The Wild West of Unregulated Cannabis Retailers

A Capital Community News, Spotlight Investigation

66
Adobe/Stock

Step past the Dick Tracy caricature on the sign advertising Street Lawyer Services and into the business at 409 H St. NE and you won’t find a lawyer. No lawyer’s shingle is visible anywhere, inside or out.

“They’re upstairs,” the woman who greets customers assures us in the brightly lit room, directing our attention away from the art on the walls, the couch no customer is allowed to sit in and the large-screen TV on the wall blasting out “Without Remorse,’’ and toward an array of marijuana products known in DC’s burgeoning and unregulated weed industry as “flower.”

An I-71 business proudly displays its Certificate of Occupancy, Basic Business License and a ServSafe Certification in safe food handling from the DC Department of Health. Photo: Sarah Payne

For a $60-$90 donation to the lawyers supposedly a floor above – what is known in these shadowy businesses as the “gift” ‒ donors can walk out with a thank-you of 3.5 grams of the flower of their choice. At other similar DC businesses, which may number more than 100, the gift is a kid’s sticker normally costing pennies, a QR code giving ownership of amateurish art, a “counseling”’ session, a tiny tube of CBD topical muscle balm or other meaningless and inexpensive item.

Reporters found no attorneys at Street Lawyer Services. Photo: Sarah Payne

This sleight of hand allows I-71 cannabis entrepreneurs to skirt DC’s law allowing only personal use and sale of medical marijuana. I-71 refers to Initiative 71, approved by DC voters in 2014, which legalized possession of up to two ounces of weed, cultivation of only three mature plants at a time and a “gift” of no more than one ounce of pot to another person over 21 years of age. Federal law still classes marijuana as a Schedule 1 substance whose possession and sale are a felony.

A loophole in the law has hindered regulation of DC’s retail marijuana sector and engendered a probably illegal and rapidly expanding drug business that appears to be spiraling out of control.

Capital Community News, publishers of the Hill Rag, East of the River and MidCity DC newspapers, supported by Spotlight DC, a nonprofit supporter of local investigative journalism, has identified 60 of these storefronts, 31 of which appear to be operating without a Basic Business License (BBL), which enables consumers, employees and governmental officials to identify business owners. 25 are operating without a Certificate of Occupancy (C of O), which assures consumers the business has been certified as safe and can legally do business at its location.

This investigation revealed that 42 of the I-71 storefronts are in DC’s Northwest quadrant. Wards 1 (23), Ward 2 (8) and Ward 6 (15) house more than three-fourths of the I-71s Districtwide, and Zip codes 20001 (12), 20002 (14) and 20009 (11) are home to more than 60%.

At one point, nearly a dozen of these storefronts populated a 10-block section of H Street NE, a popular nightlife corridor that draws customers from the whole Metro area. At-Large Councilmember Elissa Silverman (I) lives two blocks from the popular H Street corridor. “I see all of these cars with Maryland and Virginia tags come off the highway, go down H Street and then go right back out again,” Silverman notes.

Anwar Saleem, executive director of H Street MainStreet, confirms Silverman’s observation and warns that the popular nightlife corridor is being turned into DC’s version of Amsterdam. Saleem says 15 I-71s currently operate on H Street and attract street drug dealers who peddle their illicit wares or prey on patrons headed to the I-71s or to legitimate bars, restaurants and other businesses.

According to Saleem, landlords who lost tenants during the pandemic and faced mortgage and tax payments are succumbing to offers from the I-71s to pay two or three times the going rent. “These businesses have more cash and they can pay higher rents,” says Saleem. “We are losing our H Street vibe.”

Caveat Emptor 
“It’s really upsetting,” says Linda Mercado Greene, owner of Anacostia Organics, one of seven licensed medical marijuana dispensaries in the District and a national leader in the movement to legalize marijuana. “We lost 60% of our business last year.”

A jar of “flower” boasts of the seller’s I-71 compliance and warns against consumption in public and on federal property. Photo: Andrew Lightman

Greene said the same is true for the six other legally licensed and regulated medical dispensaries. She bases her claim on statistics compiled and published by New Frontier Data, considered to be the Bible of the cannabis industry nationwide, and data from the DC Alcoholic Beverage and Regulation Administration (ABRA), which regulates legal dispensaries and licensed growers.

“We have to pay so many fees, have tons of regulatory compliance, and they [the I-71s] don’t have to adhere at all,” Greene says. “The legal cannabis industry is tightly, tightly regulated. We pay a lot of taxes. We have to pay for security, background checks, workers compensation. Why are we re-upping our licenses every year when we can just go out and open up?”

Capitol Hill attorney James Loots, who specializes in steering business clients through the DC regulatory maze, says, “Normally a business needs a tax registration (with the IRS and the DC Office of Tax and Revenue), registration with DCRA as a corporation, limited liability company or sole proprietorship, and, in most cases, a basic business license.”

Since the I-71s appear to have employees, they also are required to obtain workers comp insurance and to pay state and federal withholding and unemployment. Paying workers under the table to avoid these taxes and fees is illegal, Loots says. The DC Department of Employment Services has regulatory authority over these violations.

Absence of a BBL, corporate or LLC registration and/or a C of O, Loots acknowledges, makes it much more difficult to pursue consumer protection claims when injuries or illness result from a visit to these stores or use of the products sold.

This investigation found that some of the 29 to 35 I-71s displaying BBLs and/or C of Os ‒ and, in some instances, food handling certificates from the DC Department of Health (DOH) ‒ managed to get them without meeting the requirements Loots cited above and without apparent oversight from regulatory agencies.

Map showing location of I-71 businesses in the District. Image: Jazon Yen/CCN

When asked if the DC Department of Consumer and Regulatory Affairs (DCRA) has sanctioned I-71s, Daniel Weaver, chief of staff for DCRA, which issues BBLs and C of Os and registers DC business entities, sidestepped the question. “When a complaint is received about a business, we do open up an investigation based on that complaint,” Weaver replied. “All businesses in DC are required to have business licenses,” Weaver added.

Upon entering the upstairs Capitol Budz shop at 607 Pennsylvania Ave. SE, the customer cannot escape noticing the BBL, C of O and DOH certifications displayed prominently on the wall. But the locked cases of brightly colored cannabis edibles, plus the pre-rolls (joints, or marijuana cigarettes) and flower would indicate to any DCRA inspector that the business has much more on hand than the two ounces of marijuana permitted to be possessed under DC law.

Only the licensed, legal dispensaries can stock more than two ounces at any given moment. Medical dispensary owners report commonly keeping eight to 10 pounds of weed in inventory.

I-71 stores sell a wide range of cannabis infused edibles. Everything from doctored Fritos to Sour Patch Kids. Photo: Sarah Payne

The role of the DC Council is legislative rather than regulatory. It has struggled to create a form of amnesty for the I-71 owners and bring them into the legal market that is expected to develop in DC. This leaves enforcement to Mayor Muriel Bowser (D) and the executive branch. But the regulatory agencies have been slow or reluctant to stem the rabbit-like proliferation of I-71s.

The Gift That Keeps Giving
Attorney Paul Zukerberg led the efforts to decriminalize marijuana in DC in 2013 and the passage of Initiative 71 the following year. Zukerberg said that although the gifting provision was meant to be “purely altruistic, eventually it became more like a barter situation, then if you can gift it, you can exchange gifts.”

Enterprising entrepreneurs took notice of that provision, and soon retail souvenir stores and head shops were gifting marijuana with the purchase of overpriced t-shirts and other items. Pop-up stores appeared suddenly and overwhelmed neighborhoods for a few days, and then disappeared. Eventually the gifting became less and the required purchases declined in value and desirability to the point where many I-71s engage in outright sale of marijuana, in violation of DC and federal laws.

Cannabis shops often occupy the upper floors along retail corridors. Here Gifted Curators, an I-71 business, is perched above a Subway. Photo: Sarah Payne

Zukerberg doesn’t mind that the gifting provision has become a loophole in the law big enough to pull the entire District of Columbia through. “The cannabis business is a $6 billion business nationally, and it’s run by mom-and-pop-operations,” he says. “Most of these I-71 shops are local entrepreneurs. What happens is, when you get a more formalized system and the big corporations come in, the local people get pushed out.”

Passing the Buck
Zukerberg’s vigorous defense of the current state of the cannabis business in DC has been advanced by many with influence. Critics and supporters of the initiative alike charge that District regulatory agencies under Mayor Bowser’s leadership purposely have ignored enforcement and allowed these businesses to operate illegally, free of regulations and requirements of “clean hands” (payment of all back taxes) placed on other DC businesses.

Ward 5 Councilmember Kenyon McDuffie (D) and Ward 8 Councilmember Trayon White (D), in private conversations with colleagues, have argued that the issue of the I-71s is a matter of racial justice, according to one DC Council source, who requested anonymity. This view was echoed by the Democratic candidates for attorney general last spring.

“This is one of the only ways, oftentimes, that minorities can get the opportunity to sell (and) to engage in this new form of commerce that has arisen … in that sense I support [gifting],” stated attorney Bruce Spiva during a candidate debate at the Hill Center on May 9, 2022.

“I am proud of the people who figured out how to create this loophole to act in a legal manner to be part of the burgeoning market that’s going to be very successful,” echoed attorney Ryan Jones at the same event.

This viewpoint has led to lax regulatory enforcement and legislative oversight, observers concur. No agency contacted has been willing to take the lead in addressing the problems of the local retail cannabis sector. The DC Department of Health (DOH) originally was given jurisdiction over guaranteeing the health and safety of the weed sold in the dispensaries, but DOH officials said enforcement should be the responsibility of ABRA.

ABRA officials resisted, at first, complaining they needed more resources, manpower and authority to police the cannabis sector in the same manner as they regulate alcohol sales. Recently, however, ABRA announced it will coordinate the Joint Cannabis Task Force, comprised of regulators from DOH, DCRA, Fire and Emergency Medical Services (FEMA), Office of the DC Attorney General, MPD, Office of Tax and Revenue and the Department of Forensic Science.

Only personnel from DOH, FEMA, and DCRA will enter the shops for onsite inspection. Forensic Science will test products seized in inspections for contaminants and quality.

Creation of the Joint Cannabis Task Force was announced Aug. 5, and businesses got a 30-day grace period to clean up their act or disappear before inspectors arrive.

“This is aimed at Congress,” observes political strategist Tom Lindenfeld, who has been advising the legal dispensaries on the issues posed by the I-71s. “DC is less likely to get adult use if it can’t prove it can regulate the illegal markets.”

Regulating the legal market involves keeping out marijuana allegedly brought in from other states, a felony under both DC and federal law. Only marijuana cultivated in DC by the five licensed growers can be sold, and only in the legal dispensaries. Dispensary owners report approaches by “sales reps” offering weed from “plugs” – as the cultivation sources are referred to ‒ in California, Colorado, Maine, Maryland and Oregon.

The Gentleman Toker, a local blogger (www.gentlemantoker.com), maintains a guide to all I-71 businesses in the DMV area. This certificate recognizes Euphoria, a Capitol Hill wellness center, as the “Best Store Concept in 2021.” Photo: Andrew Lightman

“Usually, people are already growing it somewhere before they open up a shop,” says Norbert Pickett, owner of Cannabliss, a legal dispensary in Ward 7, who reports being approached. “They already have the plug. That’s why they are opening the shop.”

The task force is getting pushback before the start of inspections after Labor Day. “This is absolutely unconstitutional. It’s the most disgusting thing I’ve ever seen,” declares an indignant Paul Zukerberg. “They are targeting these places and going in there, without a warrant, and demanding that they produce all of these records. It’s exactly what the Fourth Amendment was designed to prevent.”

Opaque Ownership
It is difficult to determine the ownership of I-71s. 29 have not filed information with the DC government that might aid such an inquiry. 41 of the 60 businesses examined were owned by limited liability companies (LLCs). These corporate filings are used widely here and nationwide to mask ownership.

Using information from DCRA databases and social media postings, this investigation positively identified 12 owners of I-71s. Two are white and living out of state. “Just because you have a Black person behind the counter doesn’t mean the store is Black-owned and Black-financed,” notes Lindenfeld. Lonny Bramzon, a white criminal defense attorney and cannabis advocate, is a longtime Maryland resident who has practiced law in Silver Spring since 2004. He owns Street Lawyer Services, where the lawyers supposedly were upstairs when a reporter entered the place on the afternoon of August 22. Street Lawyer Services also has businesses in New York and Miami, according to Bramzon’s social media posts. Bramzon describes the business as a “marketing service,” not a law office.

Bramzon is as difficult to find in his main law office at 8720 Georgia Ave. in Silver Spring as it is to find a lawyer at Street Lawyer Services in DC. He initially accepted inquiries to discuss his business but cancelled at the last minute.

Many I-71 stores resemble the Apple Store in their minimalist design. Photo: Sarah Payne

Seth Laderman, who owns Gifted Curators at 2469 18th St. NW, is a white businessman based in Colorado and California. A receipt for a purchase made at Gifted Curators showed no sales tax. Prices at the establishment are inclusive of sales tax, stated an employee at the time. (The establishment later provided reporters with a copy of email receipt from The DC Office of Tax and Revenue attesting to a recent quarterly sales tax payment.)

Gift Curators has reversed the order of gifting. Customers walk out with the gift of marijuana but have to request the product purchased, an artwork, by email later. The C of O for Gifted Curators defines permitted business uses as art gallery and retail.

“When the voters approved Initiative 71, nowhere in there did it talk about the creation of businesses,” points out Ward 6 Councilmember Charles Allen (D). “I-71 was about the ability for you to legally grow in your home, legally be able to possess small amounts and legally be able to give a small amount to a friend.” “There’s no such thing as an I-71 business,” states Allen unequivocally. “It’s very creative branding, but it’s not real.”

“That’s what I don’t understand,” Silverman states during a recent interview, referring to the findings reported in this article. “If half of these businesses are illegal, why don’t we just shut them down?”

This is the first article in an investigation of the DC cannabis gray market supported by a grant from Spotlight DC: Capitol City Fund for Investigative Journalism. Spotlight DC encourages the submission of proposals by independent journalists. For more information, visit www.spotlightdc.org.

Kenneth V. Cummins has been reporting on DC politics and issues for nearly 40 years. Sarah Payne is a general assignment reporter for Capital Community News.

____________________________________________________

An earlier version of this story stated that the C of O for Gifted Curators as allowing usage as an art gallery. The story has now been corrected to state that the C of O allows for both art gallery and retail uses.