Canadian Cannabis Stores, What Happens to Grey Market Dispensaries?

Canadian Cannabis Stores — What Will Happen to the Grey Market After Legalization

Ever since several Canada’s provinces announced the privatization of their cannabis industries, the fates of the grey market dispensaries have been in jeopardy. The many locally owned, Canadian cannabis stores have replaced the beenie and Birkenstock clad marijuana entrepreneurs.

Despite cannabis being illegal, Canadian cannabis stores have been supplying weed enthusiasts for several years now. What will be their fate? And what is a grey market?

What Are Grey Market Dispensaries?

The grey market is a peculiar phenomenon that emerged out of the transitional legal status of marijuana in Canada. With Justin Trudeau’s announcement that marijuana would soon be legal, a number of ambitious entrepreneurs decided to try their luck at the budding weed market. As a result, a number of Canadian cannabis stores were set up throughout the nation.

This is a massive phenomenon, with Toronto housing an estimated 70 – 80 of these grey market dispensaries alone. These business owners offer a sort of appearance of legitimacy to customers, while simultaneously providing the sort of selection and quality that the aforementioned beenie and Birkenstock clad marijuana salesmen could only dream of. So how are these places allowed to operate?

The grey market, for one reason or another, is tolerated by authorities. While these stores are temporarily illegal, they operate with little to no repercussions. Occasionally, raids will be carried out on these grey market dispensaries. However, these police operations often result in little more than a slap on the wrist. Cannabis products are confiscated, the grey market dispensaries are shut down for a day, but business, as usual, resumes the following morning.

While this tends to be the standard operating procedure, occasionally these Canadian cannabis stores owners can face more severe repercussions in the form of trafficking charges. We will delve deeper into how this detrimentally impacts business owners in a minute. But first, we must better understand how the fate of each of these businesses depends on their province of origin.

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Kathleen Wynne in front of weed, Ontario legalization disaster
Under Kathleen Wynne’s disastrous plan for legalization, the fate of Ontario’s dispensaries was sealed. Privatization breathe new life into the companies (image via Dopechef Media)

The example of Ontario merits some discussion. Under the administration of Kathleen Wynne, Ontario was set for a government-owned and controlled monopoly as the model for its cannabis economy. Quebec has adopted something similar, albeit far more promising. Ontario’s disastrous plan was projected to lose money and the fate of the independent Canadian cannabis stores would have been sealed.

However, with a changing of the guard came uncertainty. At the 11th hour, Doug Ford’s provincial conservatives made the fateful decision to privatize Ontario’s cannabis industry. Hope was given to these Canadian cannabis stores. However, much to the public’s surprise, privatization does not always represent the pearly gates into the legal recreation market that many had hoped for.

Within the provinces that have elected to go the private route, notably Ontario, British Columbia, Manitoba and Alberta, varying degrees of opportunity and permissiveness toward illegal activity have been established.

In Alberta, Premier Rachel Notley‘s administration appears the most amenable to fair market participation. The province has already accepted 533 applications for the establishment of legal Canadian cannabis stores come October. In addition, Notley’s administration will permit non-cannabis stores, such as grocery stores, to sell marijuana under certain conditions.

Ontario however, will have a far less permissive environment where business is concerned. Currently, the nature of private cannabis enterprise is up in the air and only online sales will be available until 2019 at the earliest.

Some of Ontario’s orphaned Canadian cannabis stores have uprooted themselves from Canada’s largest market in favour of Alberta. Among them is  Fire & Flower, which has already purchased 15% of Alberta’s retail licenses, the maximum amount allowed for any one entity.

However, uprooting oneself and heading west might not be enough for some of these cannabis entrepreneurs. In fact, a result of federal restrictions, some of these grey market dispensaries might be barred from market participation altogether.

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The Federal Obstacle

Justin Trudeau in Indian costume
The federal restrictions placed upon convicts entering the cannabis economy may be one of Justin Trudeau’s few legalization blunders (image via Global News)

The Trudeau administration has been remarkably permissive in how it has conducted its marijuana legalization experiment. The prime minister has allowed each individual province to implement its own style of ma economy as it sees fit.

However, one imposition on Canadian legalization that prime minister Trudeau was firm and forthright about, was the fate of those with drug trafficking charges.

“If somebody is convicted of drug trafficking already, I don’t think they’re going to be rewarded with an opportunity to sell it legally. We’re going to do criminal background checks and make sure that this is being done responsibly.”
For those caught up in dispensary raids, it appears that their fate has been sealed. Despite, drug prohibition amounting to abject failure… by Trudeau’s own admission. The owners of these Canadian cannabis stores possess rare, invaluable cannabis retail experience. Perhaps this should be taken into consideration before punishing them so harshly for their overzealousness.
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The odd circumstances of our present day and age gave birth to the grey market. This strange entity need not be regarded as a crisis but an opportunity.

The grey market essentially amounts to lucrative, successful enterprises, with a wealth of experience in cannabis retail. Rather than wandering into marijuana legalization blindly, Canada should allow its semi-legal cannabis economy to guide it through the turbulent, preliminary phases of the process.

The governing bodies of Canada would be foolish to reject them based on a legal precedent that is soon to become irrelevant. Pragmatism, in this instance, could translate into economic potential.

By: Stefan Hosko
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