Marijuana businesses, including dispensaries, cultivators and marijuana infused product manufacturers, looking to expand their brand may be limited by restrictions — both on the state and federal level — that prevent them from engaging in certain forms of advertisement, or from targeting certain audiences. Given the varying regulatory framework concerning marijuana across the country, those new to the cannabis industry may find the prospect of advertising their business rather overwhelming, and even a bit risky. The possibility of running afoul of the law and being exposed to criminal and civil liability prevents many marijuana businesses from reaching their potential through advertisement. In addition, advertising dollars spent may be non-deductable by a cannabis business under the Federal tax law, specifically IRC §280E. Thus, advertising strategies and costs must be carefully considered.
There is no need for uncertainty so long as you consult with a qualified attorney familiar with both state law and IRC § 280E. With the aid of a skilled team of attorneys who have experience in navigating cannabis regulation at both the state and federal level, you can advertise your brand to a fresh audience and limit your business’s risk of liability for a regulatory violation.
Federal Law Prohibits Advertisement
Cannabis is a Schedule I drug at the federal level and the Controlled Substances Act prohibits the advertisement of Schedule I drugs. In fact, advertising at a federal level is a felony. As such, it is important that licensed marijuana businesses avoid advertisements that target out-of-state customers. Advertising in this manner could expose a dispensary to serious criminal liability for the violation of federal law.
Given the risks, most marijuana businesses choose not to engage in advertisement that has the potential to reach out-of-state consumers. For example, even if they are not intending to advertise to out-of-state consumers, a dispensary that purchases radio or television ads that are heard/watched by a statistically significant number of out-of-state consumers could be found liable for violation of the advertising prohibition of Schedule I drugs.
State Restrictions Vary Significantly
Every state that has legalized marijuana has implemented its own regulatory framework, including provisions that relate to marijuana business advertising, Regulatory restrictions on advertising may vary significantly from state-to-state. Examples of state restrictions include, but are not limited to:
- In Colorado, a dispensary may not engage in advertising that specifically targets out-of-state persons.
- In California, a dispensary may not give away cannabis or cannabis-related products as part of a business promotion.
- In Alaska, advertisements involving cannabis and cannabis-related products must include various warnings about the drug’s intoxicating and potentially addictive effects, as well as its health risks, impairment risks, and more.