Weedmaps counters California’s order to quit assisting unlicensed cannabis companies

, Weedmaps counters California’s order to quit assisting unlicensed cannabis companies

Weedmaps apparently doesn’t plan to drop its listings for unlicensed California marijuana businesses any time soon.

In a letter sent Monday to the California Bureau of Cannabis Control, the online marijuana advertising giant wrote that it is “not a Licensee subject to the Bureau’s purview.”

The letter – signed by Weedmaps CEO Doug Francis and President Chris Beals – was a direct response to a cease-and-desist memo the company received from the agency nearly a month ago.

In its order to Weedmaps, the Bureau of Cannabis Control – which is responsible for licensing all of California’s cannabis retailers, distributors, testing labs and microbusinesses – demanded that the website stop advertising unlicensed cannabis retailers or face “criminal and administrative penalties.”

But Weedmaps essentially refused to comply on Monday.

In an interview with Marijuana Business Daily on Monday, Beals said his company was “a bit surprised” by the Feb. 16 cease-and-desist order.

He also said the bureau is “putting the cart before the horse” by focusing on enforcement while the vast majority of existing MJ companies are still unlicensed or attempting to obtain permits.

“Given how freely available this information is (online),” Beals said, “to take a very embryonic market, and say, ‘Let’s just pretend that it’s not embryonic and just pretend that these businesses don’t exist and that you can’t see them driving down any street in California,’ is not the right place” for the state to be.

A spokesman for the bureau did not immediately respond to MJBizDaily‘s request for comment about Weedmaps’ response.

Legal murkiness

There’s no clear answer currently as to what may happen next.

Two California attorneys with extensive experience in the cannabis industry had differing opinions on the strength of Weedmaps’ legal strategy based on the company’s response to the bureau.

At the heart of Weedmaps’ response is an argument that the bureau doesn’t have legal power to order it to stop accepting advertising from unlicensed companies.

The company also cites the Communications Decency Act (CDA) of 1996, a federal law that Weedmaps claims gives it “pre-emptive protections” as an “interactive computer service.”

But that won’t hold water with the bureau or in the courts, Sebastopol-based attorney Omar Figueroa predicted.

“The letter reads like it was written by a law clerk and they need to get some lawyers,” he said. “They just admitted to violating California law.”

Figueroa said the bureau has jurisdiction over all “commercial cannabis activity” in the state, up to and including Weedmaps.

He said he believes the bureau has the power under state law to order Weedmaps to stop carrying ads for unlicensed MJ companies.

While it’s not clear how that power may be exercised, Figueroa said there are a number of possibilities.

“The worst-case could be the feds come in at the behest of the state because (Weedmaps is) just being defiant and refusing to obey California law,” he said.

“Another step back could be federal asset forfeiture. Another step back would be a lawsuit in California court where Weedmaps would bring up its (CDA) pre-emption argument to try to get it into federal court.”

Another longtime cannabis industry attorney, Sacramento-based Khurshid Khoja, disagreed.

“You do have an issue where, technically, Weedmaps has a point,” Khoja said.

According to his reading of state law, the bureau doesn’t have legal jurisdiction over ancillary companies such as websites that act as advertising platforms.

“It’s not as though the disciplinary procedures that are set forth for (cannabis industry) licensees are going to be effective against Weedmaps,” Khoja said.

“The main punishment that the bureau can impose is they can suspend the operation of a licensee for a period of time, or they could revoke the license.

“Weedmaps doesn’t operate as a licensee, so that censure isn’t going to have any kind of impact.”

Weedmaps’ strategy may work as a legal Band-Aid for Weedmaps for the time being, Khoja said.

However, he believes the company will eventually have to quit accepting advertising from unlicensed retailers, medical collectives and delivery services.

He also noted that California law hasn’t yet established specific regulations for ancillary companies like Weedmaps, but that could happen either in the finalized regulations due this summer or through a separate bill in the state legislature.

“That’s the likely outcome, if Weedmaps decides to challenge this, that there will be a legislative solution addressing this,” Khoja said.

Meanwhile, Weedmaps’ Beals said the state has not clarified what types of penalties it may be facing if it doesn’t comply with the bureau’s order.

An agency spokesman told MJBizDaily last week that the penalties “are not yet specified.”

Business ramifications

Figueroa and Khoja agreed that a separate but important consideration for Weedmaps is its reputation among its California clients.

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

“Remember that the action the bureau took was at the request of current licensees, who are customers of Weedmaps.”

Figueroa added that Weedmaps could be taking a self-destructive approach to its customers by charging licensed retailers thousands of dollars a month but perhaps far less for unlicensed competitors.

That’s a complaint he’s already heard from at least one Bay Area dispensary manager.

“She was like, ‘Why am I paying for you to advertise my unlicensed competition and I have to pay even more?’” Figueroa said.

In addition, he noted, it’s quite possible Weedmaps could face legal threats from its own California client base.

“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.”

John Schroyer can be reached at [email protected]

31 comments on “Weedmaps counters California’s order to quit assisting unlicensed cannabis companies
  1. Lawrence Goodwin on

    In every state of our fair land, the 81-year federal prohibition of “marihuana” has created countless headaches. Add yet another, Weedmaps v. California state regulators, to the long list of them.

    It seems, for now, that Weedmaps should just cooperate with them to preserve the company’s role in popularizing legal cannabis. Why proceed on such flimsy legal grounds? Many of those current storefronts cited probably won’t be there long, after receiving their own notices to cease operations.

    Beals and Francis should count their blessings and work to preserve the role that Weedmaps plays in popularizing legal cannabis. I live in the most repressive, weed-hating state of New York, where companies like that are barely allowed to exist. I yearn for a day when New York adults can go online and find the nearest legal dispensary of cannabis products. What a dream!

  2. Gregory Gilbert on

    I got my law degree from a box of cracker jack and I agree. The licensing bureau has no authority over an unlicensed entity. Now if the California AG wants to act that is a different matter but I can’t say which way it would turn out.

  3. Jon on

    Bull crap weedmaps is in it for the little guys who do not have the millions of dollars it takes to open a dispensary or obtain I license. I comply with all laws through prop 215 but I will be forcednout of buisness because these deep pocket dispensary are lobbying the corrupt czar of weed to shut out the medical collective model. Please stop these big corps from taking over!

    • sean on

      You have no idea what you’re talking about. They’re actually anti little guy.
      if you don’t have the cash to get a premium icon then you are sh**, and they will let you know too. sure they will take your money, but that is it.

  4. Khurshid Khoja on

    As usual, John Schroyer has covered a very complex subject succinctly for his readers. That said, given the necessary brevity required to be a good journalist, he wasn’t able to reflect all of my comments on Weedmaps’ legal argument in this story. The reason that the Bureau may not have jurisdiction over Weedmaps’ Listing of unlicensed operator’s is due to the black letter law of California Business and Professions Code Section 26151– which specifically addresses advertisements by and for “licensees”. That said, the Bureau definitely has jurisdiction over unlicensed operators (who are also not legitimate patient collectives) by virtue of applicable criminal laws independent of MAUCRSA and the Bureau’s disciplinary guidelines. Additionally, accomplice liability could still attach to any party that aids and abets unlicensed and unlawful commercial cannabis activity.

  5. Barry Broad on

    The article does not mention that the Legislature also has the power to step in and deal with Weedmaps conduct….perhaps something along the line of a $100,000 per day civil penalty for knowingly accepting advertising from unlicensed retailers. Arrogance and stupidity is a bad combination and Weedmaps has an abundance of both.

    • Hastings RH on

      Weedmaps has to fight there are so few legal dispensaries it will be out of business.. Way to go Cali!! Got keep that anti business mantra going

  6. Jeffrey on

    Weedmaps will make it easier for the BCC to go after non compliant shops. They are essentially providing a hunting list making the BCC’s job of closing down the non compliant shops easier.

    Business practices where you unfairly treat the customer base (unfair pricing practices) and tell regulators no to compliance, rarely go the way of the business. The BCC is the state. The state will act to enforce its will, and Weedmaps may be making a very short sided move.

  7. Rodger on

    this is a serious overreach of the bureau’s regulatory authority. the regulations require the licensee to display their license number in any and all advertisements, but it has no authority over where those advertisements are listed. is a newspaper responsible for the advertisers it allows? does it have to insure that each is licensed and that the advertisement conforms to its industry – specific regulations? NO.

    • sean on

      what about the legal businesses? i have to pay $4800.00 in rent, 5% city tax, state tax, and all my inventory that i can sell because I’m being undercut by fake products that are carried by unlicensed businesses. a very dangerous environment has been created.


  8. Kevin Baker on

    Most Cannabis companies currently in the process of getting compliant are still operating legally under Prop 215 until they receive full compliance. This will take a while, as state and many local permits are still being formed. Prop 215 does not sunset until January 9, 2019. It seems a little early to impose such restrictions during the period of transition to compliance. The BCC would be wise to wait until the dust settles before making their moves.

  9. Emily on

    This is crazy. If I was planning on opening a business or was already in the process of changing my business from 1 thing to another, I would think that I am entitled to advertise as I want. Examples:

    1. I plan on opening a grocery store – I can start advertising before I open.
    2. I plan on opening a licensed dispensary – I would want to start advertising before I am open and further more that might be before I was officially licensed.
    3. I am the manufacturer of cookies – I want to advertise them before they hit shelves.
    4. I am Dave and Busters restaurant and I am planning on opening my first location in a state that has never heard of me…. I start advertising a year before I have even began to break ground on building the location.

    This seems like a far reach. When companies like backpage (web advertising platforms) charge for advertisements that are used for human trafficking and can’t be taken down because of the laws in place provided to internet based advertisement companies, I really don’t know how this is any different.

    Now Weedmaps should be charging the same rate to everyone based on what ever package people decide to purchase. That being said transparent price structures should be available if they are not already.

    Just thoughts to ponder…..

  10. Janice on

    If the cannabis business is EVER to gain legitimacy as run by law-abiding citizens, the attitude that Weedmaps is displaying will set us all back 20 years. I realize the money is so good Weedmaps can’t imagine giving it up…but Napster thought they were above the law too. Didn’t work out so well for them. And won’t work out for Weedmaps either.

    It’s impossible for any spin to make this look anything less than greedy, childish and arrogant. Rules apply in spirit as well as law. Change your model. Or you won’t survive.

  11. Pat on

    The state of ca. did not have to roll out the “law” and make its effective date Jan. 2018 if it wasn’t reasonably and prudently prepared to do so. Because they weren’t. They just went for it, and let the devil may care.

    Again, I think this was accomplished by undue special interest influence that were in a hurry to get a foot in the door to either maintain brand name recognition or get a new brand up, all at the expense of the other 99% whom hadn’t greased the wheels, for whatever reason. However, it is the governments’ job to be an arbiter; a standard bearer when it comes to promulgating and enacting state law. That’s not what’s happened, though. It’s essentially been a hocus-pocus at the state agencies, with really no transparency how decision making is taking place. It’s contrary to the govt. role to engage in that kind of behavior. You can engage in that kind of behavior if you’re a private business.

    When the govt. conducts itself in this manner, all kinds of bad things are going to happen. This is just one of many to come. I would argue, that if Weedmaps turns out to be correct, not only will the unlicensed folks will be able to take up suit with the state; the licensed one’s will be able to do so as well. It seems that the state set itself up; but morever, its taxpaying citizens for this to happen. This is just a sneak preview of what underhandedness of this kind will bring, at the ca. taxpayer’s expense, because the state did not care enough to ensure that these kinds of problems would be minimized/not exist. One has to ask: How hard was it for the state to anticipate this or anything else that’s currently unraveling right before them? Of course the state had enough brain trust to have gotten it generally right. They can’t be that stupid. Right? The state seems to have largely ignored common sense and the public’s interest just to please a few and to arguably enrich themselves ( which is also not in their mandate ) while minimizing their workload by not having to deal with a much bigger pool of licensees by now. Unfortunately, that’s not how it works. Especially for the kind of population that they’re dealing with ( potential cannabusiness owners across the spectrum that face unreasonable barriers to entry ). That personality type has been known for decades. The state chose to ignore the most salient concerns around reasonable cannabis regulation, and this is what you get.

  12. Mo on

    Weedmaps has little to fear from California regulators, true. When their legally compliant advertisers start filing suit on any number of unfair business practice causes of action, however, they might wake up to their folly. That will get expensive quick.

  13. Don on

    Why doesn’t the CA Regulators use the information from Weedmaps to identify and locate unlicensed dispensaries and close them up. Or is that too simple?

    • Jon Drucker on

      Bingo! You hit the nail on the head. Why doesn’t the BCC just send out cease-and-desist letter to all of the unlicensed Weedmaps advertisers? Answer: Because it would be too much effort.
      The BCC getting entangled in a legal fight with an online advertiser such as WeedMaps reminds me of the insult… Good enough for government work.

  14. Hastings RH on

    Weedmaps knows it is out of business if it only caters to the very few retailers that are allowed to be licensed. I’d think Weedmaps operating on solid legal ground..

    Maybe number one anti business state Cali will wake up and stop the stupid nonsense and allow all retailers to get legal instead of the few pay to play cronies. They would increase tax revenue 7 fold at minimum and likely far more.

  15. Michael on

    I am a little guy and been working hard to be legal and for the state to ask weedmaps to stop makes me feel better. Black market is black market. If a store has no permit then they are hurting the legal ones and weedmaps charges fees to each store so that is why they are pissed…Weedmaps should help our industry not turn a blind eye…shame on you

  16. John on

    I own a dispensary/ adult use store that is fully licensed. I think it in unethical for Weedmaps to continue this policy. It’s very simple.. money, I am paying their exorbitant fees and it pisses me off when I ask about licensing the reps are well trained in belligerent back speak. If they don’t stop taking money from unlicensed cannabis businesses, we should boycott and go to another site that is a good corporate neighbor and actually supports the industry in a positive manner.

  17. John chaisson on

    Weedmaps is in it for the money period. The businesses that are doing the right thing, pay taxes, stay compliant shouldn’t be penalized and unfairly treated by a multimillion dollar company. It’s really only about money. I pay those exorbitant fees every month and tolerate their weird sales tactics of when they call you to tell u this higher ranking is coming do you want it for thousands more a month. ? I say we boycott them until they show some corporate leadership.

  18. Use the phonebook on

    Check out message ads on backpage and craigslist …. ?our world is ruled by money.

    Weedmaps has the money to go to court

  19. Rick on

    Typical of these new state regulatory agencies, they start out by flexing their muscles rather than having a simple conversation with Weedmaps. I would have contacted them and explained the state’s position and asked if they’d be willing to comply.

    If not, then I’d approach the AG and seek their advice and proceed as they advise.

    I live in Washington state, our agency operates the same way, with a “our way or the highway” attitude and it’s very counterproductive and creates a lot of ill will between the regulators and the regulated.

  20. Levi Lyon on

    I’m a business owner and entrepreneur, I thank WeedMaps for being a great resource to find cannabis. WeedMaps is on the forefront of normalization of cannabis 🙂 If we the people allow the state or government to surpress information and limit the right to start a creative business venture, we will become a pretty lame country to live. This is “The People VS Larry Flynt” all over again. Although not everyone argrees to Larry Flynt and Hustler it’s our right and duty to uphold speech and freedom of press. We may also not agree with weedmaps business practices but they have the right to do business however they want. If you don’t like it put your own better ideas to commerce. Just my opinion but be careful what rules we allow to have in place and what practices we allow the state and government to hold!

    I also totally agree to pre-advertising & marketing of business. When someone publishes an idea it helps in achieving goals. Why couldn’t someone aiming for opening a ligetiment and licensed business start campaigning for it. Why does a business like WeedMaps have to be responsible for compliance, they are just a business trying to follow the American dream. Example might be that in general people use Craig’s List to search for deals on items that are on “Sale” or “For A Deal” even though everyone rides the risk of buying stolen property! Should we shut down Craig’s List or hold them responsible? Or what about hiring a contractor that doesn’t have a business license off of Angie’s List? It should be up to each ones individual belief where they spend their money or the business they support.

    STOP placing so many rules to a simple concept, (States that want to legalize vote it in, 21+, charge tax, advertise however you can and tax revenue goes back to education). Oh and give the patients that need their medicine an opportunity to grow whatever they need to survive. Everyone is debating “wrongs & rights” but the truth is some people need their medicine and the focus should be getting the law right for medical users first. Next set simple taxes in place and worry about governing testing labs and public safety. Another example of too much regulation is the cannabis cafe business plan. If people want a place to socialize and smoke let them have a venue. If you don’t like than don’t go! License and tax it, let the state create jobs and revenue! Great job to Colorado especially for allowing business owners to dream (finally allowing for social/public consumption Café). STOP allowing the states and government to take the fun out of being a business owner! Every cannabis business owner I’ve ever met is the most passionate person I know. They are strong in their beliefs and reasons why they are involved in what they do. We need to give them the respect ? and opportunity to share their passion with the rest of us. I personally want to come to Califonia and see how the culture could exist creatively and spiritually. Who wants to shop at the McDonalds of Cannabis? We might be headed in that direction if we all don’t loosen up and let the creative business owners grow on their terms.

    Again and lastly, major props/five stars to WeedMaps for starting a company advocating for cannabis use in a country the federal government won’t except YET! Shame on anyone that is pro-cannabis for trying to limit the information and growth of our industry. ~Levi Lyon

  21. Katie on

    Here’s a thought… maybe the BCC could actually get going on the licensing, and then there wouldn’t be so many unlicensed ops going! These delays are ridiculous, and there is absolutely no reason for it. This industry has been thriving in CA for over 20 years. Get over yourselves. Weedmaps isn’t even that great, but props to them for standing up for themselves and the little guys.

  22. Gail Martin on

    What if we invade California, push the idiots into the Pacific and let the sharks have some fun. Oregon and Washington while we are at it–the entire west coast is a foreign country adverse to American values, beliefs and laws. Especially now that “Rocket Man” wants to make peace, it is unlikely he will strike Hawaii and the west coast–so its now up to us.

  23. DrScott on

    “…advertisers who are licensed for unfair business practices,”

    Each licensed business would sue Weedmaps directly…..

    17200. As used in this chapter, unfair competition shall mean and include any unlawful, unfair or fraudulent business act or practice and unfair, deceptive, untrue or misleading advertising and any act prohibited by Chapter 1 (commencing with Section 17500) of Part 3 of Division 7 of the Business and Professions Code.

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