Example of a Weedmaps posting for an edibles product touting a THC potency above legal limits.
Cannabis advertising giant Weedmaps is again carrying listings on its website for illegal or unlicensed marijuana retailers and products in California, according to complaints filed with state and federal regulators.
The complaints, filed in May and June with the California Department of Cannabis Control (DCC) and the U.S. Securities and Exchange Commission (SEC), allege that Weedmaps’ leadership is “allowing vast amounts of black market activity through their website, and they know about it but won’t do anything about it.”
That alleged “black market activity” is directly harming licensed and legal businesses, the complaints contend, by giving underground operators a competitive edge with Weedmaps’ advertising platform.
That undercuts the same legal marketplace that Weedmaps aims to serve, the complaints said.
If regulators determine the allegations have merit, Weedmaps could face hefty fines, industry experts said, which would be notable for one of the most prominent U.S. cannabis companies to trade on a major stock exchange.
But such a determination is far from assured.
Weedmaps last landed in hot water over illegal ads more than four years ago.
The California-based technology company eventually took steps to remove such advertising from its website in 2020, before its parent company went public on the Nasdaq in 2021.
The complaints were filed by executives at licensed Los Angeles marijuana company Canex Delivery. The executives say they have complained directly to Weedmaps but the business has mostly taken no action.
Canex, led by CEO Jim Damask and Chief Financial Officer Joseph Bitzer, gave regulators scores of documents and screenshots to back up its allegations.
Damask and Bitzer said the ads promote the illicit market and undercut legal delivery operations and sales.
The executives wrote in the SEC complaint that their company alone had “suffered significant losses due to Weedmaps – quite possibly into the tens of millions (of dollars).”
They also allege that Weedmaps is selling the ads to bolster its own bottom line and noted in the complaint that “by allowing illegal operators to advertise on their site they are misleading investors by unethically increasing their revenue, which is being reported as legitimate in quarterly reports.”
In a statement, a Weedmaps spokesperson declined to comment directly about the allegations, other than saying, “We have not received any communications from the DCC or SEC regarding complaints made by Jim Damask and/or (Joseph) Bitzer of Canex Delivery.”
Published: July 25, 2022
Founder & Interim Editor of L.A. Cannabis News