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North Bay cannabis operators cheer Weedmaps ban on advertising unlicensed pot businesses

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A move by a major online pot shop directory and cannabis marketplace to exclude advertising from black-market businesses will improve the cannabis trade and public health, according to some North Bay cannabis operators.

“Essentially, it’s going to remove a lot of our competitors in one fell swoop,” said Alexa Rae Wall, chairwoman of the Sonoma Country Growers Alliance and co-owner of San Rafael-based MoonFlower Delivery.

The website, Weedmaps, announced plans Wednesday to remove unlicensed businesses from its site. Some North Bay cannabis companies said many legal businesses did not use Weedmaps for fear of being listed next to an illegal company.

State regulators and licensed businesses had been pressuring the company to ban unlicensed businesses. Allowing untaxed, unregulated product on the site alongside the taxed marijuana of licensed and regulated stores undercut the legal market, they said.

“What’s been challenging is that they haven’t differentiated on their platform to date between licensed and unlicensed businesses,” said Eli Melrod, CEO of the Solful cannabis dispensary in the west Sonoma County city of Sebastopol.

He said his company and many other California-licensed operators have never used the website for that reason.

“I think our perspective is the normalization of unregulated products is a public safety issue,” Melrod said, noting unregulated cannabis could contain dangerous chemicals and pesticides.

He also said that unlicensed delivery services and brick-and-mortar shops listed on the site existed to fill the holes where cannabis, legal statewide but subject to local rules, is not allowed.

“A lot of jurisdictions have banned cannabis,” Melrod said. “What fills that void is the black market.”

For legitimate businesses that do advertise on the site, Wall said, the move could mean an end to black market operators’ undercutting more expensive legal pot.

MoonFlower does advertise on the site, she said, but illegal operators do not pay the excise taxes that legal businesses do and that are passed on the consumers in the final purchase price. There are only five legal delivery businesses in Marin County, but out-of-county licensed operators were free to compete with them, Wall said.

Not all unlicensed operators want to be in the shadows, she said, but some have struggled with the expensive and slow moving state licensing program.

Wall voiced concern that Weedmaps would raise rates on the remaining businesses — like hers — to make up for the lost advertising revenue.

Other cannabis operators statewide were quick to cheer the decision as well, according to the Associated Press.

“That is a huge win,” said Ryan Kunkel, whose Have A Heart dispensary chain operates in Washington, Oregon and California. “Our biggest competitor in every jurisdiction in California is black-market Weedmaps. It’s not the tax rates, it’s not the regulations — it’s Weedmaps’ efforts to prop up unlicensed operators.”

Jerred Kiloh, a licensed dispensary owner in Los Angeles who heads the United Cannabis Business Association, an industry group, projected that half of California’s illegal operations could dry up once they are denied access to Weedmaps ads.

He credited state regulators with pressuring the company to reverse course, along with pending legislation aimed at ending the practice.

“Illegal operators are going to have to go back to the underground,” Kiloh said. “That’s not going to give them the kind of business they had.”

Weedmaps, founded in 2008 and based in Irvine, is a go-to website for people looking to find a marijuana shop. With a few clicks on a cellphone, customers can find virtually any type of cannabis product, along with the fastest route to the place selling it and ratings from other consumers to help them decide what to buy. They can also order online through the site and even have their weed delivered.

In a news release, the company framed its announcement as part of a social justice imperative.

“One of the most important and impactful promises of cannabis legalization is that it will give minority entrepreneurs the ability to enter the new industry and help reverse the damages inflicted on those disproportionately affected by the failed ‘War on Drugs,’” it said. “Unfortunately, as a result of limited access to capital and limited license opportunities provided by local governments, these entrepreneurs are actually finding it nearly impossible to participate in the legal market.”

The company said it would launch an initiative to support unlicensed, minority-owned marijuana businesses as they become licensed. That includes providing participants with free training in licensing and compliance regulations, professional support and coaching, and free listing on the Weedmaps app for up to one year once they obtain their license.

It said that “later this year” it would begin requiring U.S. advertisers to provide a state license number on their listing, and that it would restrict the use of its point-of-sale system, online orders, delivery logistics and other services to licensed businesses exclusively.

“These enhancements to existing safeguards on our platform will help patients and adult-use consumers find cannabis retailers that have provided evidence of state licensure,” Weedmaps Chief Executive Chris Beals said in the news release. “It also underscores our commitment to working with lawmakers and regulators to foster a flourishing legal market.”

Kunkel said competition from black-market companies on Weedmaps has not been as big an issue in other states, noting that Washington, for example, has cracked down on unlicensed sellers.

“Today’s announcement is a step forward for the legal California cannabis industry, which will aid consumers in identifying licensed cannabis businesses when looking to purchase safe cannabis,” said Lori Ajax, chief of the Bureau of Cannabis Control.

Mike Blood and Gene Johnson of the Associated Press contributed to this report.

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