International Cannabis Business Conference

High Court Refuses to Hear Cannabis Case Over Colorado

Colorado is bordered by seven states: Arizona, Kansas, Nebraska, New Mexico, Oklahoma, Utah and Wyoming.

Update: Nebraska and Oklahoma hoped the Supreme Court would respond favorably to their 2014 suit regarding Colorado's legal adult marijuana market, but the High Court dismissed the challenge on Mar. 21. The suit alleges that large quantities of legally-produced cannabis crossing from Colorado into surrounding states have "created a dangerous gap in the federal drug control system enacted by the United States Congress," adding:

"Marijuana flows from this gap into neighboring states, undermining Plaintiff States’ own marijuana bans, draining their treasuries and placing stress on their criminal justice systems.”

There've certainly been cases of marijuana tourists who've brought back a small stash after visiting Colorado and gotten caught in their home states, where pot is still illegal. The money people pay for legal weed in Colorado is money that's not going to illegal dealers back home. In that sense, Nebraska and Oklahoma are trying to protect the illegal business interests of some of their own citizens. Pot tourism aside, the larger question is whether marijuana is being diverted on a large-scale, and the answer to that is most likely no. At least, there's no evidence of it.

Data show the amount of pot seized that supposedly came out of Colorado has grown in the past few years, from 58 seizures in 2008 to 288 seizures in 2013. The federal El Paso Intelligence Center and the Rocky Mountain High Intensity Drug Trafficking Area also report that, from 2005 to 2008, authorities seized an average of 2,763 pounds of Colorado marijuana per year. Between 2009-2013, the average grew to 3,690 pounds per year.

The money people pay for legal weed in Colorado is money that's not going to illegal dealers in neighboring states. In that sense, Nebraska and Oklahoma are trying to protect the illegal business interests of some of their own citizens. 

According to that report: “Of the 288 seizures in 2013, there were 40 different states destined to receive marijuana from Colorado. The most common destinations identified were Kansas, Missouri, Illinois, Texas and Oklahoma. There were 68 seizures in which the destination state was unknown.” Twelve seizures of pot were bound for Kansas, 41 to Missouri, 15 to Illinois, 18 to Texas and 12 to Oklahoma.

The legal market in Colorado has oversight of production as well as distribution. Diversion of the legal product is difficult to impossible to pull off. On the other hand, there's no oversight or regulation of illegally-produced marijuana. Clearly, there are still illegal growers in Colorado. The law is relatively new, there are a limited number of outlets and taxes are high, so of course an illegal market persists. That market within Colorado is shrinking, however, while the retail market is booming.

This means that people growing illegally in Colorado are faced with dwindling prospects. You could argue that legalization is forcing illegal growers to move their product to other states. They're losing access to the market in Colorado - which, after all, was the point of legalization. It's ultimately what Nebraska and Oklahoma are arguing: that Amendment 64 has been successful in its goal of reducing the illegal market in Colorado. 

Colorado Attorney General John Suthers states about the suit: “Because neighboring states have expressed concern about Colorado-grown marijuana coming into their states, we are not entirely surprised by this action. However, it appears the plaintiffs’ primary grievance stems from non-enforcement of federal laws regarding marijuana, as opposed to choices made by the voters of Colorado. We believe this suit is without merit and we will vigorously defend against it in the U.S. Supreme Court.

It's not surpsing that the Supreme Court would not allow the case to go forward. According to the Federal Judicial Center: “Since 1960, the Court has received fewer than 140 motions for leave to file original cases, nearly half of which were denied a hearing. The majority of cases filed have been in disputes between two or more states. The Court has generally accepted state party cases dealing with boundary and water disputes, but it has been much less likely to field original cases dealing with contract disputes and other subjects not deemed sufficiently substantial for the Court’s resources.”

Diversion, bootlegging, smuggling and tax evasion are all problems in regulating the tobacco and alcohol markets, even in this day and age. 

Over time, illegal producers in Colorado will go out of business, or retire or move. The Feds, along with authorities in Colorado as well as the other states, will step up enforcement efforts, which will move that process along more quickly. Just as with the legal tobacco and alcohol markets, legal production of marijuana will almost entirely displace the illegal sources. 

The legal alcohol and tobacco markets are not great models for a good regulatory system, certainly not as far as public health is concerned. However, they're good case studies, which can be used to help inform the development of the legal marijuana market. Diversion, bootlegging, smuggling and tax evasion are all problems in regulating the tobacco and alcohol markets, even in this day and age. 

For example, moonshine (illegal alcohol) is still produced in some parts of the country. Newspaper reports of people bringing cases of booze from low-tax states like South Carolina to Georgia to re-sell are not hard to find. 

Since alcohol and tobacco are legal at the federal level (unlike marijuana),  the commerce in those markets is regulated and taxed. Differences in tax rates between different states promote smuggling activities. At the consumer level, someone going to a neighboring state to pick up something for themselves at a lower cost is really no big deal. That's not what the government needs to get involved in. Commercial business is a different story; that's the legitimate province of government.

The point is simply this: There's an unregulated criminal market in drugs in this country. Legalizing marijuana in Colorado and other states has been a big step toward reducing that criminal market. Ending federal prohibition and replacing it with state-regulated markets will not necessarily stop the illegal market entirely. As we've seen with alcohol and tobacco, so long as there are wide variations in tax rates from state to state there may still be some level of an illegal market.

Legalization/regulation may not be perfect, but it's the best system compared with all other alternatives.

Doug McVay

Doug McVay

Writer and KBOO radio host based in Portland, Ore. He's also editor of DrugWarFacts.org.