The Case Of Weedmaps And California

The Case Of Weedmaps And California

Weedmaps and California are in a jurisdictional tussle. What does it mean for the marijuana industry in the Golden State?

On February 16, Lori Ajax of California’s Bureau of Cannabis Control sent a cease and desist letter to Weedmaps, informing the online marijuana directory and search platform that it needs to stop running ads for unlicensed pot retailers. A few weeks later, Weedmaps responded, claiming the bureau lacks the authority to police who can advertise on the site. While the tussle could lead to disciplinary action for the site, it could also lead to clearer rules for canna-businesses.

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In Ajax’s letter, she explained that Senate Bill 94 requires that ads for cannabis retailers must include a California license number showing they’re permitted by state and local authorities. The license number is also intended to ensure that, when all regulations are fully enacted later this year, all marijuana sold by a particular retailer has been tested for safety, properly labeled, and is otherwise in compliance. If Weedmaps doesn’t immediately drop ads for unlicensed businesses, Ajax says, the company could be subject to criminal and civil penalties, including civil fines for each illegal ad.

While Weedmaps competitor announced that it was dropping ads for all unlicensed retailers as of March 1, Weedmaps denied Ajax’s request to cease and desist running such ads.

Online advertising giant Weedmaps, which was founded in 2007 and has offices from Denver to Berlin, helps visitors locate dispensaries and browse their selections of cannabis. Its site and app use a Yelp-like system to rate cannabis retailers — many of which are unlicensed.

As Marijuana Business Daily reports, the company responded to Ajax’s letter with a letter of its own, claiming that it is “not a Licensee subject to the Bureau’s purview,” and that he bureau is “putting the cart before the horse” by focusing on enforcement while the vast majority of existing canna-businesses are still unlicensed or in the process of obtaining permits.

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While Weedmaps hasn’t publicly commented on its letter, company president Christopher Beals was defiant about the issue of unlicensed retailers during an interview in February.

“The thing is, at the end of the day, we’re an information platform,” Beals said. “We’re showing the same information that Google and Yelp and Craigslist and 30 other websites are showing.”

Beals went on to say that if states and cities really want to control the illegal market, they need to establish a solid regulatory framework and issue permits to enough licensed marijuana businesses to meet demand.

“To sort of say, ‘Let’s pretend an illegal market doesn’t exist’ or that people can’t just type ‘dispensary’ into Google and find this information… isn’t really realistic,” he added.

Lawyers close to the industry are split on the issue.

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One attorney, Omar Figueroa, told Marijuana Business Daily that the bureau has jurisdiction over all “commercial cannabis activity” in the state, up to and including Weedmaps. He also says, however, that it’s unclear what that means in terms of disciplinary actions.

Another attorney, Khurshid Khoja, says that, according to his reading of state law, the bureau only has legal jurisdiction over licensees, not ancillary businesses like websites that serve as advertising platforms. Khoja says that since the main punishment the bureau can impose is suspending or revoking licenses, its disciplinary procedures won’t apply to Weedmaps.

While bureau spokesman Alex Traverso told the Orange County Register that there is “no immediate action planned” against Weedmaps, the company’s current strategy and defiance could be damaging its reputation among its California clients.

“It’s not just the legal concerns that they have to consider. It’s goodwill among licensees,” Khoja told Marijuana Business Daily.

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As Khoja explains, the bureau’s cease and desist letter was written at the request of current licensees, who are also customers of Weedmaps. In addition, Figueroa says, Weedmaps could be angering customers by charging licensed retailers thousands of dollars a month, while potentially charging unlicensed competitors far less. Some licensed retailers, he said, have already complained.

“Weedmaps could also get sued by its advertisers who are licensed for unfair business practices,” Figueroa said. “California has pretty strong protections for that. There’s definitely a risk of that.”