D.C. medical cannabis operators are growing increasingly concerned about the closure of unlicensed gifting shops as the medical cannabis market continues to struggle.
Since the safe harbor period was lifted at the end of January 2024, 62 warning letters have been delivered to businesses found to still be selling cannabis in the city. There have been 20 cease and desists issued to businesses and landlords of those businesses found to still be operating illegally after warnings were issued, but no businesses have been padlocked or shut down.
Medical retail locations have struggled to compete with the D.C. gifting market since unlicensed shops proliferated across the city starting in 2014. D.C. is unable to establish an adult-use market due to the federal government. Since Maryland launched its adult use market a year ago, D.C. medical cannabis sales have dropped to new lows.
The Outlaw talked with multiple medical retailers who said slow enforcement from The Alcohol Beverage and Cannabis Board is impacting their sales and could prevent them from staying open and could smother the current market expansion.
Multiple legal medical retailers said their sales were low due to competition with unlicensed gifting stores that are still operating. Despite ABCA receiving new enforcement powers to padlock stores this summer, not a single unlicensed store has been padlocked. ABCA did not provide the number of unlicensed stores its enforcement efforts have successfully shuttered when the Outlaw asked.
Mayor Muriel Bowser refused to answer questions from the Outlaw about enforcement despite signing the bill in July that allowed padlocking of unlicensed stores by ABCA. Councilmember Kenyan McDuffie also refused to answer questions from the Outlaw despite sponsoring the same bill.
ABCA has sent a warning or a cease and desist to over 50 separate stores, but many have reopened the day after enforcement or never closed due to the length of the enforcement procedure and the lack of teeth behind it, the Outlaw Report found.
Now or never
Matt Lawson-Baker, the president and cofounder of a current medical cultivator, Alternative Solutions which provides current medical cannabis retail locations legal product, said that enforcement actions by ABCA have not been adequate so far.
“It’s make or break for the market,” he said. “If this doesn’t start happening now, then there will be catastrophic failures within the market.”
Though ABCA prioritized bringing on dozens of new retailers to serve potential customers from the gifting market, Lawson-Baker said that enforcement is “the most important part of the equation right now.”
“You’ve got to be pushing enforcement so that these guys take it serious. Otherwise, no one’s going to transition over [to the legal market],” he said.
Though Lawson-Baker’s cultivation center isn’t feeling the unlicensed storefront crunch as much as some, he still sees it impacting the businesses that purchase legal cannabis from him.
“There’s others that are struggling to make ends meet week to week, so I don’t know how much longer they can [make it] without something happening in the marketplace,” he said. Lawson-Baker blames the gap in enforcement on a lack of resources.
ABCA currently spearheads enforcement and licensing for cannabis businesses in Washington, D.C. However, a task force of both the city’s police, the Department of Health and the Department of Licensing and Consumer Protection perform inspections.
There is currently only one inspector performing inspections for ABCA. They have a budget to hire more but have not yet. ABCA did not respond to questions about how many and when they hope to hire more inspectors.
“There’s no incentive to come over [to the legal marker] unless you’re going to get your product seized and a padlock put on your door,” Lawson-Baker said.
New York City launched “Operation Padlock to Protect” just three months ago and has padlocked and shut down almost 800 shops after years of slow rolling enforcement. However, the effort is facing a challenge. A recent ruling by a judge rejected a padlock-closure citing lack of due process. The ruling could undermine the efforts to close thousands of these stores in the state.
A drawn out process
As the first few cease and desist hearings were held by the ABC Board, it became clear that the process will take months. The first four decisions maintained three cease and desist against All American Papers, Safe House and Cannabis Karma to stop selling illegal weed products while lifting one other order. The average length from first warning to issued decision was over four and a half months, according to the Outlaw Reports tracking.
Safe House, an unlicensed retail store notorious for its long lines on North East H Street, submitted a conditional cannabis license application in July but was subsequently issued a cease and desist order in July. An Instagram video posted after Safe House was told to cease and desist selling cannabis, proudly proclaimed that “THEY CANT STOP THIS MOVEMENT.”
ABCA’s board recently issued a decision maintaining the order against Safe House which now allows the agency to padlock the store if they continue selling cannabis products. The store has not been padlocked yet. However, the emergency legislation passed this summer allows the padlocking of the businesses without a hearing. It is unclear if ABCA is just checking all of its procedural boxes for padlocking or if it lacks the resources to close stores.
Could red-tape sink the market?
The Director of ABCA, Fred Moosally, did not respond to questions about when the agency plans to hire more enforcement officers, begin padlocking unlicensed shops or provide the number of unlicensed shops closed due to enforcement actions.
He did highlight the current regulations, explaining the tiered enforcement procedure that the agency follows which begins with a warning and progresses to a cease and desist issued by the ABC Board.
ABCA has the authority to seal an unlicensed establishment if it presents an immediate threat to public health or safety. Such threats include, but are not limited to, the presence of unregistered firearms or ongoing violations of an ABC Board cease-and-desist order.
The enforcement law also applies to businesses that continue to sell cannabis illegally after a cease and desist order has been upheld by the ABC Board following a formal or expedited hearing, or if the business fails to timely request a hearing. There are only three board orders that would qualify a business for padlocking under this interpretation.
There are estimated to be over a hundred unlicensed stores in D.C. currently. A potential forced closure of a few will hardly redirect D.C.’s cannabis customers to medical retail stores.
Lawson-Baker thinks that if something doesn’t happen by the end of August or beginning of September, illegal operators will “continue doing what they’re doing because nobody cares.”
“If we don’t see patients or customers coming from the I-71 market into the medical market, then retailers are going to go out of business. And if they go out of business, they’ll be followed by the cultivators,” he said.
