Is D.C.’s Cannabis “Gifting Economy” In Trouble?

Last week, D.C. Council Chairman Phil Mendelson called a vote on emergency legislation that aimed, in part, to give the Council the authority to shut down any business that gifts marijuana. Although the proposed bill did not pass (by only one vote), Mendelson’s bill reveals ongoing tension regarding D.C.’s legally questionable cannabis “gifting economy” and the uncertain future of these “I-71 Shops.”

If you follow this blog you may recall that a 2015 Congressional Rider that prevents the District from using its local tax dollars to implement commercial cannabis sales, despite the approval of a 2014 measure that legalized marijuana possession, cultivation and gifting (Initiative 71), led to the creation of  a “gifting economy.”

Creative entrepreneurs have used a provision in Initiative 71 that states it is lawful for anyone 21-years of age or older to “transfer without payment (but not sell) up to one ounce of marijuana to another person 21-years of age or older….”. These businesses sell items unrelated to marijuana at marked-up prices and offering marijuana as a complementary gift with the transaction.

According to the language of Mendelson’s emergency legislation, dozens of illegal cannabis businesses are operating in the District, many of which sell untraced, untested cannabis primarily grown outside of the District.

The resolution further provides that these businesses tend to be located in areas where legal cannabis facilities are not allowed, such as in close proximity to schools and recreation facilities, raising concerns of youth exposure to cannabis and cannabis products. In addition, Mendelson’s bill explains that the unregulated nature of these I-71 shops, which do not pay the fees and taxes imposed on licensed medical cannabis dispensaries, are putting the District’s legal cannabis businesses at a competitive disadvantage.

The gifter businesses strongly opposed Mendelson’s arguments, arguing that their business operations were not only lawful, but have also created a diverse local industry of cannabis vendors that could serve as the foundation of a proper recreational market if Congress ever allowed D.C. to legalize and regulate recreational marijuana sales.

According to reporting by the DCist, the gifters have been advocating for creative ways to regulate recreational sales and circumvent the congressional prohibition on legalizing sales by moving the gifters into the medical program.

Only time will tell how the District will ultimately choose to tackle this issue but one thing is certain, until the Council receives Congress’s green light on regulating recreational cannabis, I-71 shops will remain under the Council’s radar and at risk of enforcement actions.