Photo via O'Dea
It’s only been three months since California implemented its highly anticipated adult-use cannabis market, and state authorities are already beginning to crackdown on the Golden State’s unregulated pot shops and delivery services, even targeting online dispensary advertisers despite continued confusion about what exactly is and isn’t legal under state law.
According to reports from the Sacramento Bee and Marijuana Business Daily, California Bureau of Cannabis Control (BCC) chief Lauri Ajax sent a cease and desist letter to popular online dispensary advertiser Weedmaps in mid-February, claiming that the company had repeatedly violated the state’s Medicinal and Adult-Use Cannabis Regulation and Safety Act (MAUCRSA) by advertising canna-businesses without proper state license numbers.
“Your website contains advertisements from persons offering cannabis and cannabis products for sale that are not licensed to conduct commercial cannabis activity; therefore, you are aiding and abetting in violations of state cannabis laws,” states the letter from Chief Ajax.
As recently as two weeks ago, Ajax and the BCC said that they were using advertising sites like Weedmaps and its principal competitor Leafly to locate unlicensed dispensaries, which were then sent their own letters requesting cessation of unpermitted activity. Since then, Leafly has purged unlicensed operators from their database, delisting over 750 dispensaries and delivery services so far. Weedmaps, on the other hand, has kept all of their site’s listings intact, but not without risk.
“Please be advised that such violations may result in criminal and administrative penalties, as well as civil penalties for each violation,” Ajax wrote to Weedmaps CEO Doug Francis.
Weedmaps became a major presence in California cannabis under Prop. 215, the state’s loosely regulated medical marijuana program, charging thousands of dollars for prominent ad placement to dispensaries hoping to stand out in state’s legal weed Wild West. A bill passed in 2004, SB 420, theoretically allowed every canna-business to operate as a medical cooperative without requiring a state-level license.
Now, with MAUCRSA’s adult-use and medical regulations serving as the law of land in the Golden State, the BCC is asserting that those businesses are engaged in illicit cannabis sales, even if they are still following the rules of Prop. 215 and SB 420 — arguably undermining fully licensed businesses by offering cannabis products without pricey state and local taxes.
According to the BCC itself, though, MMJ cooperatives operating under SB 420 can remain active until January 9th, 2019, raising questions about what specific rules Weedmaps and the businesses they advertise are actually violating. Still, if slow-to-license pot shops invoke SB 420 as a defense in court, the subsequent legal restrictions and fees could make continued operation impossible.
Similarly, even with a legitimate Prop. 215 defense, new regulations about advertising medical cannabis businesses may lead the BCC to levy individual fines against Weedmaps for every single advertisement of an unlicensed business — an outcome that could potentially cripple the company.
“If I had to take a guess, based on what I know and who pays them and who they advertise for, I’d say 70%-90% of (Weedmaps’) revenues are going to dry up,” said Avis Bulbulyan, CEO of Siva Enterprises, a Los Angeles-based cannabis consultancy, to Marijuana Business Daily. “They are big enough, and hopefully they have enough reserves where they are going to be able to survive and sustain, but they leave themselves open for other companies to come in.”
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As of press time, Weedmaps has not responded to state regulators or removed unlicensed operators from their listings.