We have very little idea what is going on with our illegal markets. Our policy often gets influenced by miscalculations and misunderstandings.
Kaylee Toranay of InvestigateWest
The tales of illicit cannabis operations were coming from all corners of Oregon, and by 2018—four years after the state voted to legalize recreational weed—lawmakers were feeling the pressure to act.
Workers in unlicensed grows just a few miles north of California slept inside shipping containers while being guarded on the site. The explosions were caused by jerry-rigged electric wiring in secret hash oil factories located in Central Oregon and Portland. Pressurized butane and electrical wiring exploded, blowing apart buildings and killing people. Sheriff’s deputy intercepted thousands of pounds of marijuana that was headed to Texas and Florida. State inspectors, tax collectors, and state agents were not present.
In response to this growing concern, legislators created a grant program in 2007 to help law enforcement crack down on these kinds of activities. Oregon Criminal Justice Commission was given the responsibility of managing this grant, which began with $3 million from cannabis taxes. This funding increased over time and was extended to an increasing number of counties, nonprofits, and other organizations.
Oregon has spent $46 million on cannabis in the last 7 years. Cannabis plants worth millions have been confiscated, while hundreds of workers are now safe.
The money has been spent, but is the black-market affected? Officials cannot say.
The annual grant report of the Oregon commission in 2024, and this year’s January edition stated that it was not possible at the moment to make conclusions as to whether or not the grant had reduced the illegal marijuana market. The illegal market is a clandestine one, and the scope and distribution are not well known. It’s difficult to tell if grant-funded programs have reduced the black market or associated activities.
It is the first time the Oregon agency has been so open about how little it understands the illicit cannabis market in Oregon, despite lawmakers spending millions every year on crackdowns. Oregonians have little insight on the return of their investments, which highlights state agency’s limited coordination efforts in order to reduce illicit cannabis supply and demand. Experts and advocates say more can be done—and that the inaction leaves workers and the legal market vulnerable.
Corinna scheurich, the executive director of Northwest Workers’ Justice Project (which has provided legal aid to immigrants exploited by the cannabis industry) said: “I believe we have an excellent case for this being the result of our legalization of cannabis in Oregon.” “Oregon is kind of a warning about what it looks like to deregulate the growing of cannabis—to make it legal, but also not to really build up a good enough enforcement mechanism and coordination. We’re now dealing with its consequences.”
Experts in drug policy say that to better understand the size of the illegal cannabis market, lawmakers will have to consult more sources. Consumers and legal cannabis businesses could provide insight to regulatory agencies on the economics of illicit markets. Oregon’s massive cannabis oversupply and stagnant prices may have contributed to the increase in illicit sales, since licensed growers are looking for ways to recover their losses. Oregon has not collected much data other than the legal demand, supply, and busts. This is according to state officials, cannabis advocates, and experts.
We have a poor understanding of our illicit market, which is often reflected in the policy we adopt,” says Jason Eligh, a drug policy and market expert at Global Initiative Against Transnational Organized Crime (GIATOC), a Swiss-based civil society group that studies organised crime. Money is a sign of a desire to take action. Information is the problem.
Shifting goalposts
The state Criminal Justice Commission’s staff presented a series of presentations to lawmakers during the current legislative session. Some legislators expressed interest in gaining broader insights on the illegal market.
In a Senate Committee hearing held on the 22nd of January, Sen. Mike McLane told Ken Sanchagrin (Executive Director) that he was interested in learning whether funds appropriated like these have an impact. I do have some concerns about this Legislature’s ability to prove we are doing more than just relieving the financial burden of local law enforcement through grants.
The Criminal Justice Commission was not required to make conclusions regarding the entire illegal market when the Legislature established the grant. The agency was only required to set up a “process for evaluating the effectiveness of local law-enforcement programs and services that are funded by this grant.”
The process started with collecting information from the law enforcement grantees regarding the number of incidents handled by them, the amount illicit cannabis that they recovered and disposed of, as well as the quantity of cash, firearms and other illegal drugs they seized when they executed search warrants.
Recent years the grant reports of the Oregon Liquor and Cannabis Commission have included data on enforcement collected by other state agencies who assist with shutting down and citing illicit operations. These include the Water Resources Department, Oregon State Police, and Oregon Liquor and Cannabis Commission.
Taken together, enforcement records paint only a partial image of illicit cannabis being grown, transported and processed out of state.
Eligh explained that “if you claim seizures have increased, this does not mean production or supply is affected.” Seizures show the existence of law enforcement. You can tell if law enforcement is successful in attempting to confiscate drugs by their actions.
Following a peak in 2021-2022, both the number and amount of busts and seizures by the law enforcement agencies has fallen. The decline in law enforcement busts is partly attributed to the shift from outdoor to indoor growing, as they are harder to detect. These indoor grows are also smaller.
Many people say that the grant made a huge impact, addressing the issues raised by lawmakers in the past seven years. Nathan Sickler said that the communities in Jackson County, Southern Oregon have experienced “significant relief” due to environmental degradation caused by illegal grows.
He added: “We made it extremely difficult for anyone to profit off the illegal market”. “We’re doing pretty well today.”
Jackson County is the county that has received by far the most grant money: almost $14 million in total since 2019. The Illegal Marijuana Eradication Team, part of the Jackson County Sheriff’s Office, has destroyed and seized around one million plants as well as 200 tons of cannabis processed, 400 pounds of extracted and 538 guns.
The grant’s scope also expanded past its original mandate, when charities such as Northwest Workers’ Justice Project were eligible to receive funds for humanitarian efforts. Spencer-Scheurich reported that nonprofit grantees served 700+ people. These included helping workers with food, temporary shelter, or legal aid to claim unpaid wages, as well as immigration relief. This includes more than $30,000 in damages and unpaid wages.
Recent data shows that the funds were also used to bust smaller criminal operations and prosecute them. The grant report states that only 15% of all incidents which grantees investigate in 2024 are connected with larger criminal networks.
The market is bringing in new products
To better understand trends in the illicit market, state officials could also look to cannabis business owners in the legal market—and to consumers. However, the Criminal Justice Commission has not taken into account these groups in its analysis.
Oregon cannabis experts that spoke to InvestigateWest felt the Oregon Liquor and Cannabis Commission would be well-positioned to provide a nuanced and detailed analysis of Oregon’s illicit and licit markets. Unsurprisingly, a spokesperson from the agency said that law enforcement is responsible for the illicit markets.
While the oversupply of legal marijuana is causing the market to suffer, there has not been a thorough study on the interaction between the two.
The state cannabis commission has published data showing that a decade on from legalization the prices of flower, extracts and concentrates remain stagnant or are even falling. Amid that turmoil, research by one Portland economist suggests that legal, regulated product is losing market share in Oregon—likely to illicit sources.
Beau Whitney, the founder of Whitney Economics, and an expert on U.S. hemp and cannabis markets, examines what he refers to as the “legal involvement rate” of Oregon’s marijuana industry. He uses an estimation of annual cannabis consumption, and data from legal sales, to estimate how much cannabis is sold each year in Oregon by legal retailers. He said that the rate of legal retailers has decreased over the past few years.
According to his estimates, in 2020 legal sales will account for 75% of sales in Oregon. According to his estimations, this number would have fallen to 68% in 2024.
Whitney said that “the state has a way too large capacity for growth.” Whitney said that the state has a lot of growing capacity.
While marijuana remains illegal in the United States, it is legal to sell cannabis within Oregon. Oversupply and price collapse are pushing many licensed growers to seek other ways to recover their losses.
Andy Shelley said, “Everyone’s suffering”, a co-founder and CEO at CannXperts, an advisory company for legal businesses that specializes in regulatory compliance. “People are growing a large amount of marijuana and not selling it. This is a huge sum of money, which they must make up to pay for their staff and all bills. There are ways to get around the tracking. “People are very clever.”
Research is difficult to detect the activities of some illegal cannabis producers such as criminal organizations. Daniel Bear, Canadian Research Lead for the Global Cannabis Cultivation Research Consortium and an expert in drug policy, says that studying barriers which keep cannabis retailers and growers away from legal markets can help remove obstacles and encourage people to return. This is true for both consumers and producers.
Bear believes that law enforcement will not eliminate the illegal market. Bear said that you should incentivize people to enter the legal market and then see what the overall impact of the actions taken against the black markets is. [affecting] “Social impacts and Well-Being”
Colorado is one example of a study that analyzed the supply and demand of cannabis in 2014. The data included national and local surveys, which provided details on consumption prevalence, frequency and levels. In Washington, a 2021 study based on a survey of cannabis usage found that consumers prefer legal products more than other states.
Shelley said she and other cannabis experts were unaware of recent consultations with Oregon’s licensed operators about ways to limit unlicensed competition.
Shelley added, “It would be an excellent idea. Because our licensees already know the current situation.” Shelley said that some of the licensees have knowledge about what is happening on the black-market. They should also be included in the discussion.
‘The million dollar question’
At this time, the future of cannabis enforcement grants is not known.
It was one of the few programs identified by The Criminal Justice Commission as a program that would survive if budgets were cut. It is still very popular among its grantees who write letters, submit testimony, and pay close attention.
Sickler is the Jackson County Sheriff. “There’s a perception that we won’t be able to handle the problem if stop doing what we are currently doing. “Will the situation be worse? If we say that we don’t have the funds to deal with this problem, I doubt they would come back, set up their shop and make as much money in one year.
A January proposal was only half the funding requested by grantees and about $7 million below what they needed to maintain their spending levels.
The lawmakers are trying to figure out what the correct amount is. At a meeting on February 11, the co-chair Rep. Paul Evans, D-Monmouth asked Sanchagrin (Director of Agency) to provide clarifications about how much money was needed in order to move forward. He cited a 20 million dollar one-time boost in funding that the Legislature approved just four short years ago.
“I have a feeling that the $20 million—I voted for it—made us feel good,” Evans said. But I’m not sure that $20,000,000 was sufficient to accomplish the task. “I’m interested in knowing what amount it would take to do the actual job.”
Sanchagrin called it “the million-dollar question” in another meeting.
He said, “It could even cost more than that.”
With fewer than forty employees, the Criminal Justice Commission in Oregon is among Oregon’s smaller agencies. Rima AhToong, along with two support staff members, manages the Cannabis Enforcement Grant. She said that it would require additional resources to undertake an economic study of Oregon’s illegal cannabis market.
“I’m sure we are open to it,” said the woman. We would have to devote more resources on this than what we do now.
McLane suggested to his peers that when they consider the amount of funding for the program and what their ultimate goal is, it would be helpful if they were clear.
He said: “Usually, the programs are hard to stop once they start. We end up spending a great deal of money without much accountability.” The grants on which local law-enforcement agencies rely are also important. If our goal is to decrease the illegal market for marijuana, then I don’t think we are succeeding.
This article was first published by InvestigateWest. A nonprofit newsroom dedicated exclusively to the practice of investigative journalism, it is a non-profit organization that aims to make a positive impact on society. Join their Watchdog Weekly to get stories such as this delivered straight into your inbox.
Congressional Committee Invites Hemp Industry Expert To Testify At Hearing On How FDA ‘Failed’ To Regulate Products