Some libertarians reject any efforts to legalize hemp or marijuana at the state level because they oppose the taxes, and the licensing and regulation requirements, that generally come with legalization. They prefer straight decriminalization. But despite the downfalls, there are actually advantages to a legalization strategy.

As Chris Calton pointed out in a recent article published on the Mises Wire, the preference for decrim seems to come from a misunderstanding of what decriminalization really means.

“In a legal environment, business owners are permitted to produce and sell the product in question. In the case of marijuana, this inevitably means obtaining a license, just as any business requires a license in the modern age. In the Netherlands, marijuana is legally sold through regulated “coffee shops.” In Colorado, licensed retailers face significant regulation and taxes, as well. However, by contrast, we can look at places like Portugal, which decriminalized all illegal drugs, and therein we can see the important differences between the two concepts. Decriminalization means that the substance is still technically illegal, but the person in possession of the substance will not be criminally prosecuted.”

Immunity from prosecution is certainly a good thing, but a problem remains. Anybody who wants to sell the substance still can’t run a legitimately recognized business.

“They have no shop, no ability to establish brand recognition, and limited competition. In other words, where outright legalization leaves the sellers subject to government regulation, it also leaves them subject to market regulation. There are in-built incentives to maintain a standardized, high-quality product in order to attract and maintain customers. The customers are able to know what they’re getting, and this information is conveyed through branding, with the concomitant pressure to ensure honesty and reliability in the branded product. In the case of fraud or other ethical issues that can be subject to torts, customers have the right to bring suit against a dishonest seller with their grievance accepted as a valid basis for adjudication. Decriminalized sellers, because they are not recognized as legitimate by the state, may not be subject to the exoteric regulations and taxes imposed by the government, but they are also not fully subject to the esoteric regulations of the market.”

This is particularly true when talking about legalizing something at the state level that remains illegal at the federal level. The movement to create a viable industrial hemp industry in the U.S. provides a good example. Ending state enforcement of hemp prohibition through decriminalization certainly takes a step forward. Theoretically, farmers can start growing the crop without the fear of state enforcement. But this rarely happens. We haven’t seen hemp markets quickly develop in states that have simply decriminalized the plant by removing it from the state’s controlled substances list. Instead, hemp markets have developed in states that have legalized the plant and proactively set up regulatory structures for its production and sale.

For example, the Oregon legislature initially legalized industri