Feds Request Records From Weedmaps

Weedmaps, the online directory of cannabis-store menus and locations that’s served alternately as a “little black book” for licensed weed stores and a Craigslist for off-books and illicit marijuana sales, has been subpoenaed to provide information to the federal government.

Founded in 2008, Weedmaps quickly became the leading online resource for curious cannabis buyers and weed merchants eager to sell them cannabis. Until changes to its policy, which began with new advertisers in August 2019, Weedmaps allowed almost anyone to publish on its website contact information and a menu of cannabis products — including, much to the chagrin of California state cannabis regulators and struggling legal businesses playing by the rules — unlicensed marijuana merchants, both delivery services and storefronts.

As MarketWatch first reported on Monday, Weedmaps’s parent company, Ghost Management Group, was issued a grand jury subpoena on Sept. 19 of last year for “documents related to cannabis businesses listed” on the website as well as records related to cannabis orders, on top of records related to Weedmaps’s own business dealings, including its investors and staff.

The subpoena also sought information related to at least 30 cannabis brands operating in California, including Cannacraft, which markets vape-cart cartridges under the AbsoluteXtracts and Care By Design Brands, and publicly-traded Terra Tech, according to attorney Matt Kumin, who reviewed the subpoena.

The company was given until Oct. 31 to comply and no indictments or prosecutions have resulted.

Under both the Obama and Trump administrations, the federal Justice Department has steered clear of prosecuting state-legal cannabis activity despite its violation of federal law, but with one caveat: Any cannabis activity that also violated state law would be a priority for prosecution.

“Weedmaps’s goose is cooked,” said Omar Figueroa, a Sonoma County, California-based defense attorney and author of an annual handbook outlining state cannabis laws. “The only reason why they’re allowed to exist now is to be a honeypot for the feds and California law enforcement to pick off unlicensed operators.”

Weedmaps did not comment on the subpoena nor provide a copy to Cannabis Now.

Founded in 2008, the company was raking in as much as $30 million a year in revenue by 2014 — cash flow that helped Weedmaps’s parent group donate $750,000 towards Proposition 64, California’s recreational legalization initiative, in 2016.

The company sometimes painted its actions with unlicensed companies as activism meant to provide access to cannabis patients and customers living in jurisdictions that chose not to permit legal weed businesses. But that likely does not matter to the feds.

Technology companies like Facebook, Twitter, and Google whose platforms are used for illegal conduct seek immunity for prosecution for that conduct under Section 230 of the Communications Decency Act, which states in part that companies can’t be held liable for how users abuse the platform.

“But that doesn’t protect content providers,” added Figueroa, who argued that as soon as Weedmaps starting verifying listings and products, it lost such protections.

In response to Figeroa’s statements Travis Rexrod, WeedMaps communications director, clarified that Weedmaps does not verify products.

“Weedmaps does not verify products, it provides the opportunity for brands to do so directly so this statement from Figeroa is bunk,” Rexrod wrote.

As Marijuana Business Daily reported, even after Weedmaps self-policed and removed advertisers who lacked state-issued license numbers from its website, the company still allowed paid advertisers to “self-publish,” allowing for as many as 1,700 underground cannabis merchants to peddle their (untested) wares on the site. Rexrod stated this number is incorrect.

“We assume that this stat was originally produced by using a scraper or comparing the sitemap to the number of available state licenses in California,” he said via email. “Like most modern sites, we work with the top anti-scraping software providers in the industry and they intentionally throw up garbage data to combat this. We consider our client data, including the number of listings, to be proprietary.”

In the years since legalization, the illicit market has far outpaced the legal, regulated, and heavily taxed (and therefore extremely expensive) market. By some estimates, the illegal market is eight times bigger than the legal market in California — and in some jurisdictions, legal sales have actually declined in recent months.

Exactly what triggered the Eastern District of California’s interest in Weedmaps remains unclear. The district is vast and runs from the Oregon border to Sacramento and south to Fresno. The timing of the subpoena, issued Sep. 19, coincides with the height of the vape-cart health scare when illicit cartridges likely contaminated with additives sickened and killed vape-users across the country, attorneys and insiders noted.

But for now, “we really don’t know why these companies were targeted,” Kumin said.

It’s very hard to run around prosecuting someone slinging dime bags, but it’s not very hard at all to find a central repository of illegal listings and accuse the repository-holder of aiding and abetting criminal activity.

Is this what the feds plan to do? Is Donald Trump busting Weedmaps — and, along with it, anyone who used the website to move a few packs here, a few boxes there off the books?

We don’t know, but we do know that if they were, last fall’s subpoena is a logical first step. But even if it wasn’t, trust still matters in cannabis and the damage to Weedmaps’s brand could take a long time to repair in some circles.

TELL US, have you used Weedmaps?

Editor’s note: This post as been significantly altered from its original draft to correct discrepancies.