The end of a weed paradise

D.C. is destroying its thriving cannabis industry with bureaucracy and red tape.

Diana Alvarez's son always wanted to go to college. After seeing how expensive it was to send him to college, she started working in a smoke shop to support her family. A month later, she bought the store and began offering cannabis to her clients to help pay for her son's tuition. The Lit City Smoke Shop was then born.

Based in the Columbia Heights neighborhood of Washington, D.C., Lit City is part of the District's thriving gifting industry. Nine years ago, the city passed Initiative 71, making it legal to possess up to two ounces of marijuana for personal use. The law also created a loophole allowing stores to "gift" their customers small amounts of weed as long as they also buy another item, often at an exorbitant price, such as an 11-word motivational speech for $60 or a $95 Spiderman sticker.

"Four years later, my son did graduate from Clark University in Worcester, Massachusetts," Diana happily points out. She's a member of the I-71 Committee, which advocates on behalf of gifting stores throughout the city.*

Any store can get into the business of gifting weed—no license required— making D.C. home to one of the most vibrant cannabis markets in the country. Gifting shops also happen to be majority black- and Latino-owned.

Since Congress has authority over D.C.'s local affairs, gifting is a way for the city to circumvent a federal rule that prevents it from legalizing the sale of recreational weed, as 21 states have done since 2012.

Ironically, this system functions better than most regulated cannabis markets because, other than the gifting gimmick, weed is treated pretty much like any other good that consumers can just walk into a store and buy.

Meanwhile, in states like California, recreational marijuana is so heavily regulated that sellers are struggling to turn a profit and many consumers would rather buy on the black market because prices are so high.

So what's the D.C. government doing with this successful model for recreational weed?

Trying to shut it down.

Medical cannabis is legal in D.C., but up until recently, the district had an onerous regulatory system that capped the number of dispensaries that were allowed to open. Now, it's cracking down on gifting stores.

A new bill signed by the mayor in January will impose $10,000 fines on any store found gifting and $20,000 if they do it again. These stores can also have their business licenses revoked. The bill will also empower D.C. to fine commercial landlords who rent space to gifting shops.

Although the new law will lift the cap on the number of dispensaries allowed in the district, to obtain a medical license store owners will still face significant red tape. For one thing, applicants will have to prove to the newly created Alcoholic Beverage and Cannabis Administration that there's enough consumer demand for marijuana in a particular neighborhood before they can open their doors.

The new bill also grants the agency the discretion to reinstate a cap after one year.

Gifting shops may apply for one of the new licenses, but doing so means taking a big risk. According to the new bill, if their applications are denied, they'll be ordered to shut down within 30 days.

Unlike with gifting shops, anyone who wants to buy from a medical dispensary has to register in a government database, which could create problems for the D.C. area's 200,000 federal employees.

Federal law technically prohibits medical marijuana users from buying a gun or living in federally assisted public housing, though since the passage of I-71, the D.C. Housing Authority hasn't evicted anyone on these grounds.

There's a danger that D.C. will become more like California, where the illicit market for weed is now twice as large as the legal one. Licensing regimes can also be discriminatory, whether intentionally or not: Washington State has granted 558 recreational cannabis licenses, and four percent went to black applicants.

In the end, gifting store owners would rather be left alone than have to jump through hoops to be allowed to stay open. "I have employees that have families to feed. I have to pay rent. I don't want to have to go through all of that. I want to be able to still serve the entire community as I've been serving them until now," says Diana.

Produced and edited by Justin Zuckerman; additional graphics by Regan Taylor; sound mixing by Ian Keyser.

Photo credits: Tom Williams/CQ Roll Call/Newscom

*UPDATE: This article has been edited to include a mention of the I-71 Committee.