Canada Announces Full Marijuana Legalization, But Will Black Market Sales End?

Canadian senators passed the Cannabis Act on Thursday, thus crossing a major hurdle to legalize marijuana in the country.

With Prime Minister Justin Trudeau committed to legalizing marijuana by the summer of 2018, the senate passed Bill C-45 — commonly known as the Cannabis Act — by 56 to 30 votes with one abstention. After the vote, the bill will be sent back to the House of Commons, where Parliament members will take a call on the amendments made to the legislation by the senate.

The amendments made by the senate included committing more centers to mental health and addiction services, provinces being given more power over whether citizens can grow the plan at home and tighter restrictions on advertisements, BBC reported.

Liberal leaders believe legalizing the drug would keep it out of the hands of underage users, with Canadians — especially the youth — being one of the heaviest users of marijuana in the world. They also hope the move would bring down related crime rates. But, experts are of the opinion the legalization may not put a dent on black market sales.

Medical use of marijuana has been legal since 2001 in the country; however, this move will make Canada the first G7 nation to permit the recreational use of the drug.

Even though a definite date has not been set for marijuana to go on sale, Health Minister Ginette Petitpas Taylor had said earlier this year the drug would be available to the public a few months after it was legalized because the retail system would need time to set up properly, Reuters reported.

Some provinces and police forces have also demanded more time to establish how and where marijuana will be sold.

Ontario plans 40 government-run stores in the beginning and to increase it to 150 by the end of 2020, while Quebec will start with 20 stores.

However, cannabis investors and policy analysts believe the regulated sales will face competition from a black market which is thriving. The legal cannabis is expected to be more expensive and less available because of strict regulations, due to which buyers would have no reason to switch to the former from illegal pot.

Canada also restricts medical marijuana to mail-order purchases, and as a result various unsanctioned retailers have sprung up, who will compete with legal outlets.

The country’s watchful approach toward selling the drug could limit legal investment, which is estimated to be a C$5.7 billion market by government agency Statistics Canada. With a fifth of Canadians — between the ages of 15 and 64 — spending about C$1,200 per person a year at C$7.48 per gram, it will not be hard for the black market to gain an upper hand as the legalized pot would cost about C$8.33 per gram.

If this happens, the benefits of legalization — job creation, investments, tax revenue and stamping out crime associated with illegal sales — would be curbed.

“Canada’s been brave enough to take the step to make cannabis fully legal, but they’ve also taken the stance that they don’t want to promote it,” said Steve Ottaway, managing director for investment banking at GMP Securities. “I can appreciate their intent, but at the same time, this is an adult-use market,” he added, according to another Reuters report.

A way out of this dilemma is to present the existing industry with legal status. However, most provinces, with the exception of British Columbia, want to “eradicate the existing industry,” Jeremy Jacob, president of the Canadian association of Medical Cannabis Dispensaries, said.

Ontario even plans to set aside C$40 million for enforcement and putting a dent on the black market.