First seen in Washington City Paper
Slow and lax enforcement hampered efforts to regulate illegal cannabis sales in D.C.
Green, white, and gold balloons marked an early 4/20 celebration for a D.C. medical cannabis dispensary located in the Palisades neighborhood. On April 12, Green Theory celebrated one year of business as the first cannabis gifting shop to transition from the District’s so-called “gray market” to a legal medical cannabis dispensary.
The celebration featured classic stoner munchies—Gushers, Pirate’s Booty, and Oreos—and a DIY smoker accessories workshop where people could decorate dab tools and roach clips with crystal beads. But barely two months before, Green Theory co-founder Caroline Crandall was not in a celebratory mood.
“As it stands, running a legal, compliant dispensary in D.C. is a financial impossibility,” she said during a D.C. Council roundtable in February, where she raised the alarm about why her shop—along with the rest of the medical cannabis market—might not survive. They were still competing with what was once a thriving “gray market.”
D.C.’s gray market bloomed into existence a few years after Initiative 71 passed in 2014, which allowed adults to possess and “gift” small amounts of weed as long as no money changed hands. Businesses jumped through a perceived legal loophole, and by 2021 hundreds of brick-and-mortar stores sold random objects (such as stickers or postcards) that came with a gift of cannabis (some shops eventually dropped the pretense altogether and straight up sold unregulated weed).
D.C. struggled to control the giftings shops, so the Council passed legislation in 2022 to expand the medical cannabis market and replace the I-71 shops. The tricky maneuver required regulators to essentially squash one market while standing up another competing one.
The bill introduced new licenses and regulations, removed barriers for patients by allowing them to get a card without a doctor’s note, and provided unlicensed shops with a pathway to enter the newly expanding legal medical market.
A critical piece of the legislation, however, created consequences for the gifting shops that resisted the transition. But D.C. regulators dragged their feet for almost a year in taking enforcement action.
The city’s inconsistent and delayed enforcement over the past year has hindered the medical market’s initial success, hurt entrepreneurs attempting to transition to it, and in some cases effectively encouraged unlicensed shops to continue operating, according to businesses owners, community members, and a review of official records.
Within just the past month, though, Crandall has become more optimistic. Regulators have amped up enforcement and held firm on the March 31 deadline for gifting shops to either transition to legal medical sales or shut down. (The Alcoholic Beverage and Cannabis Administration had previously extended the deadline multiple times.)
Before unlicensed gifting stores began to transition to the legal market in 2024, they outnumbered legal medical cannabis dispensaries by almost 18 to 1. ABCA has processed hundreds of dispensary applications since 2023; and the ABC Board has denied or revoked 11 applications from businesses with enforcement records.
There are currently 60 licensed medical dispensaries open in D.C., according to ABCA’s website, 45 of which previously operated as gifting shops. Only three of those 45 had records of illegal sales, according to our investigation.
And since March, almost 50 gifting stores have transitioned to the legal medical market—increasing medical cannabis shops in D.C. by almost 500 percent. City regulators have reported that just over 60 gifting shops, out of more than 200, have officially closed.
“It felt like we just kind of wasted nine months, just sitting around waiting for everyone to join us,” Crandall says of the slow transition. She watched numerous gifting operators apply for medical operators’ licenses, only to continue operating in the gray market for almost a year longer than her business.
As of mid-April, at least 19 medical cannabis shops in D.C. have been allowed to move forward in the licensing process despite violating ABCA’s regulations and, in some cases, D.C. law, according to government records.
Those 19 shops either continued selling unregulated cannabis or, in some cases, psychedelic mushrooms when they weren’t allowed to under the regulatory scheme or continued gifting illegal THC products or mushrooms even after they had become legal medical cannabis shops.
ABCA is responsible for regulating the cannabis industry, but the ABC Board—a separate quasi-judicial advisory board that is part of the agency—is responsible for approving or denying licenses, which includes the review of past infraction records for selling or gifting illegal cannabis.
ABCA did not comment directly on the fines issued and still owed. But it did respond in an email to criticism of enforcement saying that it “moved swiftly to close illegal shops once the agency received the legal authority to do so.”
Jared Powell, ABCA chief of staff, writes in an email that “ABCA investigators are no longer required to issue a written warning to illegal cannabis owners prior to the ABC Board issuing a Summary Closure Order.” This change allowed the closure of illegal cannabis shops more quickly, according to Powell.
One of those 19 shops that continued selling or gifting unregulated cannabis, Dreams Wellness initially opened as a legal dispensary but was shuttered by ABCA on April 14, a year after Green Theory opened its doors in the struggling medical market. ABCA “padlocked” the business for continuing to sell unlicensed cannabis after it opened under a medical license.
Dreams Wellness’ closure followed previous allegations from regulators earlier this year that the business was conducting illicit sales. The ABC Board approved a consent order in early March, in which Dreams Wellness agreed to stop gifting cannabis. Less than a month later, the agency allowed the business to open even though its old website redirected customers to a new domain that continued to offer cannabis gifting and psilocybin (the psychoactive compound in magic mushrooms)—both illegal operations.
For some cannabis business owners, the shop stands as one example of how operators took advantage of ABCA’s slow enforcement and the ABC Board’s leniency.
Starting in 2024, ABCA began issuing fines to the owners of unlicensed gifting shops and their landlords. The 19 current medical licensees included in City Paper’s review owe more than $126,000 in fines, according to the Department of Licensing and Consumer Protection’s online dashboard. Eventually, businesses found to be gifting unregulated cannabis were shut down completely, or “padlocked,” as ABCA puts it, even without receiving fines.
For Crandall, the unpaid fines are particularly irksome.
“I’m pretty sure if we didn’t pay our licensing fees, we wouldn’t be able to have our store,” she says. “I think that’s something where I’m like, it’s a double standard.”
Dreams Wellness applied for a medical retail license at the same time as Green Theory and more than 70 other gifting operators. And because Dreams Wellness applied during a period designated specifically for gifting shops, it was protected from enforcement for gifting cannabis until the end of March. But that exemption did not include gifting after March 31 or the sale of other drugs, which were advertised on its website.
Yutong Zhou, an attorney for Dreams Wellness, declined to comment. The ABC Board must now decide whether the business can keep its medical license or reopen under certain conditions. The Board has allowed one other previously padlocked medical dispensary to re-open.
When asked, ABCA did not comment directly on why Dreams Wellness was given a license after it had been found to engage in illegal activity. The agency only said that the shop was closed permanently on April 15.
D.C. regulatory agencies have issued more than $1 million in fines to gifting shops or their landlords. A little more than $66,000 of those fines has been paid, and about $250,000 in fines has been dismissed, according to City Paper’s review of 150 DCLP records. D.C.’s Office of Administrative Hearings is currently pursuing more than $500,000 in unpaid fines. Most of these shops have not applied for medical licenses.
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Crandall understands why operators want to stay in the gifting market as long as possible.
“I don’t blame anyone for that,” she says. “I understand the way money works.”
She and her team opened Green Theory as quickly as they could, following ABCA’s guidelines, because she thought the consequences of not transitioning were “going to be real.” But if she could do it over again, she says she would have waited.
The consequences did eventually become real for gifting shops, but only after more than a year of extended deadlines and regulatory enforcement chaos. Multiple emergency rules needed approval by the D.C. Council in order to adjust ABCA’s enforcement authority. And there are still only three enforcement officers in charge of conducting inspections for the 60 medical shops and an unknown number of remaining unlicensed shops. Throughout 2024, there was only one enforcement officer. While ABCA adjusted its enforcement methods, the few shops that had transitioned were stuck competing with those that hadn’t and that could offer cheaper products.
The impact of Maryland’s new adult-use market, which came online in 2023 and led to an almost $5 million drop in D.C. dispensary sales over the next year, didn’t help either.
“It was a barren wasteland of no customers and super high [product] prices,” Crandall says, adding that the logistical barriers to enter the legal market, between funding and navigating regulatory hurdles, are still “ridiculously high.”
She believes other businesses continued operating in the gifting market as a function of necessity, more than greed. “They might have continued I-71 because if they hadn’t, they wouldn’t have been able to afford to move to medical,” she says.
Ortiz, the owner of a newly opened medical dispensary, took a different approach than Crandall. He waited as long as he could to open his dispensary and operated a popular high-end smoke accessory store in the interim. (He asked to be identified by his middle name to avoid jeopardizing his pending cannabis license applications with the city.)
“We dragged our feet as well, because if there’s still 300-plus [gifting] shops open in the city, why would you come to me as a licensed retailer and sign up for a card and pay a premium and pay more when you can still go to your go-to shop that still exists,” Ortiz says.
“Enforcement was definitely too slow,” he adds. He recalls watching almost a dozen gifting shops located around his dispensary escape enforcement until the beginning of this year. Some would receive warning letters or orders from ABCA. But they would simply re-open a day later, Ortiz says. Since the end of March, he says many of the shops around his dispensary have voluntarily closed due to increased enforcement and the firm deadline for gifting shops to re-open as legal medical shops.
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Although the closures of several gifting shops this month have helped open the market for medical dispensaries, the effect of ABCA’s delayed enforcement still lingers.
“It’s whack a mole,” says James Salt, a board member of the D.C. Cannabis Business Association, which advocates for the legal cannabis market.
“It’s been ineffective in that it’s been inconsistent, and it’s taken them a long time to ramp up their enforcement measures,” adds Salt, who also holds a conditional cannabis testing lab license, which allows him more time to submit a full application.
But he has seen increased confidence in the legal market since this year’s uptick in closures. “And even still, the speed is kind of a trickle. It’s like one every week or two every week,” Salt says.
The enforcement delays have created an overall dampening effect that has reverberated through D.C.’s market, Salt says. He sees continued enforcement as necessary to build confidence in the medical market, ensure consumer safety, and guarantee market stability for investors.
But he does not think that aspiring legal operators should be punished for past infractions. “The fact that they’re trying to comply with the law, I think, should outweigh the consequences for engaging in past illegal behavior,” he says.
Still, he wishes ABCA had more directly targeted landlords who allowed gifting businesses to lease their buildings (ABCA has not issued a single $10,000 fine against a landlord despite having the authority to do so since 2024). Instead, the agency’s focus was mainly on the businesses, whose proprietors could hide their identities behind a web of shell LLCs and re-open in new locations.
Salt doesn’t think issues with enforcement have permanently dampened the potential for success in the D.C. market, but there are “a lot of headwinds in the District.”
One of those challenges are gifting delivery services that exist online. Multiple gifting stores, some of which have pending medical retail licenses, have moved to delivery services within the gray market after closing their brick-and-mortar locations. Ortiz and Crandall see these businesses as an existential threat to the legal medical market. It’s easy enough to padlock a storefront. Shutting down an online delivery service is more complicated.
Ortiz says ongoing enforcement is “excessively necessary” for the survival and success of the dozens of medical retail stores that are now open.
“What incentive do people have to come and be a patron, be a patient at my shop, if the [gifting] shop that they went to two doors down got closed, and they’re still online?” he says.
The shift in business following the March deadline for unlicensed operators to transition has been noticeable to Crandall. But if enforcement lets up in the next three years, she thinks many operators could return to the gifting market to escape the high barriers for success that legal medical businesses face in D.C.
“If the majority of people in the medical market don’t think it’s going well, what’s stopping them from just going back to the I-71 side, if enforcement slows?” she says. “Enforcement is one of many checks and balances that needs to continue in place to make the medical market worthwhile for us and for consumers.”
LJ Dawson 