory era for cannabis products, displacing any romantic vision that legalization or decriminalization can be analyzed without consideration of the effects of a regulatory web sticking to those efforts.


    The labels typically chosen for the legal change affected by a relaxation of our laws related to cannabis have been imprecise. The word "legalization" creates a vision of a legal status change that simply lifts the cloud of criminality without acknowledging the concomitant application of an existing regulatory structure as a result of moving the activity out of the shadows or underground and into the legitimate economy. The word "legalization" also fails to capture the invitation such changes make for the imposition of new regulatory structures. Indeed, advocates for legalization often believed that everything that was happening in the illicit market could continue as it was, with only the risk of criminal consequences changing once the activity was deemed "legal." Seldom do we see a recognition that deeming cannabis...

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