As the gravitational pull toward marijuana legalization continues, new sources of revenue continue to emerge. Former Republican House Speaker John Boehner (and former opponent of legalization) recently announced that he joined the board of directors for a cannabis company, and sales of cannabis in California are expected to exceed $3.5 billion in 2018 and to surpass the $5 billion mark in 2019. As a result, media outlets stand to gain substantial sums in advertising revenue for all the newly-licensed state legal businesses. But before placing any advertisement, companies need to consider the rarely-used but newly-relevant provision of federal criminal law that addresses advertising.
Although seldom used in federal criminal prosecutions, a provision of the Controlled Substances Act prohibits placing advertisements for marijuana and other Schedule I substances. 21 U.S.C. § 843(c)(1). Specifically, this provision makes it “unlawful for any person to place in any newspaper, magazine, handbill, or other publications, any written advertisement knowing that it has the purpose of seeking or offering illegally to receive, buy, or distribute a Schedule I controlled substance.” 21 U.S.C. § 843(c)(1). So does that mean no one can run advertisements? No, but it means that advertisements need to be approached with caution.
A media outlet can find some protection in the Rohrabacher-Blumenauer amendment to the federal spending bill, which prohibits the U.S. Department of Justice from using federal funds to interfere with state-legal medical marijuana programs. Although the amendment must be renewed each fiscal year, it has been renewed each year since its introduction in 2014, and its most recent renewal was last month. The practical effect of the amendment is that prosecutors cannot bring charges against state-legal medical marijuana businesses and those who provide products or services to them. The amendment offers no protection, however, for state-legal recreational marijuana programs. As a result, media outlets that publish advertisements for state-legal recreational businesses, and do so in accordance with state law regulating such advertisements, nevertheless leave themselves open to risk at the federal criminal level.
What about publishing advertisements for state-legal medical marijuana businesses? There is a path forward for media outlets who want to proceed, but, at a minimum, they need to confirm that the business they are advertising is properly licensed and registered, to understand the laws of the state in which the business is located, and ensure that the advertisement will not cross state lines. Additionally, the publisher must carefully review the content of each advertisement to determine its “purpose” as contemplated by federal law as well as to assess compliance with the varied state law requirements.
Advertising is just one of the areas in which the federal-state law conflict in cannabis presents both peril and the opportunity for profit. We will continue to follow this issue closely and provide updates here.