Why Toronto's cannabis 'grey market' 'ain't going nowhere' as legalization looms

As legalization nears, Toronto's cannabis businesses are refusing to be locked out of an industry they've cultivated for decades.

From 60% to 70% of the recreational market will remain underground, expert says

Dispensary owner Justin Loizos, left, former dispensary owner Tania Cyalume, centre, and lounge owner Abi Roach, right. There could still be a healthy demand for their services even after an LCBO subsidiary becomes the only legal marijuana retailer in the province, one expert says. (Paul Borkwood/Evan Mitsui/CBC)
They've been raided, warned and put on notice. But as legalization looms, players who describe themselves as part of Toronto's cannabis "grey market" say they simply aren't going anywhere.

"I will carve out a space if one isn't made for me," lounge owner Abi Roach said. 

In the first part of CBC Toronto's Joint Ventures series, cannabis entrepreneurs are fuming over Ontario's retail monopoly on weed. They refuse to be locked out of an industry they've cultivated for decades. 3:49
The 39-year-old is one of many in the industry who suddenly find themselves locked out of the market they cultivated in the shadows for decades. Many dispensary owners and lounge operators say they're part of a grey market, not a black market, because they say their status under the law is murky and ambiguous.
But currently, the only legally sold weed is for medical purposes and is delivered by licensed producers via Canada Post. Storefront dispensaries, medical or otherwise, are illegal. Lounges, under the proposed Cannabis Act, would also be outside the law but the government is looking into possibly changing that
Numbers from Weedmaps show a strong pot market as of early 2018. (CBC)
There were high hopes that the existing distribution network would be adopted into a legal framework post-legalization but the province has set up an LCBO subsidiary to be the only legal retailer of cannabis. 

Nonetheless, players in the existing network of businesses refuse to be pushed out. 

There are 219 weed delivery services and 66 dispensaries listed in Toronto on Weedmaps — a popular app that maps and reviews cannabis shops and strains in North America. 

Roach has been lobbying provincial and municipal governments to explain why lounges make sense in a recreational market.

In the meantime, her business remains in legal limbo — a position that is by no means new to her. 

"We've been here a very long time without ever knowing if tomorrow we will be open," she said. 

That's long enough to have gathered enough experience to navigate a legal recreational market, she argues. 
'I'm living a paradox here and I hate it, but I'm going to keep doing it because I don't have any choice,' dispensary owner Justin Loizos says of running an illegal storefront. (Paul Borkwood/CBC)

Agility to outlast opposition

"In 18 years, we've had the agility to outlast all kinds of prime ministers and mayors and premiers with different ideas and thoughts about cannabis, so my fear of somehow disappearing is very minimal," she explained.

"I ain't going nowhere."

Staying nimble is dispensary owner Justin Loizos's main goal as legalization approaches — whenever that may be. 

 'If I get raided, I will be open the next day if my health allows it.' - Justin Loizos , dispensary owner

The 29-year-old owns Just Compassion, a medical pot dispensary in Toronto's west end, and believes he is poised to adapt his business model enough to squeeze into the legal framework. 

"I could put a doctor's office out front, a vapour lounge here, bongs for sale, maybe some [hydroponic] equipment," he said. It all depends on the legal regulations the province lays down, he says.

Either way, he has no plans to leave the industry. 

"The day I close Just Compassion is the day Ontario Disabilities supplies weed for everyone who needs it," he said. "If I get raided, I will be open the next day if my health allows it." 

Loizos set up shop after finding that cannabis provided rare relief from his struggles with multiple sclerosis and PTSD. He says his shop allows people with medical needs quicker access to the drug than Health Canada's current delivery system. 
'It's the art of war,' former dispensary owner Tania Cyalume says of the Project Claudia raids. (Paul Borkwood/CBC)

Jumping from place-to-place

While Loizos is determined to dig in, others, like Tania Cyalume, are happy to ditch the brick-and-mortar. 

The 39-year-old used to run Queens of Cannabis, a dispensary that was shut down by Toronto police during the Project Claudia raids. Now, she's moved her business to a more flexible model.

"There are various pop-up markets in the city every month and so we've just been jumping around from place to place and our patients follow us," she said. 

The pop-up market organizers are very careful to keep their location a secret so that they're not targeted by police. 

Cyalume offers dried flower products along with THC-infused teas, creams and even dog treats through her company, Bloom High Tea. 
Tania Cyalume prepares a spread of her weed products (Paul Borkwood/CBC)

'Bottleneck' will block legal market transition, expert says

The Cannabis Act, currently in the Senate, provides for edibles to be allowed recreationally by 2019 but like all other forms, it is currently illegal. 

As many of the sellers who are now distributing weed try to find a way to fit into the new legal framework, there will likely still be a demand for underground pot after marijuana is legalized, argues at least one expert who focuses on the economics of weed. 

"The legal channel, if they're lucky, will represent 30 or 40 per cent of total demand during the first year," said Miles Light, founder of the Colorado-based Marijuana Policy Group.  

Light blames this gap on the "bottleneck" that will be created if only 80 storefronts open up in Ontario, a province of over 14 million people, by 2019 as promised. 

"Colorado has over 800 outlets and we only have five million people so if the consumers can't get marijuana at a reasonable access point then they'll probably return to the black market." 

Joint Ventures: As cannabis legalization looms in Canada, CBC Toronto's series examines how businesses are affected by the green rush. Who will rise from the ashes and who will be left behind?  

CBC Toronto's Joint Ventures series examines how the cannabis industry is changing as legalization looms. (CBC)

With files from Chris Glover