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Priority for Pot Peddlers

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eye on the news

Priority for Pot Peddlers

Governor Kathy Hochul’s proposal to put former dealers first in line for marijuana licenses is a bad idea. March 11, 2022
New York
Politics and law
Economy, finance, and budgets

Who should run New York’s legal marijuana shops? Former pushers, according to Governor Kathy Hochul, who announced Thursday that those with a marijuana arrest record will be first in line for retail licenses.

Supporters of the plan frame it as both fair and good business sense. Those individuals most affected by the “war on drugs,” they argue, should get first shot at profiting from legal marijuana. And those with prior experience selling pot would just be transplanting their skills to a now-legal market. In reality, the proposal is yet another misstep in New York’s march to legalization. Running a reasonable legal regime means keeping the previous black market as far away as possible, not welcoming its participants in with open arms.

That’s clearly what New York’s leaders would like to do. The New York Times reports on Baron Fajardo, “a Harlem resident who plans to apply for a retail license. He was 16 when the police found him smoking marijuana in his hallway and arrested him. A half dozen other pot arrests followed as he moved from smoker to dealer.” The administration, the Times reports, wants to use preferential treatment to attract “legacy” candidates like Fajardo into the licit market.

In effect, that means handing control of the state’s nascent industry to individuals who didn’t comply with the law when selling marijuana was illegal. That will happen at the expense of other “equity” applicants—minority groups favored with half of legal pot licenses under New York’s law—who don’t share that history of lawbreaking.

Why would the skills involved in selling drugs illegally apply to the legal market? The latter entails tax compliance, legal administration, and otherwise navigating a highly regulated and scrutinized industry. The former, by contrast, selects for individuals skilled at dodging the law and extracting profits through coercion, not through commercial exchange.

To the extent they have justified it at all, marijuana-legalization advocates across the country have insisted that a legal market will suppress the illegal one, with its violence and gangs, much better than criminalization did. But from California to Colorado, outside-the-law markets have persisted in marijuana-legalizing states. Putting those who ran the old market in charge of the new one is a sure way to replicate the problem in New York.

If lawmakers want to redress the harms of drug arrests, meantime, handing out licenses is an inefficient way to do it. As several RAND Corporation scholars argue in a recent paper, the benefits to the handful who receive “equity” licenses are far smaller than the benefits from encouraging employment—a step that, in turn, runs a “distant second” to the benefits of simple expungement of those individual marijuana-related criminal records. After Virginia’s legalization, for example, the RAND scholars estimate that expungement would benefit 200,000 people, while the industry would employ about 10,000 and create at most a few hundred local entrepreneurs.

This is not to say that a marijuana license would not benefit some recipients. New York has promised $200 million to fund “social equity cannabis businesses”—inexplicably spending down two years of revenue from the industry—so success through sheer taxpayer largesse is certain, at least for now. But this relatively small aggregate benefit does not justify introducing those with black-market connections into the legal marketplace.

Photo by ANGELA WEISS/AFP via Getty Images

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