The D.C. Council on Tuesday narrowly rejected an emergency bill that would have allowed the city to impose steep fines and close down shops and services that “gift” marijuana, granting a reprieve to a growing and currently unregulated industry that critics deride as illegal and supporters say represents a legal marijuana marketplace-in-waiting.

The 8-5 vote — emergency bills need nine votes to pass — was a blow to Chairman Phil Mendelson, who has pushed since late last year for lawmakers to take action against the gifters, saying that they have taken customers and business from medical marijuana dispensaries, which are legal and tightly regulated.

It also further extends the legally murky situation of the gifting shops and services, which currently face no regulations or quality control on the marijuana products they give away. Congress has since 2015 prohibited D.C. from legalizing or regulating the sales of recreational marijuana, leaving lawmakers in a bind with regards to the gifters. (Both Mendelson and Mayor Muriel Bowser have introduced bills to legalize sales, but they cannot move forward until Congress lifts its prohibition.)

Mendelson’s bill targeted an industry that has largely been growing in plain sight in recent years: shops and services that sell products from art to clothing and give customers complementary “gifts” of marijuana. Born of a creative (and, some say, incorrect) interpretation of the 2014 voter-approved initiative that legalized personal possession, use, home cultivation, and gifting of small amounts of marijuana, the flourishing industry is now said to be worth hundreds of millions of dollars a year.

The bill would have explicitly prohibited retailers from giving such marijuana gifts and empowered city agencies to fine or close down not just operators, but also their landlords. It also sought to buttress the city’s medical marijuana program by allowing anyone over the age of 21 to self-certify that they need marijuana, doing away with the usual requirement that they get a doctor’s recommendation.

“Unfortunately, Congress has prohibited D.C. from regulating marijuana,” said Councilmember Charles Allen (D-Ward 6), repeating a lament shared by others about the situation the council found itself in. “If we could have regulated non-medical marijuana, we would have. But there is no such thing as a commercial transaction that is I-71 compliant. What they are doing is illegal. Those businesses are operating outside the law, they are not registered with anyone, and we have no idea who they are.”

Some lawmakers expressed concern that closing these businesses down would simply push the whole market further underground. Some also balked not so much at the content of the measure, but rather the process by which it was being put to a vote. They said that approving an emergency bill — which skips the usual public hearing and required two votes — was the wrong vehicle for an issue that touches on not just regulated and unregulated businesses, but also racial equity and the history of the war on drugs.

“I just can’t get behind making what are drastic policy changes on an emergency basis. This dramatically changes how cannabis will be bought and sold in the District. We’re legislating on the fly,” said Councilmember Elissa Silverman (I-At Large), who earlier in the day had said she thinks the businesses are illegal.

“I don’t feel comfortable bypassing the process with emergency legislation,” echoed Councilmember Janeese Lewis George (D-Ward 4). “There will be a significant racial equity impact if this legislation passes. It is Black and brown people who will lose out.”

The gifters have said they are owned and employ Black and brown residents, a claim Mendelson contested. A majority of the city’s medical marijuana dispensaries are Black-owned.

Silverman and Lewis George were joined in opposition by Robert White (D-At Large), Trayon White (D-Ward 8), and Christina Henderson (I-At Large). The five remained steadfast despite an amendment proposed by Kenyan McDuffie (D-Ward 5) that would have delayed enforcement of the bill until August (from May) and dramatically expanded the existing medical marijuana program, offering dispensary license opportunities to operators in the gifting industry.

In an email, Grace Reeder, executive director of the I-71 Committee, which represents some of the gifters, said they were “pleased” with the vote — but wanted to keep working to make sure a more sustainable solution is found.

“This matter cannot be dealt with through emergency legislation. We are ready to roll up our sleeves and get to work to ensure there is a fair, equitable, and accessible cannabis market with access for all D.C. residents and advance social equity in the space. We look forward to a transparent process with the council,” she said.

For the time being, the status quo will likely remain. And that is likely to be to the chagrin of owners and operators of medical marijuana dispensaries, who said this week that they have lost upwards of half their customer base to unregulated gifters that don’t face the same costs and rules.

“Fair competition would be you stepping up and actually paying your fair share of taxes. It would be you adhering to the same regulatory structure that [we] are actually adhering to. And it would be you doing the things that you need to do and paying the cost for that,” said Corey Barnette, owner of the Kinfolk Dispensary and District Growers, a cultivation center. “If you want to talk about fair competition, what they are actually doing is subverting the market, destroying fair competition, and not being a contributor the way that the laws would normally require.”

As it became clear that the bill would fail, Mendelson lamented what it would mean if medical marijuana dispensaries were to fail, arguing that they would form the backbone of the recreational market when Congress allows one to be created. “The medical regulated market, which we need so they are in place when the sale of recreational becomes legal, needs to exist,” he said.