First published in Washington City Paper.
When Bryan Jackson received a conditional grower’s license for D.C.’s medical cannabis market in October 2023, it was a dream come true for the lifelong Washingtonian.
It was a moment he’d prepared for his whole career working in hydroponic cultivation and legal dispensaries in the DMV: a chance to legally grow and sell cannabis where he grew up. But a lack of access to funding and industrial real estate scarcity has deflated his dreams. Almost a year after his conditional license was approved, with no money and no place to grow, Jackson has all but given up on establishing a weed business in D.C.
“It was heart-wrenching. That’s the only thing that I could say,” Jackson says.
He is not the only one.
Fewer than 10 percent of conditional medical cannabis grower and manufacturer licenses have been approved for a location by D.C. regulators, and none have opened as of Sept. 4, 2024. Meanwhile, more than 80 new cannabis retail locations are set to open in the next three months, raising significant concerns about where those dispensaries will get their weed.
Barriers to funding and real estate are preventing licensees from opening their businesses, thwarting D.C. politicians’ efforts to squash the underground weed market, and bring cannabis consumers to legal, medical dispensaries. The lack of success is also impeding a promise to uplift Washingtonians most impacted by the criminalization of cannabis through a social equity program. The city’s unlicensed gifting stores (called I-71 stores after Initiative 71, which legalized recreational cannabis use) and Maryland’s adult-use legalization continue to divert money from D.C.’s medical market.
The first medical dispensary opened in 2013. (That dispensary closed this summer when the parent company decided to shutter its grow and retail businesses in D.C. and focus on larger markets.) Initially, growers were only allowed 95 plants, but the medical market slowly grew and expanded over the next decade. In 2014, D.C. voters approved Initiative-71, which allowed residents to grow and “gift” small amounts of cannabis and called on the Council to establish a recreational market.
But soon after I-71 passed, Republican Rep. Andy Harris, of Maryland, inserted a rider into the federal budget that blocked D.C. from setting up an adult-use cannabis market like those in Colorado and California. The rider has remained in the federal spending bill each year since.
For much of the past decade, the medical market has been relatively unwelcoming to would-be patients. Higher prices, fewer dispensaries, and privacy concerns pushed most weed smokers to unlicensed shops that flood the city with unregulated weed. These gifting shops exploited I-71 to gift mass amounts of weed to customers, up-charging for T-shirts or bracelets in exchange for “gifts” of weed.
In 2022, the D.C. Council launched an effort to remove barriers to register as a cannabis patient and expand the number of weed growers and dispensaries in the medical market. Patients can now self-certify for a medical card (no need for a doctor’s note) and the $100 annual license fee has been waived.
Opportunities for entrepreneurs to enter the expanded market launched in 2023, starting with growers and manufacturers of concentrates and edibles. Growers and producers had more than a year to apply before the city started accepting retail applications. The license process prioritized the owners of unlicensed, gifting businesses as well as social equity candidates: those who could prove they or a close family member had been incarcerated for a drug charge.
Despite the Council and the Alcoholic Beverage and Cannabis Board’s best efforts to successfully expand the medical market by setting up cannabis producers to open before new dispensaries, the majority of the producer licenses have stalled.
ABCA did not respond to requests for comment on the lack of approvals for new cannabis producers. But the ABCA director, Fred Moosally, has acknowledged the issue. He warned BisNow in 2023 that there is limited industrial or manufacturing space for cannabis grow operations. “With limited space, you have cultivation centers and manufacturers applying for the same spaces,” Moosally said. “So that’s the challenge, is making sure that there’s enough space for these cultivation centers and manufacturers.”
Struggle for a new market
In the past year, only 10 new cannabis producer businesses—out of more than 125 that ABCA preliminary accepted—have been approved for a location, according to ABC Board dispositions through August. Applicants could qualify for conditional licenses that hold their spots and set a deadline to open; if they fail to secure a location, they lose their license. Producer licenses cover the manufacturing of medical cannabis products like edibles and concentrates as well as the cultivation of cannabis flower. Retail locations are licensed separately.
Alan Amsterdam was the first new cultivator and manufacturer licensee to make it to the initial step for approval of a location in 2023, but his licenses never got off the ground due to space and funding issues. Amsterdam owns Capitol Hemp, an Adams Morgan head shop that’s been open since 2008, and has stood on the front lines of the battle for legal cannabis in the city before I-71 was passed.
“I don’t see a pathway to get operational or profitable,” Amsterdam says of the Council’s recent push.
A May zoning change that opened small-scale manufacturing space to smaller cannabis producers did not improve his situation. The size of the properties Amsterdam applied for caused investors to withdraw their funding, according to Amsterdam. And build-out and repair costs at other locations stalled his progress.
“[Investors] don’t trust the process of putting any money into this [market] now because the medical market is small,” Amsterdam says. He says another option was to take out loans from private lenders that would have left him in a mountain of debt before a single product could even touch the market (which he declined to do).
“It’s not even going to be worth it,” he says. Amsterdam qualified as a social equity candidate due to his past arrest for drug charges, which means he can take advantage of D.C.’s social equity fund. The fund primarily collects money from fines and medical cannabis sales taxes and distributes the revenue via grants to qualifying businesses.
The fund has $300,000 available for distribution this fall, and applicants can apply for grants ranging from $2,000 to $50,000. Amsterdam estimates that his pre-roll machine alone would cost $50,000.
He thinks the only way to open a viable medical cannabis business is to grow his own weed and sell it in his own dispensary—essentially combining the cultivation and retail businesses under the same roof. “If I can’t vertically integrate, why do I want to buy from three mediocre places?” Amsterdam says.
He acknowledges that ABCA and the Council have their hands tied by the federal government. “But they’re coming up short,” he says.
“Everyone’s going to have to be held accountable for these rule changes and nothing moving the needle forward,” he adds.
Amsterdam thinks that small craft grows should be allowed in residential basements, which is where much of D.C.’s underground weed has been grown for decades.
“I realized I am going to get knocked out, and I’ve been doing this since 2007,” Amsterdam says. He is currently investing in other states with more land and opportunity.
Need for market diversity
Fewer than 10 medical dispensaries currently sell a little less than 400 pounds of dried cannabis flower per month, according to monthly reports released by ABCA. The 80 new stores set to open by November represent a 1,350 percent market expansion by the end of the year.
Matt Lawson–Baker, the president and co-founder of a current medical cultivator, Alternative Solutions, isn’t worried about a supply shortage.
“There’s definitely no supply issue in the market,” Lawson-Baker says. “It’s all coming down to building that patient base and enforcement to shut down the other side of the market.”
Lawson-Baker’s team is opening a new cultivation center, DC’s Finest, taking a gamble on the new retail locations launching. DC’s Finest will add an additional 20,000 square feet of cultivation to the market by the end of 2024. Another grower, District Cannabis, could expand its production immediately by 1,000 pounds per month, which is good for more than double the current monthly consumption of the entire market, according to Grace Hyde, District Cannabis’ chief operations officer.
Lawson-Baker says it took a decade for DC’s Finest’s team to find a spot for the additional grow license that they were awarded in the early days of the medical program.
“It’s a needle in a haystack,” he says. “They’ve tried to open up some of the zoning requirements, but that doesn’t make it any easier.”
ABCA advocated for a zoning change that opened areas zoned for production, distribution, and repair for smaller producers in May, but the change was incremental.
“[ABCA] didn’t want to flood the market with a bunch of retail stores and then run out of supply. But on the flip side, none of the growers want to expand without a market being there because we’re going to end up high and dry,” Lawson-Baker says.
His team decided to take a gamble and expand despite the D.C. market struggles. “We’re either going to do really well or we’re going to have egg on our face,” he says, highlighting the need for the market to have a diversity of producers.
“We want to pack more brands on the shelf so that not only does it encourage the I-71 [retailers] to come over [to the medical market], but it also is better for all the patients,” he says.
Real estate crunch
Corey Barnette is familiar with D.C.’s constrictions. He currently runs District Growers, one of the first cannabis cultivators to open directly after the legalization of medical cannabis in D.C. in 2012.
“Most of the operations in D.C. would say that they lost money over the last 10 years,” Barnette says. His own retail location, Kinfolk, closed in December 2023.
Barnette says rent for retail space in D.C. can be up to three times more expensive than spaces across the border in Maryland. Development of luxury condos in areas such as Ivy City and Union Market has shrunk availability for industrial buildings.
“Then you top it off with the greed of landlords, it really becomes challenging to find a space that will truly work for your business,” Barnette says.
There are fewer than 30 spaces available for lease or sale in industrial zoned locations in D.C. as of Aug. 6, according to LoopNet, a commercial real estate website. The majority of these properties are leased or sold by corporate real estate firms that are likely to use federally backed loans, which bar cannabis businesses.
Two agents working in commercial real estate confirmed that corporate owners are unlikely to rent or lease to cannabis businesses because they’re considered “high-risk” and still deal in a federally illicit substance.
D.C.’s medical market will be fine, but the individual entrepreneur will struggle, Barnette says. “If we want a market that allows for the small entrepreneur [and] the craft grower to be successful, everything works against it,” he says.
Heartbreak
Only four cannabis growers are currently operating in the city, and multiple growers have closed in the past year.
Jackson doesn’t see a bright future for new business in the D.C. cannabis market. He spent two months last winter trying to secure a location and a license only for the real estate deal to fall through after the seller tacked on an additional $1 million to the price. It was “heartbreaking,” he says.
The Council extended his conditional license by 12 months, and Jackson hasn’t given up yet. But if access to capital and real estate doesn’t improve, he is not hopeful.
As Jackson has watched the D.C. cannabis market begin to shift, he sees many people like him left behind. When he got initial approval in November 2023, Jackson felt like he was finally going to get a foothold to stand and make a difference in the city he grew up in. He’s watched the criminalization of drugs and systemic racism tear his community apart since he was little.
Having come so close to his dreams, Jackson is now feeling them slip away.
“I’m starting to really see the real issues plaguing not just our community behind D.C. but plaguing us as a nation,” he says. “I think access to capital, not just cannabis businesses, but specifically for minority- and women-owned businesses is just not there.”
