First seen in Washington City Paper
The Alcoholic Beverage and Cannabis Administration has handed out 13 warnings so far, but hundreds of unlicensed shops remain open.
A version of this article initially appeared in the Outlaw Report.
Time has run out for Initiative 71 gifting shops that exist in D.C.’s marijuana gray market. As of last Friday, the D.C. Alcoholic Beverage and Cannabis Administration delivered 13 warnings to unlicensed cannabis businesses in the city, ordering them to stop gifting THC products, according to an agency spokesperson. Some D.C. gifting shops have voluntarily closed, but hundreds remain open.
Since about 2015, I-71 shops have liberally interpreted an amendment in the District’s constitution to gift marijuana to adults over 21 without medical cannabis cards. Hundreds of cannabis shops have popped up across D.C., offering overpriced non-cannabis goods for purchase with a free gift of cannabis. This loophole allowed a gray adult-use market to thrive despite occasional police raids.
Although some were shut down for not complying with the District’s two-ounce-per-person limit, among other violations, many would simply close and then pop up around the corner from their previous location. Local weed dealers set up some of the shops, but as the market evolved, more out-of-state people came into D.C. to launch I-71 stores, sometimes partnering with locals or just setting up their own businesses.
As the gray market became more ubiquitous, some shops abandoned the veil of gifting altogether and started selling marijuana straight up. Some shops filed taxes as non-cannabis retail businesses, but others didn’t. Estimates put annual gray market cannabis sales at more than $600 million in D.C. (Maryland and Virginia only had medical markets before Maryland’s adult-use legalization in 2023; efforts to set up a recreational market in Virginia have stalled behind Gov. Glenn Youngkin.)
People poured into the District to shop at I-71 stores that filled their shelves with marijuana, at least some of which is coming from California. Local residents have complained that gifting shops are taking over the neighborhood or are attracting crime.
In 2022, the District passed its solution to the gray market: the Medical Cannabis Amendment Act of 2022. The law expanded the current medical market and set up a transition process to bring gray market gifting shops into a legal medical market. The law also allowed patients to self-certify, eliminating the need for a doctor’s note.
D.C. will be unable to implement a legal recreational cannabis market until a federal budget rider (known as the Harris Rider for the Republican Maryland representative who introduced it) is lifted. Any legalization of adult use would still need the stamp of approval from Congress.
Part of the transition from gifting to medical cannabis included a safe harbor law that allowed gifting shops to operate without enforcement from District authorities until the end of January 2024. Unlicensed operators had 90 days to apply to transition to the legal market starting in November 2023.
Fewer than 80 shops applied, and many of the more notable shops are missing from the application pool. Hundreds are now still operating without licenses and a safe harbor to protect them.
ABCA promised that it would not begin enforcement against shops that applied to transition to the medical market during the 90-day period. But a shop in the midst of the application process was raided in early March by the Metropolitan Police Department and the D.C. Department of Licensing and Consumer Protection; six employees were arrested and now face felony distribution charges. ABCA has said it was not involved in the raid, but the heavy-handed enforcement action still shook the trust between the unlicensed applicants and the agency.
Since the March raid, no other businesses working through the application process have faced enforcement by D.C. agencies. But an ABCA spokesperson made clear in an email that “District Government agencies can independently conduct inspections of businesses related to their regulatory purview such as the selling of flavored tobacco which is illegal in DC.”
Neither DLCP, the Department of Health, nor Mayor Muriel Bowser’s office responded to emails asking them to verify ABCA’s statement that unlicensed I-71 applicants will not face enforcement by city agencies other than ABCA.
The current medical market in D.C. sells less than 400 pounds of cannabis per month. The self-certification (which is also available to nonresidents and visitors) is aimed at increasing the number of active registered patients in the District, which has dropped below 10,000 per month. Registered patients in D.C. hovered just above 25,000 as of February.
The medical marijuana business community and I-71 shops that transitioned to the medical market are counting on enforcement to quell the competition from the gifting market.
“Without enforcement, the new and old cannabis businesses are up against an unfair competitive market, and therefore, enforcement is vitally important for the new cannabis market to survive,” Rabbi Jeffrey Kahn, owner of Takoma Wellness Center (the District’s first medical cannabis dispensary), said in D.C. council testimony in early March.
ABCA delivered two warning letters during the last week of February. The agency issued six more warning letters in Georgetown on March 20 as part of a joint agency inspection operation that included the D.C. Department of Buildings, D.C. Health, DLCP and MPD. Last Wednesday, March 27, ABCA delivered another five written warnings as part of joint agency inspections conducted on Georgia Avenue NW and Upshur Street NW.
ABCA has not responded to requests to provide the warning letters or names of businesses that received warnings. The agency has previously said that its enforcement process starts with a warning letter before escalating to fines and then a cease-and-desist letter before referring businesses to law enforcement or other agencies. ABCA Director Fred Moosally asked the D.C. Council to pass legislation giving the agency more power to collect fines and seize cannabis products in early March.
The first three unlicensed I-71 operators who successfully transitioned to the legal medical market will likely open this month.
LJ Dawson 