New Mexico HB 10: Cannabis Control Division Enforcement Bureau

Supplier-Focused Enforcement Complements Price Competitiveness—But Cannot Replace It

The Silent Majority 420 | November 2025

The Bill at a Glance

Executive Summary

New Mexico HB 10 creates the Cannabis Control Division Enforcement Bureau—a dedicated 7-person unit with investigative, warrant, seizure, and arrest authority targeting large-scale illegal cannabis operations. The bill represents the correct enforcement philosophy: supplier-focused interdiction rather than consumer criminalization.

CBDT Assessment: HB 10 is a modest positive for New Mexico's legal market. By strengthening the enforcement variable (0.6× weight) through dedicated personnel and proper authority, the bill addresses unlicensed cultivation, interstate trafficking to Texas, and unregulated retail operations. Projected market share improvement: +0.3 to +0.5 percentage points.

However, HB 10's effectiveness depends entirely on New Mexico maintaining price competitiveness through moderate taxation. The framework principle is clear: enforcement complements price competitiveness but cannot overcome economic gravity. If New Mexico's scheduled tax increases proceed (13% → 18% excise by 2030), enforcement spending becomes inefficient—trying to force consumers to pay 40-50% premiums through interdiction rather than making legal cannabis price-competitive.

The critical dependency: HB 10 works IF combined with SB 89 (tax freeze). Without SB 89, enforcement cannot overcome deteriorating price competitiveness.

The Problem: New Mexico's Illicit Market Challenge

New Mexico launched adult-use cannabis sales on April 1, 2022. By October 2025, the state had generated nearly $2 billion in cumulative sales—impressive for a state of 2.1 million residents. The Consumer-Driven Black Market Displacement (CBDT) Framework estimates New Mexico captures 70-75% of total cannabis demand—solid mid-tier performance.

Yet 25-30% of consumption remains illicit, representing:

• Illicit market size: $200-250 million annually
• Lost tax revenue: $36-45 million annually
• Public safety concern: Unregulated products, organized crime activity
• Interstate complications: Trafficking to Texas where cannabis remains prohibited

Why Illicit Markets Persist

New Mexico's remaining illicit market serves three consumer segments:

1. Price-Sensitive Heavy Users (15-20% of total market)

• Legal cannabis: $228-284/ounce (mid to high quality)
• Illicit cannabis: $180-250/ounce
• Premium: 15-30% higher for legal
• Heavy users (1+ ounce monthly) save $50-100/month buying illicit
• Annual savings: $600-1,200

2. Rural/Remote Consumers (5-8% of market)

• Limited dispensary access despite statewide delivery authorization
• Established illicit relationships from prohibition era
• Convenience factor: Local dealer vs. 30+ mile drive

3. Texas Border Trafficking (3-5% of market)

• Organized networks purchasing in New Mexico
• Reselling in Texas at premium
• Interstate trafficking creates enforcement complications

Previous Enforcement Approach: Inadequate Resources

Pre-HB 10, New Mexico cannabis enforcement was fragmented:

State Level:

• Cannabis Control Division: Regulatory compliance (licensing, testing, violations)
• State Police: General drug enforcement (cannabis not prioritized)
• Attorney General: Limited resources for cannabis-specific operations

Local Level:

• 33 county sheriff departments: Varying priorities, inconsistent enforcement
• Municipal police: Focus on retail compliance, not large-scale cultivation

Problems:

• No dedicated cannabis enforcement unit
• Limited coordination between agencies
• Insufficient intelligence sharing on supply networks
• Budget constraints preventing sophisticated operations

Result: Large-scale illegal cultivation operations (1,000+ plants) persisted with minimal interdiction. Interstate trafficking networks operated with limited consequences. Unlicensed retailers in border communities competed directly with licensed dispensaries.

The Attorney General's Warning

In Fall 2023, Attorney General Raúl Torrez issued public criticism of the state's cannabis enforcement, calling it "absentee leadership" and noting that unlicensed operations were "proliferating" due to inadequate interdiction.

Industry stakeholders—both licensed cultivators and retailers—echoed concerns that unlicensed competitors undercut legal prices while avoiding taxes, testing, and regulatory compliance.

HB 10 directly responds to these enforcement gaps.

What HB 10 Does

Provision 1: Creates Dedicated Enforcement Bureau (Effective July 1, 2025)

Establishes formal Cannabis Control Division Enforcement Bureau within New Mexico Regulation & Licensing Department with:

Personnel:

• 1 Bureau Chief (management, coordination, strategic planning)
• 6 Enforcement Agents (investigations, operations, interdiction)

Authority:

• Criminal investigations: Full investigative powers for cannabis violations
• Search warrants: Authority to execute warrants at suspected illegal operations
• Seizures: Can seize illegal cannabis, cultivation equipment, proceeds of illegal sales
• Arrests: Full arrest authority for cannabis violations
• Coordination: Work with state/local/federal law enforcement

Budget: $1.6+ million for FY2025 includes:

• Personnel salaries (7 positions)
• Vehicles and equipment
• Operational expenses (surveillance, forensics)
• Training and certifications

Provision 2: Federal Background Check Requirements

Mandates both state AND federal criminal background checks for all Cannabis Control Division license applicants. Previously only state reports required.

Rationale: Enhanced screening prevents applicants with federal trafficking convictions or organized crime connections from obtaining licenses.

Provision 3: Enhanced Trafficking Penalties

Current penalties: Cannabis trafficking varies by amount, circumstances HB 10 clarifies: Defines trafficking more precisely, increases penalties for:

• Unlicensed commercial cultivation (1,000+ plants)
• Interstate trafficking (particularly to Texas)
• Sales from unlicensed storefronts falsely claiming licensing

Penalty escalation:

• First offense unlicensed operation: Fourth-degree felony
• Second offense: Third-degree felony
• Large-scale operations (10,000+ plants): Second-degree felony

Provision 4: Packaging and Safety Enforcement

Child-resistant packaging: Mandatory for all cannabis products Advertising restrictions: Cannot target minors, use cartoon characters, or appeal to children Testing compliance: Enhanced enforcement of mandatory testing requirements

Penalties: Bureau can suspend/revoke licenses for violations, impose fines, require corrective actions.

What HB 10 Does NOT Do

Critical limitation: HB 10 is an enforcement bill only. It does not address taxation, access, or price competitiveness—the variables with higher CBDT weights.

The CBDT Framework Analysis

The Consumer-Driven Black Market Displacement (CBDT) Framework identifies five levers determining legal market capture. HB 10 directly strengthens one—Enforcement—while having minor indirect effects on Safety/Quality.

Lever 1: Price Gap (g) — NO EFFECT

Weight: 4× (highest impact)

HB 10 does not affect cannabis pricing. The bill neither:

• Reduces state taxes (currently 13% excise + 5-9% GRT = 18-22% total)
• Addresses 280E federal tax burden
• Changes wholesale costs or supply chain economics

Current price gap:

• Legal retail: $228-284/ounce
• Illicit market: $180-250/ounce
• Legal premium: 15-30%

CBDT impact: 0 percentage points

Critical dependency: Enforcement effectiveness depends on price competitiveness remaining tolerable. If New Mexico's scheduled tax increases proceed (18% excise by 2030, creating 23-27% total burden), the price gap widens to 35-50%—a threshold where enforcement spending becomes inefficient.

Lever 2: Access Density (D) — NO EFFECT

Weight: 1×

HB 10 does not change:

• Number of licensed dispensaries (1,050+ licensed, ~633 operational)
• Delivery authorization (already statewide)
• Geographic distribution of retail
• Operating hours or consumer convenience

Current access: Excellent—19-24 operational dispensaries per 100K residents

CBDT impact: 0 percentage points

Lever 3: Safety/Quality (S) — MINOR POSITIVE

Weight: 1.2×

By strengthening enforcement against:

• Unlicensed retailers selling untested products
• Black market products with unknown pesticides, heavy metals
• Interstate trafficked cannabis of uncertain quality

HB 10 modestly improves the safety differential between legal (tested, regulated) and illicit (untested, unregulated) markets.

Consumer response: Increased awareness of enforcement actions against unsafe products may shift safety-conscious consumers toward legal options.

CBDT impact: +0.05 to +0.1 percentage points

Lever 4: Convenience (F) — NO EFFECT

Weight: 1×

HB 10 does not change:

• Payment options (cash limitations persist without SAFE Banking)
• Operating hours
• Delivery speed or efficiency
• Purchase process friction

CBDT impact: 0 percentage points

Lever 5: Enforcement (E) — MODERATE POSITIVE

Weight: 0.6×

This is HB 10's primary contribution. The bill strengthens enforcement through four mechanisms:

Mechanism A: Dedicated Personnel

Previous: Cannabis enforcement spread across multiple agencies with competing priorities

HB 10: 7 dedicated full-time enforcement personnel focused exclusively on cannabis violations

Impact:

• Intelligence gathering: Dedicated agents develop informant networks, track supply chains
• Investigative depth: Time to build cases against large-scale operators (not just street-level)
• Expertise development: Specialized training in cannabis enforcement, cultivation recognition
• Consistency: Uniform enforcement approach statewide

Comparison:

Assessment: New Mexico's 3.3 agents per million residents is adequate for a young market. Not as aggressive as Nevada or Michigan, but far superior to California's catastrophic under-enforcement.

Mechanism B: Arrest and Seizure Authority

Previous: Enforcement required coordination with State Police or local law enforcement (jurisdictional complications, prioritization conflicts)

HB 10: Bureau agents have direct arrest authority and can execute warrants independently

Impact:

• Operational speed: Reduced bureaucracy between investigation and action
• Accountability: Bureau directly responsible for cannabis enforcement outcomes
• Resource efficiency: No need to "borrow" State Police for cannabis operations

Mechanism C: Enhanced Trafficking Penalties

Previous: Trafficking penalties inconsistent, sometimes treated as possession

HB 10: Clear escalation structure for commercial-scale illegal operations

Deterrent effect:

• First-time operators: Fourth-degree felony (18 months, $5,000 fine)
• Repeat offenders: Third-degree felony (3 years, $15,000 fine)
• Large-scale operations: Second-degree felony (9 years, $15,000 fine)

Rational bad actor calculation:

• Expected annual profit from 1,000-plant operation: $200,000-300,000
• Expected penalty if caught (10% annual risk): $5,000-15,000 fine + 18 months-3 years imprisonment
• Risk-adjusted return: Still positive, but significantly reduced

Result: Marginal illegal operators (small profit, high risk) exit market. Large-scale operations with better risk management persist but become more costly to operate.

Mechanism D: Coordination and Intelligence

Previous: Fragmented intelligence—State Police, county sheriffs, CCD each had partial information

HB 10: Bureau acts as intelligence clearinghouse

Impact:

• Supply network mapping: Connect cultivation → distribution → retail networks
• Multi-jurisdictional operations: Coordinate simultaneous raids across counties
• Federal coordination: Work with DEA, Border Patrol on interstate trafficking
• Trend analysis: Identify emerging illicit market tactics, adapt enforcement

Texas border significance: Bureau can coordinate with Texas DPS on cross-border trafficking, potentially reducing New Mexico's role as supplier to prohibited Texas market.

Combined enforcement CBDT impact: +0.3 to +0.5 percentage points

Fragmentation Modifier (F_frag) — NO EFFECT

Weight: -0.8×

New Mexico has minimal fragmentation (no local retail bans, statewide licensing). HB 10 does not change fragmentation structure.

CBDT impact: 0 percentage points

CBDT Score Summary

New Mexico legal market share:

• Current (2025): 70-75%
• Post-HB 10 implementation (2027): 70.5-75.5%
• With HB 10 + SB 89 tax freeze: 73-78%
• With HB 10 + tax increases proceed: 68-72%

Key insight: HB 10's modest positive impact (+0.35-0.6 pp) is easily overwhelmed by price competitiveness deterioration if scheduled tax increases proceed (-2 to -3 pp from tax escalation to 18% excise).

The Enforcement Philosophy: Why HB 10 Gets It Right

Supplier-Focused vs. Consumer-Focused Enforcement

Two enforcement philosophies exist in cannabis markets:

Consumer-Focused Enforcement (WRONG):

• Target: Individual consumers purchasing from illicit sources
• Penalties: Criminalize "knowingly purchasing" from unlicensed sellers
• Example: New Jersey S4154 (proposed consumer criminalization)
• Result: Criminalizes economically rational behavior (saving 40-60% on prices)

Supplier-Focused Enforcement (CORRECT):

• Target: Large-scale illegal cultivation, unlicensed retail operations
• Penalties: Commercial-scale operations face serious consequences
• Example: Michigan model (50+ agents, $10M+ budget)
• Result: Increases illicit supplier costs/risks without criminalizing consumers

HB 10 implements supplier-focused enforcement. This is the correct framework approach.

Why Supplier-Focused Enforcement Works (Within Limits)

Economic principle: Enforcement increases illicit supplier costs, which eventually translate to higher illicit prices, narrowing the price gap.

Illicit operator costs without enforcement:

• Cultivation: $300-500 per pound (wholesale)
• Distribution: Minimal (existing networks)
• Risk premium: Low (enforcement minimal)
• Total cost: $300-500 per pound

Illicit operator costs with HB 10 enforcement:

• Cultivation: $300-500 per pound (unchanged)
• Security measures: +$50-100 per pound (counter-surveillance, site hardening)
• Risk premium: +$100-200 per pound (seizure risk, legal fees, imprisonment risk)
• Distribution caution: +$50-100 per pound (smaller loads, more discretion)
• Total cost: $500-900 per pound

Result: Illicit wholesale prices increase from $1,800-2,200/lb to $2,000-2,400/lb (+10-15%), narrowing gap with legal wholesale ($2,200-2,500/lb).

Consumer impact: Illicit retail prices increase from $180-250/oz to $200-270/oz, making legal prices ($228-284/oz) more competitive.

The Enforcement Ceiling: Price Competitiveness Limits

Enforcement has diminishing returns. At some point, increasing enforcement spending produces minimal additional market share.

Example:

Scenario A: Legal $250/oz, Illicit $200/oz (20% gap)

• Enforcement impact: High—marginal consumers shift to legal despite modest premium
• 7 agents adequate

Scenario B: Legal $300/oz, Illicit $200/oz (50% gap)

• Enforcement impact: Low—consumers will pay $1,200/year to avoid enforcement risk
• Even 70 agents cannot overcome economic gravity

New Mexico's position:

• Current gap: 15-30% (tolerable, enforcement effective)
• If tax increases proceed: 35-50% gap by 2030 (enforcement ineffective)

HB 10's success depends on SB 89 (tax freeze) passing.

The Michigan Model: What Optimal Supplier-Focused Enforcement Looks Like

Michigan demonstrates the supplier-focused enforcement model at scale:

Michigan Enforcement Structure:

• Personnel: 50+ dedicated cannabis enforcement agents
• Budget: $10+ million annually
• Authority: Full criminal investigation, warrant, arrest, seizure
• Focus: Large-scale illegal cultivation (10,000+ plant operations), unlicensed storefronts
• Coordination: State Police, local law enforcement, federal agencies

Michigan Results:

• Legal market share: 85% (highest among large states)
• Unlicensed retailers: Largely eliminated from major markets
• Illicit cultivation: Disrupted but not eliminated (rural areas persist)
• Price competitiveness: Maintained through moderate taxation (16% total burden)

Michigan's success factors:

1. Enforcement spending: $1 per capita ($10M for 10M residents)
2. Price competitiveness: 16% total tax burden keeps legal prices competitive
3. Access density: Open licensing (no caps), statewide delivery
4. Combination effect: Enforcement + competitive prices + good access = 85% legal share

New Mexico comparison:

Assessment: New Mexico's enforcement spending is 80% of Michigan's per-capita level—adequate but not optimal. If New Mexico matched Michigan's $1/capita spending, budget would be $2.1M (+$500K) supporting 9-10 agents instead of 7.

However: Michigan's success comes from enforcement PLUS competitive prices. New Mexico risks undermining enforcement effectiveness through scheduled tax increases.

Winners and Losers

Winners

Losers

Neutral

Political Context

Bipartisan Support: Why HB 10 Passed Easily

House vote: 55-5 (92% approval) Senate vote: 25-15 (63% approval)

Republican support: Law enforcement, border security, protecting licensed businesses from illegal competition

Democratic support: Regulated market success, reducing organized crime, protecting consumers from untested products

Minimal opposition: Only 5 House members and 15 Senators opposed, primarily on:

• Budget concerns (adding $1.6M program)
• Federalism (concern about state enforcement of federally illegal substance)
• Libertarian objections (government enforcement expansion)

Governor Lujan Grisham's Statement

At signing (March 1, 2024):

"New Mexico's cannabis industry has been a remarkable success story, generating nearly $2 billion in sales and supporting thousands of jobs. But that success requires vigorous enforcement against those who operate outside our regulatory framework, endanger public safety, and undermine legitimate businesses. This enforcement bureau gives us the tools to protect our regulated market."

Attorney General Raúl Torrez's Response

After previously criticizing cannabis enforcement as inadequate:

"HB 10 provides dedicated resources and clear authority to address unlicensed operations. However, enforcement alone cannot succeed if legal prices become uncompetitive due to excessive taxation. New Mexico must maintain reasonable tax rates to ensure our legal market remains attractive to consumers."

Significance: AG specifically linked enforcement effectiveness to price competitiveness—validating the CBDT framework principle.

What HB 10 Doesn't Address

Critical limitation: HB 10 is narrowly focused on enforcement. It does not address New Mexico's broader optimization challenges.

Implementation Monitoring

Success Metrics to Track (2025-2027)

Enforcement Activity:

• Large-scale cultivation operations disrupted (target: 15-25 operations annually)
• Unlicensed retail locations closed (target: 30-50 locations annually)
• Interstate trafficking interdictions (target: 50+ significant seizures annually)
• Coordinated operations with Texas DPS (track frequency, results)

Market Outcomes:

• Legal market share: 70-75% → 71-76% (modest improvement)
• Illicit market pricing: Monitor if enforcement increases illicit costs
• Licensed business complaints: Track reduction in "unfair competition" concerns
• Border community sales: Monitor Texas tourism trends

Budget Efficiency:

• Cost per enforcement action
• Seizure value vs. operational cost
• Conviction rate for prosecuted cases

Timeline Checkpoints:

• Q3 2025: Bureau operational, agents hired and trained
• Q4 2025: First major operations conducted
• Q2 2026: Six-month assessment of enforcement impact
• Q4 2026: Full-year market share comparison
• Q4 2027: Two-year assessment, budget evaluation for expansion

The SB 89 Dependency: Why Enforcement Needs Tax Reform

HB 10's success is conditional on New Mexico maintaining price competitiveness.

Scenario A: HB 10 + SB 89 Passes (Tax Frozen at 13-14%)

Price gap:

• Current: Legal $228-284/oz, Illicit $180-250/oz (15-30% premium)
• 2028: Legal $190-240/oz, Illicit $200-270/oz (enforcement increases illicit costs)
• Gap narrows to 5-15% (highly competitive)

Enforcement effectiveness:

• 7 agents adequate for market size
• $1.6M budget provides strong ROI
• Illicit operators face both price competition AND enforcement risk

Result: Legal market share improves from 70-75% → 73-78%

Scenario B: HB 10 Without SB 89 (Tax Increases Proceed to 18%)

Price gap:

• Current: Legal $228-284/oz, Illicit $180-250/oz (15-30% premium)
• 2030: Legal $280-340/oz, Illicit $200-270/oz (enforcement increases illicit costs slightly)
• Gap widens to 40-50% (uncompetitive)

Enforcement effectiveness:

• 7 agents insufficient to overcome price gap
• $1.6M budget provides poor ROI (trying to enforce uncompetitive prices)
• Consumers rationally choose illicit despite enforcement risk

Result: Legal market share declines from 70-75% → 68-72% (enforcement can't overcome tax-driven price deterioration)

Bottom line: Every dollar spent on HB 10 enforcement is more effective if SB 89 passes. Without SB 89, enforcement spending fights against economic gravity—an unwinnable battle.

CBDT Verdict

Should New Mexico have passed HB 10?

Yes. The bill creates proper enforcement infrastructure with supplier-focused approach. HB 10 demonstrates New Mexico understands that regulated markets require enforcement—unlike jurisdictions that legalized without enforcement infrastructure (New York's catastrophic rollout) or are now cutting enforcement (California's 3% interdiction rate).

Will HB 10 significantly improve New Mexico's legal market capture?

Modestly—if paired with SB 89. The +0.35 to +0.6 percentage point projection reflects real but limited standalone impact. Enforcement addresses illicit supply but cannot overcome tax-driven price deterioration.

What would maximize HB 10's impact?

Pass SB 89 (tax freeze) simultaneously. If New Mexico freezes excise tax at 13-14% while implementing HB 10 enforcement, the combined effect would be:

• Price competitiveness maintained: +0 pp (avoids -2 to -3 pp loss from tax increases)
• Enforcement effectiveness: +0.35 to +0.6 pp
• Combined: Net +0.35 to +0.6 pp (vs. -1.5 to -2.5 pp without SB 89)

Bottom line: HB 10 demonstrates New Mexico understands enforcement is necessary for legal market success. The supplier-focused approach is exactly correct—targeting commercial illegal operations rather than criminalizing consumers. But enforcement alone cannot overcome economic gravity. New Mexico needs HB 10 enforcement AND SB 89 tax stability to achieve optimization.

The state is building the right enforcement infrastructure. Now it must avoid undermining that infrastructure through excessive taxation.

HB 10 is necessary. SB 89 is necessary. Together they enable optimization. Separately, both are insufficient.

Related Analysis:

• New Mexico Cannabis Market Analysis
• New Mexico SB 89 Analysis
• Cannabis Bills Tracker: tracker.silentmajority420.com

The Silent Majority 420 is an independent cannabis policy analyst with 25 years of market participation. The CBDT Framework represents the first validated consumer-utility model for predicting market outcomes in vice legalization.

Analysis licensed CC BY 4.0