Regulated cannabis markets

Colorado and Washington are setting up regulated markets for cannabis. What implications will this have for the USA and the wider world?

Colorado and Washington remain at odds with other states and federal laws, as cannabis is a Schedule I drug according to the Controlled Substances Act of 1970. Colorado Amendment 64 permits the use and regulation of marijuana for adults over 21, whilst Washington Initiative 502 distinguishes marijuana from other parts of the cannabis plant, legalising small amounts of marijuana-related products for most adults. States that have adopted similar approaches do so principally through a liberal/libertarian approach, the belief that government has no business monitoring the lives of ordinary people. The beneficial economic arguments of regulating marijuana use extend to increases in state revenues, largely through increased tax receipts derived from tax paid on cannabis. A highly regulated market also eliminates the black market, and criminal opportunities facilitated by this. Surveys and polling carried out prior to Colorado Amendment 64 being passed indicated a majority (53%) in favour of the amendment, to 46% opposed. 

A regulated market would eliminate many dangers, and reduce risks to the health of individuals. Considerable business opportunities exist as a result of new legal approaches to cannabis. However, this leads to a paradoxical scenario--in the eyes of the public good, the minimum amount sold is the most agreeable outcome; however, businesses seek to maximise their profits with increased sales. To clarify, The Supreme Court developed restrictions on commercial speech, the term given to speech used by businesses for commercial transactions and to persuade customers to buy specific products or services. This allows the law to intervene if speech is fraudulent, misleading, or proposes an illegal transaction. The Supreme Court has stated ‘The commercial marketplace, like other spheres of our social and cultural life, provides a forum where ideas and information flourish. Some of the ideas and information are vital, some are of slight worth. But the general rule is that the speaker and the audience, not the government, assess the value of the information presented. Thus, even a communication that does no more than propose a commercial transaction is entitled to the coverage of the First Amendment’. 

The First Amendment also prohibits the passing of any law that restricts freedom of speech. The Supreme Court has suggested that the First Amendment protects ‘the right to receive information’ as well as the right to speak. Given increasing corporate power, businesses are only interested in airing commercial speech, not total freedom of speech. A regulated market for cannabis could also face a clampdown similar to that imposed on fast food, alcohol, tobacco and gaming, products and services that potentially have a negative impact on the consumer. The challenging free market approach to cannabis also exists at a governmental level, within the European Union. An alternative system centres on public sector intervention, principally a regulated market for marijuana provided with government support. Currently the European Union is opening up state-run businesses in the transport, energy, telecommunications and postal markets to competition. EU countries can also offer state aid to some of these sectors prior to being opened up to competition. 

A regulated market for marijuana in the EU would, in all likelihood, be provided through services of general economic interest (SGEI). These are economic activities that government bodies recognise are of great importance, and they would not be supplied (or would be supplied under different frameworks) if governments did not intervene to operate them. These include public transport and postal services, as described above. However, although a regulated market would fall under SGEI, it would also be subject to state aid rules if a private business provided a highly regulated market for cannabis in place of the public sector. These rules exist to allow private companies to run essential public services, yet the services would be paid for by governments in the EU (similar to Britain’s privatised rail system, which can access government financial support).