Federal probe into Weedmaps is unresolved, federal investor document says


Bethan Rose Jenkins, Cannabis News Writer/Editorial

During the second week of December, an investor presentation was filed with the U.S. Securities and Exchange Commission. Based on the document – which was filed by Weedmaps’ parent company, WM Holding Co. a federal investigation into cannabis giant Weedmaps is still “unresolved.” 

December 10 was the date on which U.S. securities regulators were alerted of the unresolved probe into Weedmaps. The U.S. Department of Justice’s investigation also featured a “supplemental investor disclosure” inclusive of the company’s business dealings.

“As of Nov. 10, 2020, the DOJ investigation has not been resolved. In our dialogue with the DOJ, we have had productive discussions about a potential resolution, but no agreement has been reached,” reads an excerpt from the last page of the presentation document. “Following an initial production of documents in November 2019, further productions responsive to the subpoena have been postponed pending discussions about resolving the matter.”

When CheddarTV reporters inquired about the unresolved probe into Weedmaps, the company’s CEO Chris Beals said that he and other company officials were not willing to comment on specific legal matters.

An overview of the subpoena highlighting unresolved probe into Weedmaps

Little light has been shed on the situation regarding Weedmaps’ federal investigation, what with the U.S. attorney’s office for the Eastern District of California refusing to comment on the disclosure. The office which represents the federal government issued a subpoena to Weedmaps’ former parent company, Ghost Management Group, in September 2019. 

According to the details of the government agency-issued writ, as many as 100 individuals and companies in the cannabis industry were deemed to be unlicensed retailers. The subpoena requested that Weedmaps divulge an array of records outlining the company’s history; dating back to 2008. In spite of the federal probe into Weedmaps, no charges have yet been filed.

“Based on our discussions with the DOJ since we received the subpoena, we believe the primary focus of their investigation is on our relationships in 2019 with cannabis retailers in California who may not have been properly licensed under state law at the time they were advertising on the WM platform,” WM Holdings wrote in the document. “In August 2019, prior to receiving the subpoena, and following discussions with the California Bureau of Cannabis Control, we announced that we would remove from the platform any remaining California retailers who failed to provide us with information demonstrating a valid cannabis license.”

The news update regarding the unresolved probe into Weedmaps has emerged some months after the tech company was exposed for breaching California law. Although there is a chance that the probe may not be detrimental for the company, it’s likely that Weedmaps will face some repercussions; this potential liability runs the risk of punishment, due to the fact that all retailers on the Weedmaps platform are required to provide license information for their cannabis businesses.

Unresolved probe into Weedmaps may or may not affect company’s NASDAQ listing

California-headquartered Weedmaps was planning on trading publicly on the NASDAQ via a deal that pins a $1.5 billion valuation on the company. WM Holding’s disclosure confirmed that the NASDAQ listing will not be affected. The company’s parent intends on merging with Silver Spike Acquisition Corp a blank-check company to secure the publicly-traded stock listing.

However, not everyone is so sure that the NASDAQ listing won’t be affected by the unresolved probe into Weedmaps. Based on the opinions of cannabis industry analysts and attorneys, it would have been in the cannabis company’s interest to release the requested information. Since the cannabis company failed to do so, investors are likely to be stand-offish and backlash is likely to ensue.

The disclosure will “raise a lot of questions from the shareholder base,” principal at New York-based GreenWave Advisors, Matt Karnes, told reporters.

“There’s uncertainty. This transaction, we don’t know what the DOJ is going to conclude, or what other issues are out there. If I was a shareholder in Silver Spike, I’d think really hard about approving this transaction,” said Karnes, who made a point of noting that Silver Spike Acquisition Corp. – the special purpose acquisition company (SPAC) that Weedmaps intends to go public with – may collapse if investors feel nervous about Weedmaps’ lack of cooperation.