Cannabis-Related Ads Could Be 1 Toke Over the Line for Broadcasters

A National Cannabis Industry Association spokesperson said with cannabis and hemp derivatives like CBD technically legal but unregulated, the onus is on broadcasters to ensure the ad buyer is in compliance with state law and the federally mandated hemp program. He said broadcasters express eagerness for those ad dollars, but the risk and labor to ensure compliance and reduce that risk isn't worth the effort. He said the cannabis industry would like regulatory parity with the alcohol or gambling industries, including on commercials, but ad issues aren't as big an advocacy priority for the industry as access to banking and federal decriminalization. The FCC didn't comment Wednesday.

Pot advertising "is an easy one" for broadcasters and media companies: Avoid it because marijuana remains illegal federally, said broadcast lawyer Frank Montero of Fletcher Heald at an FCBA CLE Tuesday. Under the Controlled Substances Act, use of communications that facilitates sales or distribution is a crime, so stations and media companies "take such ads at their own peril," he said. He said broadcasters could be more vulnerable than other ad media, like billboards, because of federal licenses. He said the FCC advised "don't do it."

Hemp and CBD supplements in food and beverages haven't been approved by the Food and Drug Administration and thus are technically illegal, but it's a growing market, said Amin Talati food and beverage regulatory compliance lawyer Rend al-Mondhiry. It's a legal risk for anyone to disseminate an ad of a product a federal regulatory agency deemed illegal, she said. The FDA has taken no enforcement action against such products, she said. "I don't think regulatory clarity is on the horizon." About 20 states allow CBD beverages, and the risk for carrying such ads in those states is lower if the spot is solely in that state, she said.

Assistant General Counsel Claire Ferguson said Gray Television has a checklist when approached about such advertising, including what the state law is in a particular designated market area, whether the company is licensed, and if the ad makes therapeutic claims. For over-the-top and web-based ads, one issue is that most digital platforms have their own prohibitions, such as Google not allowing ads for unapproved supplements or Facebook allowing advertising of topical hemp brands but not the products themselves, she said.

With sports betting, Supreme Court decisions would seem to indicate commercials promoting it on stations in a state where sports betting is allowed should be permissible, said Paul Hastings internet gambling lawyer Behnam Dayanim. It hasn't been tested, and the FCC hasn't acknowledged that, so it's an open question, he said.

Nineteen states have legalized sports betting, and four more are expected to join in the next several months, which would cover about 40% of the U.S. population, said Covington and Burling's Gerry Waldron. For national broadcast and cable networks, that could be a tipping point where advertising there is suddenly more relevant, he said. Big states such as California and Texas will likely be slow to adopt, though, he said. "The early movers have already moved."

The Supreme Court's 2018 Murphy decision declaring unconstitutional the Professional and Amateur Sports Protection Act, which barred state-sponsored sports betting, resulted in marketing "war chests" being put together by the online sports industry, said Fox Associate General Counsel Adam Reiss. Along with legal considerations of a patchwork of states allowing sports betting, media companies face editorial considerations of not wanting to see the same backlash that came after ramp-ups of online fantasy sports businesses, which were then attracting attention from state attorneys general and claims of illegal gambling, he said. "No one wants to kill the golden goose."