Washington DC’s Cannabis Market Is Still Untested, Untaxed, and UndergroundEthan McLeodJanuary 19, 2018
Neon-hued smoke fills the air, puffed by patrons smoking joints or taking “free sample” dabs. A DJ blasts stoner classics. Dozens merrily chant the chorus to Afroman’s “Because I Got High.”
'It's weird. It's built into you to feel nervous. You still feel like you could get in trouble.'Laura, Guest at DC's underground Capital Cup
“I had a great time,” says a man named Mike who leans against the building, awaiting his Lyft. He’s visiting from outside the District with his wife, Laura. Their haul includes some gummies and a few different types of flower.
“It’s weird,” Laura says, “because it’s still built into you to feel nervous…you just kind of still feel like you could get in trouble.”
Cannabis events are a niche piece of D.C.’s gray economy for legal cannabis. Three years ago, District voters overwhelmingly passed Initiative 71 (I-71), a ballot measure legalizing possession of up to two ounces of cannabis, home-grow of up to six plants and gifting – not sales – of up to an ounce.
The industry that’s emerged has worked its way around the sales ban through the gifting loophole. Dozens of delivery services now sell candies, baked goods, art and more, with the purpose of gifting cannabis to customers. A postcard-sized art print, for example, might cost $55 or $60 – the market price for an eighth in D.C. Vendors at events like the Capital Cup adhere to the same system, selling bracelets, art, rolling papers and more to move their flower, edibles, tinctures and concentrates.
“You’ve gotta follow the rules,” says Mark, the hired head of security at the Capital Cup. “Give ‘em an inch, they try to take a mile.”
The Initiative 71 Economy
Many companies in the I-71 economy rely on word of mouth or social media channels like Reddit and Instagram to draw customers. Cannabis event planners share flyers online and take cover charges at the door. Vendors post when and where they’ll be setting up and what products they’ll have. Delivery services use the same tools to announce when they’ve got a new strain in.
'I-71 makes you be more creative, operationally,' says one gray market entrepreneur.
Business is booming. Shay Etheridge, owner of The High Society, which planned the Capital Cup, estimated that 2,000 paying patrons attended over the two-day event. (Admission on Saturday cost $20.) She hosts around four events a month, generating revenue from cover charges, working with promoters and renting spots to vendors.
“I’m growing every day,” she says. “The more people that we can get to come out to events, the more people don’t have to go and find somebody on a corner somewhere, or feel like they’re in a bad situation.”
Plenty of Room for Growth
A quick search for “#dcweed” or “#i71” on Instagram indicates there’s plenty of product to go around, with demand to match.
'Someone could enter the market today and be making enough money to live in D.C., which is saying something.''Henry Mullins', delivery service operator
“The market is not at all saturated,” says the operator of a delivery service called High Focus, who identified himself with the pseudonym Henry Mullins. “Someone could enter the market today and be making enough money to live in D.C., which is saying something.”
Mullins started High Focus in February 2017, selling small art prints online for $60 each. Those looking for a specific strain or, more generally, indica or sativa, can check his Instagram for updates and order via his webpage. If it’s available, he’ll give them a time window for delivery.
He says he makes 35 to 50 weekly deliveries, and as many as 60 per week during the summer.
“It’s like legal sales with the same method that people used for decades,” he says. “All you have to do to start one of these companies is have a website that people can order from, and have supply.”
300 Deliveries a Month
Canamelo, another delivery company, launched in April 2017. Its founder, who also spoke with Leafly using a pseudonym, Melo, uses traditional business tools like inventory management and analytics software to keep track of supply and customer trends. He’s hired two drivers, effectively tripling his delivery capacity – a key upgrade in light of the two-ounce possession limit. Nine months in, he says Canamelo makes around 300 deliveries a month by selling candies and gifting cannabis to customers.
“[I-71] makes you be more creative, operationally,” he says. “We kind of have to be strategic…how do we restock, how do we control our inventory?”
Tourists and wealthy D.C. residents, both common commodities in the capital, have fed the boom.
“I deliver to a lot of people who are like, ‘Oh my god, I haven’t smoked weed since the 70s,’ or just tourists visiting D.C.,” Mullins says. Many of High Focus’ deliveries take place downtown, a largely non-residential area of the city.
Melo says his clientele are “working professionals, 30 and up, highly educated people. It’s not uncommon for us to be in like an exclusive penthouse-type situation…I’ve got some people that just give me $100 and say ‘keep the change.’”
Keeping it Craft Scale
Not everyone in the I-71 economy is seeking rapid growth. Lucy Parker started making small-batch flavored tinctures as a side gig last year. She flavors each one, turning them into breath mint-like concoctions. She works with promoters to gift them to customers under the brand Lucy Parker’s Herbal Solutions.
“Plenty of the value of my product is my actual time,” she says. “One flavor can take an hour to get right, and I don’t produce gallons of it – I produce ounces.”
For her, staying small allows her to keep a low profile, where she’s comfortable.
“You don’t want to get too big to attract attention,” she says, “but you want people to know who you are.”
Pushing the Law, or Breaking It?
While many D.C. residents have embraced their gray market, tensions have emerged over how some participants interpret or skirt the law. Leafly spoke with multiple vendors who expressed concern that public use at events – as well as the crowds – risks drawing unwanted attention from law enforcement.
Cannabis consumption events are 'totally illegal,' says Adam Eidinger, co-founder of DCMJ. 'The bar can be shut down by the mayor, and there's no appeal.'
I-71 didn’t permit public consumption, such as the dabs and smoking seshes happening at bars, and D.C. lawmakers banned social clubs last year.
“Totally not legal,” says Adam Eidinger, a prominent D.C. cannabis activist. “The bar can be shut down by the mayor, and there’s no appeal. This is something that is on the books.”
Eidinger drafted the language for Initiative 71, and has been organizing large-scale cannabis protests since 1999. He remains a prominent booster of homegrow and of gifting, in the most basic sense of the word, but shies away from any transaction involving cash and cannabis. On the day of our interview, he said he’d just declined an invitation for a $50 invitation-only cannabis-infused dinner. “I don’t care if it’s in your house,” he said. “You’re still selling the cannabis.”
Etheridge, of The High Society, acknowledged the risks associated with hosting events, such as random checks of host venues from the city’s Alcoholic Beverage Control Board. However, she says the board is more focused on ensuring vendors aren’t selling cannabis, and that public use isn’t a major concern.
“I have worried in the past” about getting in trouble for public use, she said. “But no, not so much because we’ve already kinda gone through the scariest part, I hope.”
Her chief priority is hiring extra security to make sure her vendors adhere to the gifting rule and possession limits. Mark, her security director, says he verifies that all vendors pre-package their gifts, IDs patrons to make sure they’re 21 or older, and keeps patrons from bringing lit joints outside.
Oftentimes, vendors come from other legal states like California and Colorado, and aren’t familiar with D.C.’s I-71 restrictions, Etheridge says.
Dabs at ‘Stoner Saturdays’
Three miles east of the Capital Cup, a young upstart event planner who declined to give his name is hosting “Stoner Saturdays” at a Benning Road creative arts space. His event is much smaller, with about six booths inside and around a dozen patrons sifting in and out. He stands outside the door taking $5 cover charges, chatting with friends, patrons and passersby, some of them neighbors who he knows from growing up nearby.
His guests are taking dabs inside, but, like Etheridge, he says it’s not a risk. “As long as you’re not outside with it…cops, they know,” he says.
Eidinger worries about the brazen nature of some events, particularly those that draw large crowds. He still suspects a “mass crackdown” could happen any day, especially with Jeff Sessions, an outspoken legalization opponent, helming the U.S. Justice Department in the same city. “There have been raids,” he says. “There was a raid this summer. A lot of people got arrested during one of these grassroots cannabis events.”
But he agrees that largely, there may be some unspoken code by which law enforcement “are so altruistic in the city that they know what’s going on, that they’d rather just manage it than arrest everybody.”
The District government’s motto, he says, has been, “‘if there’s no one complaining, we’re not looking for it.’ It just isn’t a high priority. And that’s great. I really appreciate that perspective.”
What’s In This Stuff?
A visitor from a state with a fully regulated cannabis economy will notice what’s missing in D.C.: Vendors aren’t required to track supply chains, test products or pay taxes on cannabis sales.
The delivery operators, vendors and event planners who spoke with Leafly said they’d prefer to have a regulatory structure with all of those pieces.
'We keep it as honest as possible,' says one vendor, 'but I do know of companies that take advantage, and just have shitty stuff.'
“My heart is for the medical [patients],” says Selena at Stoner Saturdays. She worked behind a stand for her edibles company, Bud Baker Products. “If you don’t regulate it, people are gonna get turned off or get sick.”
It would bring some added credibility to those producing high-quality products, adds Parker, the tincture maker. “I think we’d all be happier with testing because then we’d have numbers and actual certifications to back up our product claims.”
Some have taken the responsibility upon themselves.
As a minimum, Mullins, of High Focus, checks every batch from growers, and won’t sell any bud that’s not up to snuff. “We do keep it as honest as possible, but with there being no actual structure, I can definitely imagine this being taken advantage of. I do know of companies that take advantage of the structure and just have shitty stuff.
Parker bought a tCheck machine to measure the potency of her tinctures and adjust them as needed. “It’s not a perfect system,” she admits.
Canamelo pays a testing company to verify product quality before packaging and labeling any goods. Melo says he preemptively deducts sales tax and pays it to the government in advance. He argues it could help his case if marijuana eventually becomes regulated similarly to Colorado, Oregon and other states.
“We’re hoping that by paying taxes early, we’ll be looked at favorably when it’s time to apply for licenses.”
The Home Rule Act Blocks Progress
While enthusiasm seems high for future regulation, federal law stands firmly in the way. Under the Home Rule Act, D.C. has the ability to set its own laws, but all are subject to congressional review. Congress used this power to try to block Initiative 71 from taking effect in 2014, when Maryland GOP Rep. Andy Harris added a rider to the federal budget blocking the District from using any federal to legalize a Schedule I substance.
Congress was then given 30 days to review the law that passed, but didn’t overturn it, despite members threatening local officials with jail time. What was left was an economically toothless legal market.
“After the initiative was passed, the District could not do anything to lessen criminal restrictions on marijuana,” explained D.C. Council Chairman Phil Mendelson in November. “We are unable to develop a regulatory scheme as long as Congressional riders exist. This is very frustrating and not just from a Home Rule point of view, but it’s as if we’re caught in the middle decriminalizing and legalization as well as adopting a control system.”
Mendelson argues cannabis should be regulated similarly to alcohol, “but we can’t get there because Congress has a crudely constructed prohibition on us changing the criminal law.”
The future Eidinger envisions is one where public consumption is taxed similarly to alcohol at bars and restaurants, and where retail sales are subject to the city’s 5.75% sales tax. Homegrow and any medically prescribed cannabis should remain untaxed, he adds. Down the line, he hopes outdoor growing will replace indoor cultivation industry-wide.
While Eidinger admits D.C.’s legal system pales in comparison to those implemented on the West Coast – “they’re a decade ahead of us” – he argues the District is “the best place on the East Coast to be a cannabis entrepreneur.”
“People are growing in their home, creating products in their home, and using it as an incubator space,” he says. “These small entrepreneurs, they’re all working out systems for how to be cannabis businesspeople. They’re just well-positioned.”
For now, D.C.’s cannabis merchants are doing what they can with the system they’ve been given.
“I feel like it’s a gold rush here in D.C.,” said the host of Stoner Saturdays. “Why not capitalize and take advantage?”