States that limit the number of legal cannabis retailers, typically by allowing jurisdictions to impose local bans on dispensaries, have larger illicit markets, according to new research.

Whitney Economics and the online publication Leafly gathered and analyzed data on both legal and illegal cannabis sales, the density of legal cannabis retailers between jurisdictions, and the maturity of the legal market.

Their analysis reveals that more legal marijuana dispensaries is correlated with fewer illicit cannabis sales, as is the case in Colorado, Oregon, and Alaska which have the highest number of cannabis stores per capita. Those states with fewest legal marijuana dispensaries, such as California, Illinois, Michigan, and New Jersey, tend to have more illicit cannabis activity.

“States with roughly 20 to 40 legal regulated stores per 100,000 residents, in general, have captured 80 percent to 90 percent of all cannabis sales in the legal market,” the report reads.

“States with single-digit stores per 100,000 residents tend to struggle to capture legal sales, with the illicit market still accounting for 30 percent to 50 percent of sales. States with less than one store per 100,000 residents remain dominated by the illegal street market,” it continues.

While the slow roll-out of legal cannabis dispensaries is part of the problem in states that have legalized marijuana sales, the report argues the main issue is local ‘opt-out’ clauses for jurisdictions that don’t want a cannabis dispensary. In California, 62 percent of localities prohibit retail marijuana stores, while in New Jersey it is as many as 71 percent.

The report’s authors conclude that by opting out of legal cannabis sales, local jurisdictions are unwittingly sustaining the illicit cannabis market and perpetuating its attendant social problems while depriving the state of marijuana sales tax revenues.

NORML’s deputy director, Paul Armentano, has called for municipalities to reconsider their stance on reviving prohibition at the local level.

“Local moratoriums banning the establishment of licensed cannabis retailers do nothing to limit local residents’ access to cannabis; they only limit their access to legal cannabis,’ he said.

“Municipalities need to embrace this reality and provide the necessary oversight in order to hold these businesses accountable and to make this marketplace safe, transparent and profitable for the community.”

Other research indicates that allowing marijuana retailers to operate legally has other benefits besides stemming the illicit market. One economic analysis revealed a positive association between legal cannabis retailers and rising property values, while another showed that jurisdictions with legal cannabis stores had more job growth than those which had chosen to prohibit them.

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