The legal cannabis delivery platform Eaze faces a legal battle over allegedly processing credit card payments in an illegal manner.
The Toronto-based Herban Industries filed a lawsuit against Eaze in the San Francisco County Superior Court on Tuesday, reports Leafly.
The complaint claims that Eaze used a system to illegally process credit and debit card payments through European-based shell companies.
“Eaze conspires to disguise the cannabis transactions as transactions for dog toys, dive gear, carbonated drinks, drone components, and face creams, among other things, to obtain approval for these transactions,” the lawsuit alleges.
“To perpetrate these frauds, Eaze created or partnered with Cyprus- and U.K.-based shell corporations that purport to sell these seemingly innocuous products but in fact exist solely or primarily for the purpose of misrepresenting the nature of the underlying transactions.”
Herban Industries filed the lawsuit as a California subsidiary of the Toronto-based DionyMed. Herban also runs a rival cannabis delivery service called Chill.
A lawsuit filed against cannabis delivery company @Eaze alleges the company violated California’s unfair competition law by accepting credit card payments.
complaint: https://t.co/CSrqsBBKvY pic.twitter.com/E7aOHdH8fj
— Ben Adlin (@badlin) June 5, 2019
Eaze representatives contend that the platform doesn’t process credit card payments, and believes its partners are compliant with Californian regulations.
“This lawsuit is a thinly-veiled attempt by publicly traded Canadian company [DionyMed] to gain an advantage through litigation, prop up their failing stock price, and publicize their new delivery platform,” said Elizabeth Ashford, Eaze’s senior director of corporate communications, to Leafly. “The allegations are false and their attempts to hide their true motives are obvious.”
Competitors such as Justin Hall, CTO and founder of the online delivery service bud.com, are wary of accepting credit cards since federal regulations currently prohibit banking services to legal cannabis businesses.
“Figuring out how to accept credit cards has been a major challenge for bud.com, without playing overseas whack-a-mole hanky panky,” said Hall in a statement to Smell the Truth. “When I see cannabis companies accepting credit cards, I wonder: how did they pull that off, and how long until they get shut down?”
Some legal experts believe such litigation could set a risky legal precedent, however.
“We all know in the cannabis industry you have to get your hands a little dirty,” San Francisco attorney Katy Young, who specializes in business disputes, told Marijuana Business Daily. “And the second we start blowing each other up in lawsuits for the various ways that entrepreneurs have figured out how to do business, that’s how the industry starts to cannibalize itself.”
Oscar Pascual is the editor of Smell the Truth, syndicated on GreenState and SFGATE. Smell The Truth is one of the internet’s most popular destinations for cannabis-related news and culture. This blog is not written or edited by Hearst. The authors are solely responsible for the content.