Legal medical marijuana delivery services have been frustrated for years by competitors who haven’t bothered to acquire licenses or pay taxes. California state regulators have finally taken notice. Will they take action?
In 2011, Kevin Reed, a San Francisco businessman, went to authorities with a problem.
Reed’s business, The Green Cross, delivered medical marijuana to qualified patients. It was the only one of its kind with a permit from the city of San Francisco to operate, but there were at least 19 other cannabis deliveries in San Francisco — Reed’s competitors — advertising their services in print and on the web. None of those outfits had bothered to get a license or pay the attendant permit fee of roughly $9,000 a year. And since the illicit delivery services weren’t permitted, it was reasonable to assume they also weren’t paying state or local taxes.
Reed didn’t ask for a crackdown, he merely asked for a “leveling” of the playing field. City public health officials acknowledged that the unlicensed deliveries were probably breaking the law and not paying their taxes, but also said there wasn’t much they could do about it. Law enforcement wasn’t interested either. And so Reed’s complaints went unheeded.
In the rest of California and the western United States — including in jurisdictions like Los Angeles, where delivery-only companies are still ostensibly banned — cannabis businesses operating without state or local permits have flourished. These delivery companies have found the atmosphere so accommodating that they didn’t think twice about advertising their services publicly on sites like Weedmaps.
Flush with advertising dollars from these illicit outlets, Weedmaps also flourished. The company bought billboards all over North America, including in Hollywood and San Francisco, and ran print and web advertisements throughout the state. Weedmaps had enough spare capital after the rapid expansion and attendant marketing blitz to help bankroll Prop. 64, the ballot initiative that legalized adult-use marijuana in California.
Investing in legalization seemed like smart business. Prop. 64 legalized adult-use cannabis as well as commercial marijuana sales, and so it would reliably lead to an explosion of outlets needed advertising services. But it may turn out to be Weedmaps’s undoing — and may finally provide a measure of the justice Reed requested earlier in the decade. (Though a bit late: A few years after reopening a storefront dispensary, Reed shuttered the delivery service.)
On. Feb. 16, Lori Ajax, chief of California’s new Bureau of Cannabis Control, sent WeedMaps CEO Doug Francis a sternly worded letter. By offering advertising for cannabis dispensaries and delivery services without state licenses, Weedmaps is “aiding and abetting… violations of state cannabis laws,” Ajax wrote.
“Weedmaps.com must immediately cease and desist all activity that violates state cannabis laws,” wrote Ajax, who warned that failure to comply could result in “criminal and administrative penalties.”
It remains to be seen whether Ajax and the BCC will follow up the letter with enforcement — and what form that may take. Either way, the letter demonstrates a marked shift in California’s supposedly permissive marijuana policy.
Though Weedmaps was the only advertising outfit to receive a warning from the BCC, the agency has sent more than 900 other unlicensed marijuana businesses similar letters since January 1, BCC spokesperson Alex Traverso told the Orange County Register. Of these, 375 were sent in response to complaints, including complaints from operators of registered, compliant businesses.
“We’re starting to see more and more licensed cannabis businesses that invest millions of dollars and go through the process to do things the right way and to pay their taxes — which they have to pay a lot of — those businesses are demanding that individuals who don’t follow the law be put out of business,” Aaron Herzberg, a Southern California-based cannabis attorney who is a partner in two dispensaries, told the newspaper.
In a way, these complaints violate an old cannabis industry ethos, which goes something like this: Authorities are all the same — they’re the authorities, they’re the entities who try to shut marijuana outfits down. But nowadays, that counterculture attitude appears to be an outdated approach that’s harder to find, and harder to defend.
Along with licensing and registration requirements, marijuana businesses must test their products for contamination and potency. Those requirements don’t take full effect until later this year, but it’s safe to assume that a business not bothering to seek state and local permitting — as they were required to do as of Jan. 1 — may not also bother to test its products before selling them to the public.
Instances of lax enforcement like the Weedmaps situation led to a prevalent conception of California as a cannabis-friendly “Wild West,” and led to other states passing much stricter medical-cannabis laws. It’s not clear if enforcement when people like Reed asked for it would have changed this public perception, and it’s also not clear if the pre-Prop. 64 “Wild West” days are over or not.
As the Register noted, Weedmaps is continuing to run advertisements for dispensaries and delivery services in areas where both outfits are banned. It appears it will be up to the BCC to decide if it wants to start behaving like a sheriff.
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