California orders Weedmaps to stop advertising unlicensed marijuana businesses

The honeymoon is over for Weedmaps and California’s gray-market marijuana businesses.

The California Bureau of Cannabis Control sent a cease-and-desist letter last month to Irvine-based Ghost Management Group, the owner of popular marijuana dispensary finder Weedmaps.com, ordering the company to stop advertising unlicensed operators or face unspecified “criminal and administrative penalties.”

Sacramento authorities recently sent their own cease-and-desist letter to the company over the same issue.

Weedmaps is one of the industry’s most successful online advertising platforms for cannabis retailers and delivery services, and it hosts ads for thousands of such businesses across the globe, including at least several hundred in California.

The letters – and Weedmaps’ upcoming response – could have significant ramifications for the California market, where competition is becoming heated between licensed operators that are paying local and state cannabis taxes and unlicensed dispensaries, medical collectives and delivery businesses that can undercut them on price by not paying taxes.

The bureau’s letter, addressed to Ghost Management Group CEO Doug Francis and dated Feb. 16, accused Weedmaps of breaking California law by continuing to advertise unlicensed businesses “offering cannabis and cannabis products for sale.”

Regulators also accused the company of “aiding and abetting in violations of state law.”

“Weedmaps.com must immediately cease all activity that violates state cannabis laws,” the letter reads.

Weedmaps did not immediately respond to a request for comment, and the company previously declined to specify to Marijuana Business Daily how many cannabis retail ad listings it has in California.

Weedmaps targeted

The bureau isn’t alone in blowing the whistle on Weedmaps.

The city of Sacramento’s Office of Cannabis Policy and Enforcement sent its own cease-and-desist letter to Weedmaps as well as a  local newspaper, the Sacramento News & Review, which was carrying ads from unlicensed businesses. The Sacramento Business Journal reported those letters Tuesday, and the Sacramento Bee reported on the city letter to Weedmaps in mid-February.

Joe Devlin, the Sacramento agency’s chief, told MJBizDaily that Weedmaps had not yet responded to his department, which sent Weedmaps the letter Feb. 7.

“I know that they’re violating the law and wish they would stop, and so does pretty much every other person who has my job in cities up and down the state,” Devlin said.

Alex Traverso, a spokesman for the Bureau of Cannabis Control, said Wednesday that his agency is in talks with Weedmaps.

Traverso also said it’s the only cease-and-desist letter sent to an online MJ advertiser “thus far” about posting ads for unlicensed MJ businesses.

He added that the possible penalties referenced in the letter “are not yet specified, but they, when determined, can be administered by law enforcement or by (the) bureau.”

Market shift

Weedmaps is a significant driver of customers for retailers.

Many of those licensed retailers have been making their case known for enforcement, even tipping off the bureau to illegal dispensary competitors, Traverso told MJBizDaily.

“Weedmaps is the No. 1 go-to source,” said Avis Bulbulyan, CEO of Siva Enterprises, a Los Angeles-based cannabis consultancy.

“Anybody that opens up a dispensary, the first thing they think about is, ‘We’ve got to get listed on Weedmaps and we’ve got to pay them for a gold listing.’”

Bulbulyan – who serves on a state cannabis advisory panel – said he knows Weedmaps has been trying to avoid this situation for months and that the situation came up during conversations with state regulators last year.

“They’ve actively been trying to push it off,” Bulbulyan said of Weedmaps. “I think this is the first time they’ve formally been put on notice.”

The financial hit to Weedmaps’ bottom line could also be “easily millions,” Bulbulyan said, given that its primary business model is based on advertising revenues that range up to tens of thousands of dollars a month for a single retailer.

“The city of L.A. alone – up until Jan. 1 and to some degree recently – had about 1,300 dispensaries, a couple thousand cultivators, manufacturers, distributors, and that was just the city of L.A.,” he said.

“Now you’re talking about the entire state having less than 2,000 temporary licenses issued.”

The fine print

The bureau’s letter to Weedmaps noted that California law mandates that any online advertisement of a marijuana business must include that company’s state license number, a rule Weedmaps has not complied with.

“The weedmaps.com-issued license number … is not a valid license number required by law, and weedmaps.com is in violation” of the law, the letter reads.

The Weedmaps letter is in addition to more than 900 cease-and-desist orders the Bureau has sent to unlicensed plant-touching companies, Traverso wrote in an email Tuesday to MJBizDaily. That’s up from about 500 two weeks ago.

The bureau’s letter also noted that Weedmaps could face “civil penalties for each violation.” That could conceivably mean a fine for each unlicensed business advertisement.

That’s in addition to lost revenue from unlicensed businesses that will probably pull their ad listings after they learn the state is using the site to track down unlicensed operators, Bulbulyan said.

And compliance with the bureau’s letter will likely contribute to the company’s financial losses.

“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,” Bulbulyan said.

“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.”

Leafly already pivoting

The Weedmaps news comes on top of a policy shift by the company’s primary competitor, Seattle-based Leafly, which also runs an online locator for dispensaries and delivery services.

Leafly announced in early February that, as of March 1, it would no longer advertise unlicensed California MJ companies because of state law.

On Tuesday, the company’s CEO, Chris Jeffery, told MJBizDaily it had already dropped about 750 listings as part of the shift, leaving the business with about 300 California listings.

“It wasn’t substantial,” Jeffery said when asked how much of a hit to its revenue Leafly had taken due to the switch.  “It’s less than a few percentage points of the worldwide listings that we have.”

Still, Jeffery noted that many of those dropped accounts will likely return, since plenty of companies in California are still wading through red tape to obtain a state business permit.

Once many of those companies get licensed, he thinks they’ll be back as paying clients.

“Some of these folks are getting their licenses, and obviously we’ll work with them to get back on the site when they do get their licenses,” Jeffery said.

John Schroyer can be reached at [email protected]

23 comments on “California orders Weedmaps to stop advertising unlicensed marijuana businesses
  1. Steve Martin on

    Weedmaps isn’t going to stop but nice try. From the state’s perspective they are trying to give the impression they are actually doing something on behalf of their registered entities.

    Reply
    • Damian Moran on

      Sure they will, or they’ll be shutdown and fined out of contention. If you haven’t noticed, California is not fukin around.

      Reply
    • Vinny Ka Ching on

      @steve you’re one rebel that don’t take laws serious. wake up, time to legalized or go bust if you’ve been under a rock or maybe just clueless.

      Reply
  2. Greg mcarthur on

    not the job of an advertising agency to enforce state laws . let the unlicensed continue to advertise, seems it would be much easier to find them. Sounds like a case of lazy law enforcement. do we really want to force any portion of any of this back underground . did we not learn our lesson .

    Reply
  3. MaximusBraveheart on

    CA: Regulators also accused the company of “aiding and abetting in violations of state law.”

    Oh the irony. Illegal much CA? What about the little 1A issue (First Amendment) ? Also FB, YouTube, Google and the like need to respect 1A and stop the censoring. The internet was created on the tax payer dime, DARPA. They should have no license to stop posts, videos, or memes that are reasonably decent. The ISPs can’t discriminate on content and public social networks open to anyone signing up should not be permitted to “book burn” shadow block either . MaximusBraveheart

    Reply
  4. Katie on

    Maybe if California didn’t decide to tax the shit out medicine that has been legally accessible for the last 20 years (not to mention make it nearly impossible for the numerous businesses to obtain growing and sales licenses), this wouldn’t be an issue. Capitalism is not the answer, especially not taxation without representation. I will keep purchasing my medicine from wherever is cheapest and readily available. Thank you, Weedmaps!!!

    Reply
  5. Steven Tuck on

    What about first amendment protections of patients to know where to get the best and cheapest medicine and let the pigs worry about who has a Licience and who doesn’t!

    Reply
  6. Hastings RH on

    Cali wouldn’t be Cali if it were not anti business and corrupt.. Legalization is a total sham and sellout to the greedy oligarchs whom fund these crooked politicians..

    Reply
  7. Skip Mots on

    Illegal – lower prices – jail time – pesticides – sketchy products – weedmaps free speech OR
    legal – higher prices – no jail time – certain restriction may apply =
    you can’t have it both ways (or maybe you can, just grow your own)

    Reply
  8. Tony B. on

    I have read where Jeff Sessions is willing to back down on his threat of enforcing federal law on the legal cannabis industries in states that have legal cannabis laws medical and recreational. If those states enforce their there laws governing such cannabis industries, and make an effort to curtail efforts to transport cannabis products into states that do not have laws legalizing such commodities in their state, that the federal government will leave them alone to conduct their business as proscribed by sate law.
    I am invested in pot stokes, I am basically broke and disabled, and in my line of work could not smoke pot for thirty years. Now I do not live in California any more but I was borne and raised in Santa Barbara. I have lived in Nevada for a number of years now, we have legal pot in this state and I don’t want to see the state I was borne in and called home for 37 years bring the wrath of the federal down on the rest of us states with legal pot. California more power to you enforce your laws and keep the fed out of our business.

    Reply
  9. John DeFloria on

    Contractors, and any other biz that requires a license has to post their lic. # when they advertise., and so should the mj industry, including weedmaps. Great news for the legal industry. Weedmaps has made millions doing essentially nothing.

    Reply
  10. Elsa Mayhew on

    It’s unethical to turn towards enforcement NOW for two good readons. 1) Legally, the non-profit collective model is still in effect through this year. Why shouldn’t those groups be allowed to post? Especially given the next reason… 2) Most operators havent even had the chance to apply for a license yet. Its not ethical to turn to enforcement until legacy operators have been given a fair chance to comply with the local and state licensing processes. If it were March 2019, Id support these actions but we’re only 3 months into phasing in a brand new system and most local governments are running way behind in getting regulations passed and any type of licensing system underway.

    Reply
    • Jim Boynton, TTE on

      The current state administration doesnt seem to care about any rights even when guaranteed by the constitution. They’ve gone rogue and are displaying clearly what happens when the powerful feel they can do whatever they wish, with impunity. They turned an illegal immigrant murderer loose on us just to prove that point, so brandishing their fascism in “government by edict” is nothing to them.

      Reply
  11. William Fower on

    The entire idea behind this enforcement issue is this: Big business is behind this, just look at Nevada. All dispensaries, local deliver businesses, etc. were shut down so that the Alcohol industry could control all distribution…simply called monopoly of the big boys network. Same thing happening in California, the big boys, before setting up shop want all unlicensed cannabis businesses out of the way so the big boys don’t have to worry about their bottom line.

    Reply
    • Jeff on

      We’re not a big business. We pay our taxes and comply with the law and we CANNOT compete with illegal operations that do neither. It is part of the government’s job to enforce the rules and level the playing field so people who follow the rules can stay alive. That’s the simple truth. If you cannot come to grips with that, you clearly have never run a legal business and are just a black marketer. You should not, and will not, survive in the legal market place because you just can’t follow the rules.

      Reply
  12. Concerned Consumer on

    Are Restaurants, Liquor Stores, Breweries, Pharmacies, Pharmaceutical companies, Alcohol brands, etc. that sell Alcohol, Tobacco and Drugs required to post their license on advertising? Just another unnecessary prohibition move against this harmless plant.

    Reply
  13. Jim Boynton, TTE on

    Leave it to the grafting bureaucracy to seek to pick the winners/losers in the cannabis boom. The taxation structure which they propose has effectively created and sustains the black or grey market activity by being so draconian as to FORCE legitimate business underground.
    NOW they want to squelch 1st amend rights of advertisers.
    Weedmaps should move their operation next door, to Nevada and enjoy the tax benefits of that state while still advertising here, even for free!
    Seriously people, do you really think this administration has ANY thought whatsoever of acting in benefit of consumers? How will purity laws be enforced in the black market? They only want to get their hands on that tax revenue, period.
    SHAME on the governor and his minions, you are destroying Cal’s position as a world leader for your own short term narrow view greed.

    Reply
  14. Natia on

    This is good idea.. just get legal.. if not then we will loose. Not fair to the Business who pay to get it right. Let’s help support them. Soon it will be all legal. Until get it done right.

    Joint By Love Cannabis Wedding Magazine will only list valid license dispensaries. We hope to get right the1st time. Let Grow the right way.

    Reply

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