June 20, 2024


Technology and Age

In Markets Where Cannabis Sales Are Legally Nebulous, Businesses Find a (Legal) Way

Most people wouldn’t pay $60 for the unique joy of listening to a 3-and-a-half-second recitation of a motivational speech. But some might if the oration accompanied a “gift,” like an eighth of an ounce of weed.

That’s the business model behind a slew of startups in select states around the country and Washington D.C., which are offering to sell customers everything from a motivational speech or legal advice to a sticker or a coupon, all accompanied by the gift of marijuana. The indirect sales strategy, effectively, serves as a workaround for gray-market businesses specializing in the sale of cannabis, which remains illegal on a federal level. 

While the rules governing each state’s program differ, the loophole itself offers a path forward for businesses attempting to get cannabis into the hands of consumers, even if the companies themselves can’t legally sell it. It also serves to reinforce the old saw that entrepreneurs — in the face of adversity, no less — will always find a way. 

One of the earliest test cases for the strategy is Washington D.C., after voters there approved a ballot measure, dubbed Initiative 71, in 2014. The measure, which legalizes personal possession of up to two ounces of marijuana for recreational use, also allows the transfer of up to one ounce so long as no money is exchanged and the recipient is at least 21 years old. The implementation of I-71 did not legalize the sale of marijuana, but it helped carve out a new cannabis culture and economy to hand out legal weed. States like Massachusetts have adopted similar cannabis gifting frameworks in the past, while others, like the State of New York, are currently participating in a similar system.

“Just because it’s legal doesn’t mean it’s right, and just because it’s illegal doesn’t mean it’s wrong,” says Ryan Ha, the 33-year-old CEO and co-founder of Dreamy DC, a Washington D.C.-based “motivational speech company.” The six-year-old business operates a web app (and is currently working on a mobile app) through which users may select the duration of the speech they’d like and wait until the closest speaker near them arrives. Dreamy currently works with the D.C.-based Dupont Dispensary to source its cannabis gifts for customers. A 3-and-a-half-second speech will run a customer $60, while a 28-second speech is $360. The duration of the speeches cheekily align with the amount of cannabis, in grams, that a customer is gifted.

It’s hardly the only game in town. In D.C., other I-71 compliant shops exist, like No Kids Allowed, Gifted Curators, Ez Gifting DC, and so on. There are only seven licensed medical marijuana dispensaries located in the nation’s capital. In New York City, there’s a budding group of similar shops vying to participate in the cannabis gifting model, after former Governor Andrew Cuomo signed into law a bill that legalizes recreational marijuana in March of 2021. The law recommends that 50 percent of cannabis licenses go to minority- or women-owned businesses, distressed farmers, or service-disabled veterans. 

NYC’s Empire Cannabis Club, which is unlicensed, sells cannabis via a membership service. The store is not licensed, but its website says, “We have taken the blessings of the New York State Legislature allowing the transfer, without profit, of cannabis, and have set up a membership service in which the club will acquire cannabis products for its members, and only add the cost to facilitate the acquisition and transfer of said products.” New York City officials have recently cracked down on unlicensed shops and sent out 52 cease-and-desist letters, according to Gothamist. 

While some businesses using this gifting model can invite customers to buy a sticker, a T-shirt, or some other type of tangible item, Ha says Dreamy chose speeches because it was better for the environment. “We needed an intangible good that doesn’t create waste,” Ha says. “That way you can buy it over and over again without increasing your carbon footprint.”

As hopeful as businesses are regarding these frameworks, there’s still great risk in operating any business that sells or works with cannabis. It’s still illegal federally, and that makes everything from banking to conducting commerce across state lines harder. There is hope for change on Capitol Hill. The House of Representatives passed the Marijuana Opportunity Reinvestment and Expungement Act in April. While Senator Chuck Schumer was expected to introduce the Cannabis Administration Opportunity Act in April, the formal announcement has now shifted to sometime before Congress’s August recess. The measures, if enacted, would forge a pathway to federally legalize and regulate the marijuana industry. 

What’s more likely to pass is the Secure and Fair Enforcement or SAFE Banking Act, which was introduced in 2021 and would allow cannabis businesses to access banking and credit card services. It passed the House last year this month, and maintains 180 bipartisan cosponsors. 

In the meantime, it’s important to stay on the right side of the law. For starters, businesses must ensure that their products are labeled as accurately as possible, says Morgan Davis, an attorney specializing in cannabis law and policy at the Raleigh-based Davis Legal. A common example of this is making sure that products are classified accurately, in relation to the amount of tetrahydrocannabinol (THC), the psychoactive component in cannabis, contained within.

Davis also recommends sending products out for independent third-party testing to ensure that the certificate of analysis accompanying each product is accurate. COAs are official documents that verify THC levels in a product, but third-party testing is still important, since Davis cautions that some COAs may not be legitimate. 

When businesses are operating in a gray area, they need to self-regulate to a certain degree, Davis says. “Businesses need to compare and contrast standards in other industries and come up with best practices to run their operations to help them determine if they are taking on any unnecessary risk.”