Is This Legalization?

Written by Henry Antupit and Philip Eldred

The Diamond Baron (DB) and TNT Extracts (TNT) are Denver-based cannabis processors and cultivators who are generally regarded as “Hypebeast” hash makers within the cannabis extraction community. Their brand recognition on Instagram helped to bolster their reputations within the industry, giving them a wide-ranging appeal.

Both DB and TNT were first on the scene when it came to crystalizing THCa in live resin hydrocarbon extracts. This method produces a consistency colloquially known as “Diamonds”, “Terp Diamonds”, “Rocks n’ Sauce”, or “Terp Sauce”. Their technique of “naturally” derived co-solvent crystallization became a highly sought after consistency starting in 2016, around the same time as other crystalized cannabinoids became readily available such as hemp-derived CBD isolate.

At its peak notoriety, many well established licensed cannabis processors in California hired one or both of these extractors to consult on this specific finishing method for their product lines.

DB and TNT are considered “OGs” of these techniques and, thanks to this status, both were perceived to have notable exclusivity surrounding their products.  People all across the country and in some cases internationally sought after their “Baller Jars” (1oz. jars of “Diamonds”).

Because of the perceived exclusivity of these products, brokers were able to add additional markup, much higher than normally acceptable for similar type products both in MMJ and underground markets. This set a bounty of sorts on sourcing these products in the eyes of brokers, who gravitated to these type of value added products because of shrinking margins on flower based products for several consecutive years.

Having these hypebeast products available to a broker’s clientele could function as a way of differentiating brokers in an increasingly competitive market.  In fact, there are a number of MMJ clubs in California who advertise on social media and other platforms about stocking DB products on their shelves. There is a definite sense of legitimacy and quality that comes with purchasing a well branded and packaged product from a reputable retailer, no matter the industry.

Surely, then, DB and TNT are perfect examples of the sort of brand-oriented value generation that would set their products apart and give them a special ability to be competitive in the nascent legal recreational cannabis markets. This advantage would seem to be exactly the sort of legal asset which would incentivize robust participation in legal markets while abandoning established black-market interests as liabilities threatening the favorable assets of legal licensure and robust brand recognition.

Surely, it would seem, that struggling and unknown legal license holders may be tempted to risk their licensure by engaging in black market activity, but not cannabis rock-stars like DB and TNT. Surely they are perfect examples of how legalization can open up opportunities stable and lucrative enough to undermine the appeal of engaging the black market. Surely…

Or perhaps not?

On December 12 the DEA and a smattering of other state and local law enforcement agents served 8 search warrants across the Denver metro area. Six people were indicted on 23 counts by a grand jury. As of the time of writing, only four of the six individuals named in the indictment have been arrested.

Seventeen stolen cars with fraudulent VIN numbers, totalling almost $1.1 million in value, as well as multiple firearms, were recovered  across the eight location. What appears to be unregulated cannabis cultivation was occurring at all targeted locations as well. According to the indictment, the suspects in the case are Joshua Robertson, Sage Greco, David Guzman, Cody Kerstiens, Jason Siew and Brian Richburg.

“The Blacklist” is “the only ANONYMOUS, peer-to-peer, cannabis industry-specific search engine & reputation resource.” They claim to have received this direct message on Instagram @theblacklistxyz:

“FROM OUR DM: Dave Guzman is Diamond Baron @the_diamondbaron and Jason Siew is TNT. The diamond baron and tnt extracts @tnt_extractions1 were both busted today . Those two guys fuck with the entire underground cannabis world. Lots of people need to be concerned. Hsvent seen ANYBODY in the weed world talking about it. It definitely effects a LOT of underground growers who those dudes were processing for. #helpcleanupourindustry

This investigation started 6 months ago when a potentially stolen car was brought into a local auto shop to have a custom fitted hidden compartment installed for $43k. This drew the attention of the local business owner.  

Once the DEA got wind of a Colorado based black market cannabis operation using stolen cars to transport their products around the country, it was all hands on deck. Jason Siew’s (TNT) bond is $500k for aggravated motor vehicle theft and David Guzman’s (DB) is at $350k for racketeering.

All of this raises the question:  if extremely well-known cannabis processors like DB and TNT don’t find their legal opportunities to be robust enough to exclude risking those opportunities by engaging the black market, then who would?

The rhetoric behind cannabis legalization has been that legalization and regulation would undermine the black market by creating robust competition and advantageous opportunities for entrepreneurs.

But this assumption isn’t proving to be true, as regulators and politicians are making the cost of doing legal cannabis business so high that the black market appears only to be bolstered by legalization.

Enforcement is more difficult in a climate of legalization, which makes crime less risky. As long as regulators are more interested in collecting tax dollars than serving the public interest by bringing an extremely large and developed market out of the shadows, and into the world of consumer protection and social responsibility, won’t the black market only continue to grow?

Regulators and politicians need to decide: are strict control of a miniscule legal market and steadily growing tax revenues more in the public interest than an approach to regulation that actually makes the legal markets more attractive, thereby undermining underground markets?

Of course, regulators and politicians aren’t known to be agents of change. What has to change is the general naivete among the electorate in assuming that simply having a legal market is sufficient to undermine illegal markets.

Just as in any market situation, behaviors will only shift when there is a real incentive to do so. Regulations should be focused on serving the public interest through consumer, worker, and environmental protections, not serving the interests of regulators and politicians who are concerned only with the amount of tax revenue for which they can take credit.

Bluntly: the pay-to-play taxation system keeps legal markets from being competitive with the underground markets they are supposed to be disrupting.

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