Online advertising giant Weedmaps said Wednesday it will begin requiring a state license number for all marijuana retail listings on its site, indicating it will cease carrying ads for unlicensed cannabis shops and delivery services.
The move could prove an enormous boon to legal retailers that have been struggling to compete with illegal shops simply by eliminating the black-market advertising presence on Weedmaps, which remains one of the most commonly used dispensary finders by marijuana consumers.
A spokesperson for the Irvine, California-based company did not immediately respond to a request for further comment, so it’s unclear exactly when the new requirement may go into effect.
According to a news release, Weedmaps will also 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.
“In addition, Weedmaps will explore ways to make it easier for patients and adult-use consumers to identify the license number on advertised listings.”
Insiders in California’s cannabis industry said Weedmaps was “capitulating” to pressure from both state regulators and others in the industry to quit carrying ads for hundreds of unlicensed companies that don’t comply with state regulations and don’t pay taxes, which critics of Weedmaps argue has undermined California’s legal market since it launched in January 2018.
Weedmaps CEO Chris Beals said in the release, however, that the move is a reflection of the company’s “commitment to working with lawmakers and regulators to foster a flourishing legal market.”
The California Bureau of Cannabis Control (BCC) sent Weedmaps a cease-and-desist letter in February 2018 regarding its ads for unlicensed retailers, but the company last March refused to comply, contending it was protected by federal law.
That means Weedmaps has been advertising for nearly 2,000 illicit competitors of California’s legal market for over a year and a half.
Sacramento-based cannabis industry consultant Jackie McGowan estimated that, as of Aug. 1, Weedmaps was still carrying ads for roughly 400 unlicensed marijuana storefronts and 1,400 unlicensed MJ delivery services in California.
Weedmaps conceding to state
“That’s how I read it – they’re capitulating,” Khurshid Khoja, a longtime California cannabis attorney, said of Weedmaps’ statement.
Weedmaps’ ads have served as a flashpoint since the legal market launched and have led many in the legal market to push for any action they can get to force the site to stop advertising for unlicensed shops.
Longtime critics hailed Wednesday’s news as a win.
“It’s good to hear. That’s all we’ve ever wanted,” said Jerred Kiloh, the president of the Los Angeles-based United Cannabis Business Association.
Kiloh has been one of the most vocal critics of Weedmaps and has been sponsoring a bill in the state Legislature that would help force Weedmaps to stop advertising for unlicensed retailers if it becomes law.
But he and others in the industry believe another new law – Assembly Bill 97 – has already given the BCC the tools it needs to force Weedmaps to comply because the statute includes a possible $30,000-a-day fine for violations that could apply to companies that don’t hold state MJ business licenses.
If regulators chose to do so, they could have possibly levied a fine in the tens of millions of dollars against Weedmaps for its carrying ads from illegal MJ sellers, sources told Marijuana Business Daily.
“I know the BCC has been putting pressure on them to comply or else, so this is the ‘or else’ part,” Kiloh said.
BCC Chief Lori Ajax wrote in an emailed statement to MJBizDaily Wednesday night, “Today’s announcement is a step forward for the legal California cannabis industry, which will aid consumers in identifying licensed cannabis businesses when looking to purchase safe cannabis.”
“The Bureau is continuing enforcement activities against businesses not complying with cannabis advertising laws.”
‘Even playing field’ may result
McGowan wrote in an email to MJBizDaily that she “applauds” the move by Weedmaps.
“Over the past two years, Weedmaps has continued to undermine the licensed industry by advertising illicit operators just as the newly legal market has attempted to expand,” McGowan wrote.
“According to a report that came out just last week, the illicit market remains almost three times the size of the legal market. Legal businesses deserve an even playing field, and that’s not possible when a technology platform plays both sides.”
Kiloh also estimated that Weedmaps’ support for illicit retailers may have cost the legal industry upwards of $800 million in sales since January 2018 in the city of Los Angeles alone and cost the state of California $200 million in marijuana tax revenue.
A good bit of that revenue may shift into legal channels once Weedmaps stops directing consumers to unlicensed shops, Kiloh said, since the site is one of the most well-known marijuana-shop finders on the internet.
Nicole Elliott, senior adviser on cannabis in California Gov. Gavin Newsom’s Office of Business and Economic Development, expressed measured support for the move but implied Weedmaps will need to live up to expectations.
“From day one we’ve made it clear we want to support the legal market. This includes ensuring everyone is abiding by the law. Advertisers are no exception,” Elliott wrote in an email to MJBizDaily. “While this is a signal that Weedmaps seems to be taking our priority of compliance to heart, like anything, the devil is in the details.”
John Schroyer can be reached at [email protected]