DC marijuana market set for shake-up as ‘gifting’ shops transition

Medical marijuana dispensaries are multiplying rapidly in Washington, D.C., as regulators convert “gifting” shops that were operating under Initiative 71.

Initiative 71, approved in November 2014 by District of Columbia voters, legalized the recreational possession, consumption and sharing of marijuana among adults while outlawing sales of the drug.

But the measure allowed stores selling non-marijuana items to include a “gift” of cannabis.

Now, however, cannabis retailers operating under the measure have only until March 31 to open as licensed medical marijuana dispensaries, or they’ll be shut down.

Seven medical marijuana dispensaries and eight cultivators were licensed to operate in D.C. after the district legalized MMJ in May 2010 – but far more stores were selling cannabis.

“There’s a safety and health factor – these are undocumented, untested products,” said Linda Greene, owner and CEO of Anacostia Organics, a dispensary in Washington D.C.

“You don’t know where this stuff is coming from.”

Greene said there were hundreds of gifting shops, which had two years to apply for medical marijuana licenses.

So far, regulators have shut down roughly 35 shops that did not apply for licenses, she said.

From pens to pot

One gifting shop that made the transition is Monko, which sold pens, T-shirts and other merchandise before converting to a licensed MMJ dispensary that is expected to begin legal sales Friday.

It took Monko about six months to complete the process to become a licensed MMJ business, said CEO Terrence White, who eventually plans to become a vertically integrated operator.

“Now we’re all on the same playing field,” said White, who already serves an estimated 26,000 customers in the D.C. area.

“It’s going to come down to who markets the best, who has the best brand identity and who has the best customer loyalty.”

It’s easy to get approved to purchase medical marijuana in D.C., which allows anyone 21 or older to register, regardless of where they live.

Out-of-town visitors can pay $10 for a medical marijuana card that’s good for three days or $100 for a card that’s valid for 360 days.

But there are people who don’t want their names to appear on a register that indicates they purchased marijuana, so they have chosen to buy from the gifting stores that didn’t require medical cards, Greene said.

“If somebody famous or a high-level government official walks into one of these stores, gets some bad cannabis and dies or gets sick, that’s a black mark on our city,” Greene said.

“Plus, the city is not getting any tax dollars from these gifting shops.”

The D.C. medical cannabis industry also was adversely impacted when neighboring Maryland converted medical-only licensees to adult-use operators in 2023, making it easier for people who don’t want to appear on a registry but want the benefits of purchasing marijuana in a regulated market.

“Before Maryland went rec, D.C.’s market was good,” Greene said. “We had people coming from everywhere.

“Maryland is next door, so when it went recreational, D.C. lost 50% of our business right away.”

The U.S. Congress oversees the government of Washington, D.C., preventing local authorities from regulating cannabis sales as other jurisdictions do.

Congress has blocked the district from using tax dollars to legalize recreational cannabis.

Greene said she’s working with D.C. zoning officials to revise rules to allow empty buildings to be used for cultivation facilities, which have trouble finding appropriate real estate to use for growing cannabis.

“Cultivators can’t find anyplace to rent,” she said. “We have all these empty office and apartment buildings.

“We’re trying to bend the rules so they can grow in them.”

National brands eye district

Grace Hyde, owner of District Cannabis, said her vertically integrated company didn’t break even during any month of 2024 but is optimistic the regulatory changes will improve business.

“We’re finding customers are more willing to do the brief, five-minute registration process, and on the wholesale side, it’s awesome to have more customers to sell to,” Hyde said.

“We’re feeling for the first time in a long time that there are tailwinds in the district.”

District Cannabis is delivering products to dispensaries four times per week.

Now, however, Hyde said she’s starting to see repeat orders coming in once or twice a week and anticipates the company will be delivering products daily in the next week or two.

Hyde said it’s been challenging to get nationally recognized brands interested in the D.C. market because of the gifting shops and proximity to Maryland, but with the new regulations in place, they’re starting to take notice.

Cookies recently entered the D.C. market through a partnership with Alternate Solutions. Cookies joins Khalifa Kush, which has been working with District Cannabis for about a year.

Khalifa Kush CEO DJ Saul said the company entered the market ahead of other national brands mainly because he lived in D.C. for 15 years.

“I remember the early, somewhat awkward phases of the gray market and gifting exchange events,” Saul said.

With the elimination of that market, business is expected to improve for medical marijuana dispensaries.

“It’s a small market, but there are just under a million people who live in D.C., and it’s important to serve them,” Saul said.

Margaret Jackson can be reached at margaret.jackson@mjbizdaily.com.