"Oh, great! Another cupcake shop!"
I hear these words as soon as I step onto M Street, the posh, townhouse-lined retail thoroughfare in Washington, D.C., and most lately the raging epicenter of the great American cupcake pandemic. I'm standing in front of an outpost of Sprinkles, a California cupcake chain that joined the fray just the week before. The words (shouted by an upscale-looking man into his Bluetooth headset as he tore down the street, his fine-leather messenger bag flapping behind him) foretold my future, at least for the next 36 hours. I had traveled down to the nation's capital to investigate the cupcake craze—to find out who eats them, and more important, who sells them, how, and why.

Cupcake shops are everywhere, and the craze has perplexed me. I mean, I knew cupcakes growing up. Back then, the whole family was two flavors, chocolate and vanilla, and a preservative-addled cousin, Hostess, that loitered around truck-stop and gas-station snack racks. But I hadn't seen them much since. That is, until a few years ago.

The cupcakes showed up at an office party, looking prettier than I remembered. Then, again, at a stylish wedding. They had new names—vanilla was now Madagascar Bourbon Vanilla; chocolate came with a sophisticated-sounding topping called ganache. Everywhere an affluent crowd gathered, cupcakes seemed to be popping up. They had appeared on an episode of Sex and the City, someone told me. And they cost a fair bit of money, three or four dollars apiece. A lot of people were making them and making a living—sometimes, a killing—selling them.

Many of those people are in our nation's capital. Washington doesn't just have dozens of cupcake bakeries; it also has a TV show, TLC's DC Cupcakes, currently in its second season. Inevitably, perhaps, cupcake chains from elsewhere are moving in to lay claim to the city's aficionados. New York City—based Crumbs has three locations. In early March, the most aggressive cupcake company of all, Los Angeles's Sprinkles, opened a location in the Georgetown neighborhood. When I arrived the following week, a Mercedes Sprinter van called the Sprinklesmobile, the tip of the Sprinkles spear, had been blanketing the city with free cupcakes for four straight days. I tried one of Sprinkles's peanut butter chocolate cupcakes. It was damn good.

Sprinkles's co-founders, Charles and Candace Nelson, are former Silicon Valley investment bankers who fled the profession in 2001, after the dot-com bubble burst. The two regrouped in the world of cupcakes and opened their first store, near Rodeo Drive in Beverly Hills, in 2005. They got their cupcakes into the hands of celebrities such as Tyra Banks and Barbra Streisand and Oprah, whose adoration has since echoed in Sprinkles's press releases. To lend an air of preeminence, the Nelsons started calling Sprinkles The World's First Cupcake Bakery, a statement that's technically true, but only if you disqualify the star of the seminal Sex and the City cupcake episode of 2000, Magnolia Bakery, and another landmark bakery called, as a matter of fact, Cupcake Café, because both make other baked goods in addition to cupcakes (as Sprinkles does not). Then Candace got onto the Food Network show Cupcake Wars, not as a contestant but as a judge, cementing her place over any would-be competitors. And finally, just in case any competitors got too close, the Nelsons engaged the powerful Silicon Valley law firm Wilson Sonsini Goodrich & Rosati to attack any dessert purveyors they felt were encroaching on their turf. So far, they have sued three, for infringing on their name or their cupcakes' distinctive fondant dot, and sent cease-and-desist letters to more.