D.C. Delivers the First Round of Warning Letters for Unlicensed Marijuana Dispensaries

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.)