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Issues Around Marketing Your Cannabis Business

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June 12, 2019

What are the Rules on Advertising Cannabis?

While we're not lawyers and cannot give legal advice, we've seen a few best practices that we want to share with you. As cannabis is still considered a Schedule I substance, advertising is strictly prohibited on a federal level, while also being highly regulated on a state-by-state basis.

The U.S. Postal Service is subject to § 843(c) of U.S. Code, Title 21, meaning it cannot distribute newspapers or other materials that contain articles promoting the commercial use of cannabis. This does not apply to radio and television, which are regulated by the Federal Communications Commission (“FCC”), but the advertising content is heavily scrutinized and so most cannabis related ads are not used by radio and television stations.

On a similar basis, the ubiquity of internet advertising has complicated the Controlled Substances Act (“CSA”), the statute from 1970 forming the basis of federal drug policy in the United States.

Does that Include Social Media?

Unfortunately, yes (though instagram has a little more wiggle room).

Popular advertising channels, such as Instagram, Facebook and Google, do not allow cannabis companies to purchase ad inventory on the grounds that such advertising would violate federal law.

For example, under Facebook’s Community Standards, it is stated:

“To encourage safety and compliance with common legal restrictions, we prohibit attempts by individuals, manufacturers and retailers to purchase, sell or trade non-medical drugs, pharmaceutical drugs and marijuana.”

Instagram’s community guidelines are less explicit, and consequently many cannabis businesses have had their Instagram accounts disabled due to inexplicable violations.

Their guidelines state, “...buying or selling...illegal or prescription drugs (even if it’s legal in your region) is also not allowed,” but numerous Instagram profiles have been disabled despite compliance with these guidelines.

A Huffington Post article has provided some of these users with a platform to express their frustration (and in certain cases, the accounts were reactivated). However, instances where images of the Schedule I substance are depicted on products that would not readily be used for cannabis consumption (e.g. teacups with painted images of cannabis leaves) arguably still promote a lifestyle consistent with the drug’s use. Such innocuous images are found to be in violation of Instagram and Facebook’s terms.

The difference between the two being that Instagram does not actively prohibit the use of their platform for advocacy of the drug, but it primarily prohibits imagery that promotes the sale of cannabis, which includes making the business’ contact information directly available. The main loophole here is that a business’ website is not considered by Instagram to be contact information, and so users are tentatively providing their own website within posts. Through these websites, contact information is often provided.

But Commercial Cannabis is Legal in Many States

In terms of how these federal limitations have impacted advertising within states where cannabis is legalized, there are important restrictions based on the scope of reach achieved by an advertisement.

For example, in California any cannabis advertising or marketing used by broadcast, cable, radio, print, or digital communications can only be adopted where at least 71.6 percent of the audience are expected to be at least 21 years old as stated under § 5040(a) of the California Code of Regulations (“CCR”).

Colorado prohibits cannabis dispensaries and businesses from extending their consumer base beyond state lines through advertising channels, and does not allow unsolicited cannabis “pop-up” ads over the internet.

In Connecticut, cannabis product advertising may not disparage any competitor’s product.

Generally speaking, the least controversial advertising medium for cannabis brands has been billboards. Though there are important restrictions based on proximity to sensitive use sites such as day care centers, K-12 schools, playgrounds and youth centers. California legislation caps this distancing at 1,000 feet from such sites (Business and Professions Code § 26152).

Other local restrictions limit such advertising differently, such as found in the Los Angeles Municipal Code, which limits off-site advertising to at least 700 feet (though this must still comply with the current state cap of 1,000 feet) from sensitive use sites. Moreover, there are exceptions to interior signage of cannabis businesses, which can promote their products or another business’ products as long as the premises is licensed to sell cannabis and cannot be viewed from outside the premises.

Loopholes 

Advertising of cannabis products in states where such commercial activity is legal has proven to be far more complicated than anticipated.

While local publications may allow cannabis ads in their publication, they must ensure that the publications stay local and do not cross state lines.

Satellite radio is not considered to be a broadcast service by the FCC, and therefore is not subject to the same regulations as traditional radio stations. This opens up the possibility for other means of advertising through non-regulated media channels.

Alternatively, shifting the focus of a cannabis business from the drug itself towards a business’ lifestyle brand may prove to be more acceptable by most traditional advertising channels.

Until the cannabis industry becomes more efficiently self-regulating, advertising is likely to be complicated for all cannabis businesses, but there are stills means of effectively promoting a product within the boundaries of its state legality and without provoking federal scrutiny.

Advertising is a First Amendment right, and the BCC and DCR have both adopted clauses allowing cannabis products to be advertised in the state of California, but as always, cannabis businesses must tread carefully and remain cautious at every step.

If you have any questions about running a commercial cannabis business, please contact GreenGrowth CPAs by clicking the "Get Started" button below.

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Filed Under: Business