Cannabis Legalisation: Undermining or Enabling Organised Crime?

After years of intense debate in Germany’s Bundestag, proponents of cannabis legalisation law won out over the bill’s sceptics and fierce opponents. Whilst other countries have fully decriminalised drugs including cannabis (such as Portugal) or adopted cannabis-permissive grey-area policies (such as in the Netherlands), Germany’s policy establishes a clear path for a legal market within Europe’s largest economy. Momentum has slowly been building globally for decriminalisation and legalisation, but little meaningful consideration has been given to the policy’s impact on organised crime groups (OCGs).

Optimising Enforcement and Undercutting Crime?

Since Cannabis’ prohibition, the trade has been almost entirely dominated by OCGs seeking to profit at every stage of the supply chain. Even in decriminalised or grey-area enforcement areas, such as Amsterdam, the supply of cannabis is dominated by the criminal underworld, with sources ranging from local Dutch suppliers to products trafficked from North Africa or the Western Balkans. The cannabis market is thought to represent an estimated 38% of OCG drug revenues in the EU – a staggering 11.4 billion euros annually. Likewise, in the UK, annual estimates approach a value of 3 billion pounds.

Despite cannabis’ reputation as a ‘softer’ drug, it is a serious error to assume the cultivation, trafficking and sale to be low or no-impact relative to heroin, crack cocaine and other high-impact drugs. From the perspective of the organised criminal, revenue is revenue, best evidenced by the rise in criminal convergence and multicommodity smuggling. In fact, the lower threat associated with cannabis – correctly based on potential user harms – may provide a lower-risk environment for OCGs to operate in, making the trade all the more attractive and lucrative. According to the National Police Chiefs’ Council (NPCC), the social harms associated with high-profit criminal markets surround the trade in cannabis, including ‘violence, class A drugs and other serious criminality including human trafficking and modern slavery.’

Legalisation could help governments capture the multi-billion-pound market through regulation. Beyond the potential tax revenue benefits, a regulated cannabis market would relieve OCGs of their monopoly, depriving them of significant income and reducing harms associated with the current unregulated environment. Of course, OCGs would remain involved in the trade in higher-harm drugs – which in UK account for the overwhelming majority of OCG drug revenue. But a reduced focus on combating the cannabis trade will leave law enforcement agencies (LEAs) better placed to prioritise and reallocate their time.

Law enforcement agents and officers recognise their acute capacity issues. A proliferation in tech-enabled and street crime, coupled with funding cuts and freezes, has left forces struggling to meet demands in the UK and globally. In the US, where a preponderance of related theory and empirical research exists, cannabis legalisation provides a theoretical solution to existing resource challenges. There were over 600,000 cannabis possession arrests in the US in 2018. Reduced arrests carry foreseeable knock-on effects: a decrease in prison overcrowding, clearance of court backlogs, decreased need for police resourcing and an alleviation of significant community relations issues.  For these and other reasons, law enforcement agencies – including in the UK and US – have gradually de-prioritised the street-level disruption of the cannabis trade. However, without comprehensive legislation, this withdrawal tacitly acknowledges and encourages the growth of an unregulated and harmful illicit market. Legalisation carries the potential to free up necessary human and technical resources for higher priority threats and demands, without conceding the cannabis market to OCGs.

How (Not) to Legalise

The theoretical benefits outlined above assume an ‘ideal’ form of cannabis legalisation. In practice, where cannabis legislation has been rolled out, theory and reality remain painfully distant. Legislation passed in New York City in 2021 sought to legalise the distribution of cannabis in an already cannabis-heavy city. Positive intent notwithstanding, only two of the new cannabis shops unveiled following the legislation were licensed, relative to a minimum of 1,400 unlicensed shops opened in the City. The negative impacts of this asymmetrical growth are varied.

The overwhelming majority of cannabis sold by unlicensed shops originates from out of New York and, as of 2022, an estimated 40% of cannabis products tested positive for E. coli, salmonella, pesticides and significant lead, in addition to inaccurate THC level representations. Adding to the consumer-safety failings, a spat of robberies of unlicensed stores may be indicative of new targets for criminal street gangs who victimise the illicit, cash-rich shops or seek to re-sell stolen cannabis products. It is highly unlikely that these unlicensed shops source their products from a licensed, legal vendor. Therefore, the current state may in fact represent a more stable sales platform for existing cannabis-involved organised crime.

In terms of law enforcement capacity, the legislation aimed to support LEA’s prioritisation of higher value drugs, which caused over 5,600 overdose deaths in 2021 alone. Instead, the rise of unlicensed shops led to the reluctant creation of a new police taskforce, with enforcement and prosecutorial assets now dedicated to countering hundreds if not thousands of newcomers to the still-illicit market.

In the case of New York, three years on, we’ve seen neither a meaningful reduction in state resource expenditure nor in illegally sourced and sold cannabis products.

Not Your Average Market

Bridging the theoretical and practical divide requires a total re-framing of cannabis and legalisation. More specifically, legalisation should not be viewed primarily through the lens of cannabis as a commodity but as the reformation of an existing market. When legalised, the regulated supply of cannabis enters into competition with the existing illicit market. How can governments improve safety, transparency and ethics along the supply chain? This multi-million – or billion – pound question has not thus far been satisfactorily answered, if answered at all. However, potential strengths and advantages of a thoughtful legal, regulated market are present.

For instance, as a market, the legal product must be competitive in price. Initial studies of cannabis consumption in legal jurisdictions indicate a strong price effect in choosing product – legal or illegal. Though there is legitimate incentive to levy high taxes to disincentivise cannabis usage and implement other regulations such as requiring domestic production, these measures put upwards pricing pressure on legal goods. Consequently, illegal supply retains pricing power. From a market regulatory perspective, whilst further research is needed into consumer safety and quality considerations, the growth of ‘California Quality’ cannabis products – a state which legalised in 2016 – indicate reputable, safe products can further accelerate positive market replacement.

The above considerations are not exhaustive. However, each element looks to answer how legalisation can achieve the tripartite objective of undercutting organised crime, improving social outcomes and freeing up law enforcement assets. The existing legislative focus on social justice or personal freedoms, though not without its merits, fails to capture the importance of such a policy on organised crime. As governments like Germany adopt legalisation, their policies should reflect this strategic vision of bringing a harmful, illicit underground market above ground. This involves looking beyond siloed priorities and examining case studies in successful or failed policy rollouts.

The views expressed in this article are those of the author and do not necessarily reflect the views of RUSI, ECPR, Focused Conservation or any other institution.

Elijah Glantz is a Research Analyst and Project Officer at RUSI specialising in commodity trafficking, corruption and associated illicit financial flows. His research spans projects on global organised crime sanctions to in-country research on wildlife crime in sub-Saharan Africa. Elijah is the Co-Project Manager of the Strategic Hub for Organised Crime Research (SHOC) and Lead Editor of The Informer on SHOC.