Weedmaps unlikely to receive fines for illicit cannabis firms’ ads – but vaping illnesses could lead to action, experts say

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Weedmaps, Weedmaps unlikely to receive fines for illicit cannabis firms’ ads – but vaping illnesses could lead to action, experts say

For legal marijuana businesses frustrated by ads for hundreds of unlicensed MJ retailers on Weedmaps, relief may not come immediately.

According to the California Bureau of Cannabis Control (BCC) and other sources, it appears online advertising giant Weedmaps can dictate its own timeline for removing ads from its site for unlicensed marijuana shops and delivery services.

That might not happen until Dec. 31, based on statements from California-based Weedmaps.

However, there is an outside chance the vaping illness epidemic – which some experts suggested may be related to an additive used in black-market vape oils made from vitamin E acetate and sold in illicit MJ shops – might force state regulators to step up that timeline.

But there’s no definite sign of that just yet.

“At this point, there hasn’t been any additional conversation about fines,” BCC spokesman Alex Traverso said when asked about the agency’s approach to Weedmaps.

“It’s something that we’re going to keep an eye on, and again, it will be telling to see how quickly they go about this delisting of illegal operators … but we haven’t made any determinations yet” on whether to fine Weedmaps or let the company remove ads for illegal operators at its own pace, Traverso added.

But, he emphasized “all options are on the table” if Weedmaps does not follow through.

The enforcement decision comes despite a new measure, Assembly Bill 97, which went into effect July 1 and would allow the BCC to fine Weedmaps or other unlicensed MJ businesses up to $30,000 a day for violations.

In August, Weedmaps reported it would begin requiring a state license number for all marijuana retail listings on its site, indicating it will stop carrying ads for unlicensed cannabis shops and delivery services Dec. 31 at the latest.

What’s next?

Jerred Kiloh, president of the United Cannabis Business Association (UCBA), sent a demand to both California Gov. Gavin Newsom’s office and the BCC last week asking Weedmaps be fined $85 million per day over the ads, per Assembly Bill 97’s provisions.

But he was told the state would let Weedmaps choose the timeline for removing all ads for unlicensed MJ retailers.

“Where both of their stances are coming from is they really want to bring as many people into compliance before they throw down the heavy hand of enforcement, and they’re doing that with every possible licensee in every possible case,” Kiloh said.

“Where we’re at is, how long are you going to let someone else tell you they’re going to break the law and when they’re going to stop. That’s a bad look for California, and that’s a bad look for enforcement.”

The alternative communicated to him from state officials, Kiloh said, is a likely court battle between the state and Weedmaps, which has deep pockets and could likely afford a lengthy legal fight to avoid any financial culpability.

In a response last year to a cease-and-desist letter from the BCC, Weedmaps asserted federal protection under the Communications Decency Act. If the BCC tried to levy a hefty fine, Weedmaps could fight back, perhaps dragging out the entire situation even longer, Kiloh said.

“And when you look at a cost-benefit analysis, if they’re done in three months and they’ve guaranteed that and they do that, that’s probably a bigger win for everybody,” Kiloh added.

That doesn’t mean the UCBA is going to give up, however, and Kiloh suggested there may be a “renegotiation” at some point before the end of the year on what state regulators might do about Weedmaps’ ads.

Vaping illness epidemic a possible factor

Kiloh said the UCBA is going to continue to make the case to the public, as it did in its letter to Newsom and the BCC, that Weedmaps presents a public health threat, directly linked to the recent vaping illness epidemic, since many of those illnesses have been tied to illicit market vape cartridges.

“We’re not going to stop until they either delist or start getting fined. This fight will last until Dec. 31 if that’s what it’s going to take,” Kiloh said. “This is death and diseases and things that are hurting our California residents, and (Weedmaps is) continuing to push them.”

Weedmaps representatives did not respond to requests for comment for this story.

Nicole Elliott, senior cannabis business adviser to Gov. Newsom, also did not respond to requests for comment.

But Traverso, and other industry insiders, said the vaping illness epidemic could be a key factor in getting the ads removed sooner than the end of the year.

“If the state agencies were smart about it and they really wanted to shut down Weedmaps, they wouldn’t use the BCC. They’d use more traditional systems where there is case law, consumer (protection) laws that are on the books,” said Avis Bulbulyan, the CEO of Siva Enterprises, a Los Angeles-based consultancy.

“They could probably shut Weedmaps down a lot sooner, and it’s because … it is causing people to get sick. It is causing people to die.”

The California Department of Public Health has identified 67 reported cases of the illness. There has been one reported death in Los Angeles County from the outbreak.

Khurshid Khoja, a Sacramento-based MJ industry attorney, added, “Given the current concerns over illicit market products, it does make it a lot more likely that you’re going to see robust enforcement than before all this came about. There’s much more pressure to do something.”

“If the governor’s office were seen to be passive, given the attention being paid now to illicit market products, I think that would be a huge political liability. … And it doesn’t seem like there’s any way but to say, ‘Clean up your act, and here’s your timeline to do it.'”

Delisting is expected

Every industry source contacted for this story expressed confidence that Weedmaps will, over time, remove all of the unlicensed retailers from its website.

There’s also the real possibility that if Weedmaps does not remove all unlicensed retail ads, it could face at least one class action lawsuit from legal businesses that compete with illegal shops.

One law firm, Zuber Lawler in L.A., said it has a class action lawsuit ready to file if Weedmaps keeps advertising for illegal shops.

The impact

If or when Weedmaps actually removes all unlicensed retailers from its website, Bulbulyan said that would prove the “single biggest, most impactful change this industry sees to a legalized market.”

Kiloh estimated that legal operators could see business boom by as much as 50% because Weedmaps is so well-known among consumers and directs so much foot traffic to retailers.

Not only that, but it could also arguably have the biggest impact on the illicit market, far more than any actions by law enforcement or state regulators, simply by removing those shops from the public’s awareness.

“The majority of (illegal retailers) are relying on the fact that you get a listing on Weedmaps, that’s going to drive traffic,” Bulbulyan said.

“It’ll take a month, two months, three months, but those companies really can’t survive that long.”

For more of Marijuana Business Daily’s ongoing coverage of the vaping crisis, click here.

John Schroyer can be reached at johns@mjbizdaily.com