D.C.'s medical marijuana dispensaries are getting smoked

D.C.'s medical marijuana dispensaries say they are being squeezed by the so-called I-71 weed shops and the new, legal cannabis market in Maryland .

Why it matters: Some medical dispensary owners worry they'll go out of business if the District doesn't do more to crack down on the "gray area" I-71 shops.

The big picture: D.C. has a complicated marijuana landscape. Congress continues to block the city from allowing commercial sales of recreational cannabis.

• In a workaround two years ago, city leaders made it easier for medical dispensaries to expand and draw clients, allowing residents aged 21 and older to " self-certify " for medical cannabis.
• The medical dispensaries have their draws: The product is regulated and sourced from D.C. cultivators. But the drawback: higher prices.

State of play: Five legal dispensaries went out of business in the past two years, according to Grace Hyde, a director at District Cannabis, which has a cultivation center in Northeast.

• The operators blame an uneven playing field.

Catch up quick: There are nine medical cannabis dispensaries in D.C. But more than a hundred I-71 shops, or unlicensed "gifting shops" that exist under a loophole law, can offer customers a cheaper product with no medical form needed.

• To eliminate the gifting market, the city created an on-ramp for these shops to become legally permitted as medical marijuana dispensaries and began accepting applications late last year. Shops that fail to apply will be forced to shut down.

What they're saying: Hyde, who co-chairs the Regulated Cannabis Association of DC, wants Mayor Muriel Bowser to come down hard on the I-71 shops.

• "I would say the industry has — without enforcement — 60 days before we really start to collapse," Hyde says. "Our business has not broken even in any single month in 2024."

Making matters worse for the capital's medical dispensaries, residents can hop the border to Maryland and buy from legal recreational shops, where prices have come down since January.

The intrigue: The D.C. Alcoholic Beverage and Cannabis Administration has issued 21 cease and desist orders and 75 warnings to unlicensed businesses, spokesperson Mary McNamara told Axios.

• A business that ignores a cease and desist order, or "poses an imminent danger to health and safety," is at risk of being padlocked, McNamara said in a statement.

So far, regulators have not padlocked any stores, but that could be imminent.

• Council chair Phil Mendelson told Axios on Tuesday that a conversation with ABCA gave him the impression the agency "is on the verge of … padlocking its first business."
• "I hope there will be many more to follow," he added.

Meanwhile, Hyde wants the city to commit to closing unlicensed shops by a certain date. "The mayor's the only person who can make that happen."

• The mayor's office didn't return Axios' request for comment.

Some have argued against strict measures against the shops, saying it will hurt small businesses trying to get a foothold in the market.

• Mendelson's view: "Roughly, there are 125 establishments that are operating illegally," sometimes selling contaminated products. "There's nothing mom and pop about them," he says.

The latest: The city has received 75 applications for dispensary status from I-71 shops. So far, 13 applications were accepted and 34 are undergoing review. Two dozen were denied.

• 31 of the 75 applications were "social equity applicants" — a status aimed at giving people "disproportionately harmed by cannabis criminalization" a leg up.

What's ahead: Two new medical marijuana dispensaries recently received approval to open, according to the ABCA.