Many people involved in the cannabis industry have complained that the online advertising giant Weedmaps has been fueling the black market by accepting ads from unlicensed operators.
According to the Orange County Register, “Weedmaps’ dominance of online cannabis advertising — has helped prop up the illicit market in the two years that recreational cannabis has been legal in California.”
Many cannabis entrepreneurs who’ve struggled to make money in the state’s strict legal market have blamed Weedmaps for helping the illicit market continue to thrive, since its service is often the first thing shoppers find if they do an online search for a dispensary in their city. This has given unlicensed stores and illegally operating delivery services a substantial advantage, since they haven’t been paying fees and taxes to comply with state regulations.
Weedmaps fought efforts that would have curtailed the company from its long-standing practice of accepting advertising from illegally operating companies. The company spent more than $100,000 in the second quarter of 2019 lobbying against a bill, CA AB 1417 (19R), that would have authorized the state attorney general, district attorneys and city prosecutors to assess fines on online platforms that display cannabis ads without license numbers.
Weedmaps won that round and the bill failed to advance.
However, in July of 2019, CA Assembly Bill 97 was passed, which lets regulators fine unlicensed parties up to $30,000 per violation, per day that they’re in violation of state cannabis laws. This means that the state could have been fining Weedmaps potentially hundreds of thousands of dollars a day since the bill took effect July 1.
Weedmaps responded by saying it would begin requiring a state license number for all retail listings on its site, indicating it will cease carrying ads for unlicensed cannabis shops and delivery services.
Buried in an otherwise unrelated news release, Weedmaps said it would be “restricting the use of its point of sale, online orders, delivery logistics and wholesale exchange software-as-a-service (SaaS) platforms to licensed operators exclusively.”
However, the company bought itself some time, saying that the process would take place sometime before the end of the year.
Fast forward to today, and Weedmaps is purportedly requiring that dispensaries and delivery services provide license numbers in order to advertise.
However, is Weedmaps actually verifying these numbers?
Reports are surfacing about ads appearing for illegal shops and delivery services using a legally operating company’s license number. In other words, the illicit shops and delivery services simply copy a legal company’s license number, and pass it off as its own. As long as an advertiser provides a “valid” license number they can list their dispensary, delivery or product on Weedmaps.
Since Weedmaps apparently makes no effort to verify these license numbers, ads continue to run for illegal operators and products, and the black market continues to thrive.
The company, which is in the middle of a capital raise, is reportedly telling investors that it is 100% compliant and legal. However, many familiar with the situation say that Weedmaps does not comply with the spirit, if not the letter of the law.
Because Weedmaps allows third-party users to post directly to its site, the company has contended that it is protected by a federal statute — Section 230 of the Communications Decency Act — which prevents tech platforms like Facebook and Google from being held liable for user content.
But California Assemblywoman Blanca Rubio cautioned her colleagues about taking Weedmaps at face value.
“Instead of putting our faith in a company with a demonstrated track record of advertising illegal businesses, the Legislature should enact strong laws which will protect consumers and promote the legal market,” she said.
The illicit market is estimated to be triple the size of the legal market in California. While there are several components to any solution to this problem, including lowering taxes on regulated businesses and encouraging more cities to allow licensed stores, one of the biggest factors is Weedmaps – and as long as it continues to allow advertisements for illegally operating stores, delivery services and non-compliant products, the black market will continue to thrive.