March 9, 2018
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Marijuana entrepreneurs are an innovative group, and when faced with barriers to get their products to consumers, they can get very creative. One of these creative strategies is marijuana gifting.
In simplest terms, states like Massachusetts, Maine, and Washington, D.C. have legalized recreational marijuana but don’t have retail systems in place yet to sell marijuana products to consumers. States like Massachusetts and Maine are still working to put together marijuana retailer regulations that would create a framework for adult-use sales. However, such a framework is unlikely to come to Washington, D.C. anytime soon since the current law says the District government is not allowed to spend funds or resources on developing a taxation system or a regulatory system for cannabis sales.
As a result, marijuana businesses in these states need a way to meet consumer demand without retail locations. Keep in mind, marijuana cannot be shipped through the mail either. Gifting is the solution for many of them.
Here’s how marijuana gifting works: The marijuana business sells a product that is not marijuana, like a T-shirt, baseball hat, or coffee mug, and includes a free gift of marijuana with the customer’s purchase. The price of the T-shirt or coffee mug could be $100 or more to cover the cost of the free marijuana gift.
Since the laws in Alaska, California, Colorado, Maine, Nevada, Oregon, Washington State, and Washington, D.C. allow marijuana gifting, and the laws in Vermont don’t specifically disallow the gifting of marijuana, entrepreneurs are able to sell their products in these state where recreational marijuana is legal without retail locations.
Marijuana gifting has been happening for years. In April 2017, the Portland Press Herald reported that The Cannabis Shack and Elevation (formerly Leaf Delivery) were providing marijuana “gifts” to people in Maine. The Cannabis Shack was accepting donations to cover packaging and handling of its products. When a purchase was made on its website, the owner hand delivered the marijuana gift to the customer in exchange for the donation. Elevation listed its marijuana gifts on Craigslist charging only a delivery fee.
At the end of December 2016, Craigslist ads selling plastic bags with free gifts (i.e., marijuana) started popping up in Massachusetts. Another Massachusetts company, HighSpeed, sells and delivers a variety of items to customers, including lemonade, along with a free gift (i.e., marijuana). Also in Massachusetts, Duuber drivers deliver marijuana-themed T-shirts along with marijuana gifts.
In Washington, D.C., the gifting economy is thriving in what’s been dubbed the District of Cannabis. Here, stores sell T-shirts, artwork, and other products along with marijuana gifts. Dozens of businesses participate. In addition, there are hundreds of public events happening in the city dedicated to marijuana and marijuana gifting.
While states take time creating marijuana laws and licensing structures, entrepreneurs see a large market with growing demand. In other words, licensing delays are adding to the “gray market” of the marijuana industry.
While some of these entrepreneurs will likely try to get retailer licenses to sell marijuana legally when they’re available, the licensing process can be expensive. Retail licenses can cost tens of thousands of dollars, and high taxes add even more financial burdens to marijuana businesses. It’s not surprising that some entrepreneurs like the gray market so much.
On the other hand, many consumers would prefer to purchase marijuana that has been fully tested, and that’s something they can’t get through the gray market currently.
It’s unlikely that the growing gray market will push regulators to create marijuana programs, laws, and licensing structures faster in the near future. However, as more states legalize recreational marijuana, it could become a motivator to push startup or micro programs through faster which can be expanded when complete regulations are developed.
Originally published 4/12/17. Updated 3/9/18.
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