Marijuana Business Magazine - May-June 2018

COLUMN: TRENDS AND HOT TOP¬CS ¬ t recently emerged that California regulators were trying to force per- haps the biggest online advertiser of marijuana retailers – – to quit carrying ads for businesses that are technically illegal. California-based Weedmaps responded with a letter to the chief of the state’s Bureau of Cannabis Control, contending the company was not really at fault. Instead, the online marijuana advertising giant blamed the way Cali- fornia’s marijuana market is structured. Weedmaps asserted that most long-standing businesses have been unable to obtain legal business permits because local governments have what amounts to veto power over California’s voter-approved MJ industry. Put another way, these companies are at the mercy of local government officials who may not look kindly on the cannabis industry. How the fight between Weedmaps and the bureau will play out remains to be seen. But the confrontation rep- resents a deeper divide in the state’s entrenched marijuana industry: A grow- ing number of companies already have obtained business permits or are in the process of doing so, and they now view unlicensed competitors as serious threats. As well they should. Fully compliant MJ retailers across California’s Cannabis Cannibals Legal MJ businesses in the Golden State are blowing the whistle on unlicensed operators to protect their own bottom lines John Schroyer By John Schroyer California are being forced to pass on high tax rates to their customers, which in turn is driving many customers to the black market. I’ve even heard stories of some brazen unlicensed dispensaries advertising to customers that they don’t pay state or local taxes, meaning that their MJ is far cheaper than prices at law-abiding shops. That’s also led licensed retailers to file complaints with the bureau about many of those same unlicensed competi- tors, plenty of whom the bureau was able to identify by finding their ads on Weedmaps. But Weedmaps is incidental to the real conflict. The real story is a crisis of conscience that’s taking place in Califor- nia. It pits former political allies – Cali- fornia MJ companies were largely united behind full legalization in 2016 – against each other as the economic pie gets divided into haves and have-nots. In this case, the have-nots often are companies having trouble finding a legal home, as opposed to illicit dealers that care only about turning a profit. “As a partner in a nonlicensed delivery weed business, we’re at our wits’ end trying to get a license,” one MJ businesswoman wrote to me in early March. “We are collecting state taxes and following all the laws, but cannot get a city to issue us a business license in the Tri-Valley of the San Francisco Bay Area.” The woman expanded, saying that if Weedmaps stops running her compa- ny’s advertising, it would be the “death knell” for her business. And that’s precisely what many companies in California probably want: contraction. It would mean more market share for those who can get licenses. It’s a return on investment for those operators – many of whom have sunk hundreds of thousands or even millions of dollars into their companies. And they are naturally going to fight tooth and nail to protect that investment. That, in turn, may mean “diming out the neighbor,” in the words of one regu- lator I spoke with. The situation even led Alameda County District Attorney Nancy O’Malley to try to soothe industry concerns over “snitching” on competitors when she took part in a March panel sponsored by the California Cannabis Industry Asso- ciation in Sacramento. O’Malley specifically raised the pos- sibility of businesses being hesitant to inform on unlicensed competitors that are breaking state law. “That’s not snitching,” she said. “That’s business.” That represents a culture shift. Tax- paying marijuana businesses are incen- tivized like never before to get the entire 34 • Marijuana Business Magazine • May-June 2018