Business

Editorial: California’s battle with Weedmaps shows the growing pains of legalization

Weedmaps may have positioned itself as Yelp for pot shoppers, but state regulators say there is a crucial difference: The bulk of the businesses in Weedmaps’ directory are illegal, even under state law. That’s undermining one of the primary goals of Proposition 64, which was to extinguish the black market in favor of a state-authorized, highly regulated cannabis marketplace.

Last month, the state’s Bureau of Cannabis Control sent Weedmaps a cease-and-desist letter, threatening fines and criminal penalties if the company did not remove the listings for unlicensed marijuana businesses. The Weedmaps site and app let users search through listings submitted by marijuana dispensaries and delivery services, then offer their own reviews. The bureau said the Irvine-based company is violating a state law that bars websites from publishing a cannabis business advertisement if it does not display a license number.

The warning letter was part of a broader crackdown launched after licensed retailers complained that they were being undercut by unlicensed ones that didn’t pay the state’s hefty fees and taxes. The bureau sent 900 warning letters to marijuana shops suspected of operating without state licenses since Jan. 1. Many of those illegal shops, ironically, were found on Weedmaps, state officials said.

Weedmaps responded this week with a letter to Lori Ajax, the bureau’s chief. The company argues that it’s an interactive computer service that cannot be held liable for the behavior of its users under Section 230 of the Communications Decency Act. This federal law has been vital to the development of online start-ups that rely on user-generated content, such as the ones that grew up to become Twitter, Craigslist and Facebook. And it may very well shield Weedmaps and its competitors from state rules on advertisements.

Check out our updated map showing shops licensed to sell recreational cannabis in California.

Just because the state may not be able to compel Weedmaps to take down illegal listings, however, that doesn’t mean the company shouldn’t do it, as a good corporate citizen and supporter of Proposition 64. In fact, Weedmaps executives have said they will banish unlicensed pot shops from the site — eventually.

A Weedmaps billboard in Hollywood. The company has been given a cease-and-desist order by the state’s cannabis czar and told to stop promoting businesses that are not legally licensed by the state. (Photo courtesy CALmatters)

Sorry, Weedmaps, eventually doesn’t cut it.

The dilemma here is that California is experiencing the growing pains of transitioning its marijuana businesses from a largely uncontrolled, unchecked and underground industry into a highly regulated, taxpaying marketplace (although it remains illegal under federal law). This was never going to be an easy process. Los Angeles alone had hundreds — perhaps well over a thousand — medical marijuana dispensaries, the vast majority of them unauthorized, plus growers, manufacturers and other cannabis businesses that were operating prior to the passage of Proposition 64 in November 2016 legalizing recreational use.

The ballot measure gave cities and the state roughly a year to develop regulations and a licensing regime before commercial recreational cannabis sales could officially begin on Jan. 1.

Weedmaps contends that it’s too soon to begin cracking down on unlicensed pot shops, many of which have been operating — legitimately or not — as medical marijuana dispensaries for years. These businesses often want to join the legal market for recreational pot, but they are located in cities that are still developing regulations or have delayed licensing. Others are based in cities that continue to ban recreational sales, which local governments are allowed to do under Proposition 64.

Related: Search our database of local marijuana policies

Here’s where Weedmaps is right: California should be making it as easy as possible for legitimate operators to get licensed. Simply forcing Weedmaps to remove listings of unlicensed operators won’t magically diminish the black market if the legal market isn’t big enough to meet demand.

But at the same time, Weedmaps is helping to extend the life of unlawful operators and hurting the businesses that have gone through the expense of getting licensed. That ultimately impedes the effort to clean up the industry. That’s why one of Weedmaps competitors, Leafly, announced last month that it was removing listings for unlicensed businesses from its pot-shop-finding website.

Weedmaps and others in the cannabis business have to recognize that they have a vital role in helping California tame the Wild West marijuana market into the regulated industry envisioned by Proposition 64. The sooner they do, the better.


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