DC cannabis coalition files sweeping lawsuit against two dozen illicit marijuana operators

A group of licensed marijuana companies in Washington, D.C., have filed a federal lawsuit in a last-ditch attempt to force the court to hold several unlicensed cannabis shops and their landlords to account.

The suit, filed in the U.S. District Court for the District of Columbia on Sept. 27, was brought by the Alliance of Legal Cannabis Entities (ACLE), which was organized by DC Holistic Wellness Group LLC and Herbal Alternatives II LLC. It targets 24 defendants that the suit claims are all either illegal dispensaries or their owners or landlords.

While the city has been trying to transition many gray market cannabis companies to the fully legal market for years, many stakeholders have lost patience, alleging that plenty of the unlicensed businesses have no desire to operate under the city’s rules for fully compliant marijuana companies.

“Due to the operation of illegal unlicensed dispensaries selling cannabis products that are illegal in the District of Columbia, the legal, licensed cannabis market has lost substantial commercial sales diverted to the illegal cannabis market in D.C.,” the suit charges, estimating that illegal marijuana sales have topped $600 million annually.

Due to pressure from the unlicensed market, the suit states, “several legal licensed cultivators/manufacturers and retailers have been forced to discontinue operations.”

The 10 unlicensed shops named in the suit have flaunted city rules and warning letters from the Alcoholic Beverage and Cannabis Administration against unlicensed cannabis sales, and 12 landlords or property management companies identified as defendants have aided them, the suit charges.

All of the illegal shops claim compliance with city law under Initiative 71, a voter-approved ballot measure that legalized recreational marijuana possession and “gifting” back in 2014, which led to a widespread business model based on overpriced T-shirts and other trinkets that would come with a “gift” of cannabis goods.

But that model has been deemed illegal by ABCA, the suit noted.

“The D.C. government has repeatedly emphasized that commercial ‘gifting’ is the transfer for remuneration and is illegal,” the suit notes.

Beyond cannabis

Not only that, but many of the shops in question are also trafficking in “magic” mushrooms, which were placed on the lowest possible law enforcement priority due to a 2020 ballot measure, Initiative I-81, the suit charges.

That measure didn’t legalize the production or sale of psilocybin, however.

“There are no legal means of purchasing or selling any magic mushrooms in D.C.,” the suit asserts. “Licensed cannabis cultivators cannot grow these mushrooms nor can manufacturers produce the mushroom chocolate bars being promoted by illegal cannabis dispensaries.”

In addition, many of the unlicensed shops named in the lawsuit advertise illegal interstate delivery of cannabis and psilocybin mushrooms to neighboring states, further flouting local and federal laws, the lawsuit asserts.

“Many of the ten illegal dispensary-defendants offer to deliver illegal cannabis products outside of the District of Columbia into Maryland and Virginia and present such delivery options as being safe and legal,” the suit states.

The lawsuit also asserts that the 10 illegal shops in question are also selling illegal knock-off edibles that play on popular mainstream candy brands or other foods, including THC-infused versions of Nerd Ropes, Snickers, Chips Ahoy, Milky Way, Three Musketeers, Almond Joy, Jolly Ranchers and Doritos.

Most of the illegal shops have also been advertising their illegal services online via plenty of platforms, ranging from social media sites like Facebook and Instagram to more mainstream sites such as Google, Yelp, MapQuest and Reddit, the suit claims.

The lawsuit requests damages equal to three times the profits received by each of the defendants for the past three years or from the date when operations began through the end of the legal action. It charges the defendants with unfair competition, false advertising and promotion, conspiracy, and negligence.