Cashing In On Cannabis: It’s Complicated… and Risky.

Story by Inside Radio

It’s the pot of gold that radio seemingly can’t touch. The exploding U.S. hemp-based CBD market could be a $2.25-$2.75 billion industry in 2020, according to Nielsen. Yet broadcasters are largely precluded from taking a piece of the CBD ad pie by an intricate thicket of state and federal laws that make accepting ads a risky proposition. Recreational marijuana, too, is a booming business in a number of states that have decriminalized it. But that also remains off limits.

A hot topic at state broadcaster meetings and across the industry, the complexities of cannabis advertising was dissected last week by Washington-based law firm Fletcher, Heald & Hildreth during the cheekily-titled webinar “Getting into the Weeds of CBD & Marijuana Advertising."

While recreational use of pot is legal in California, Colorado, Massachusetts, Washington and a growing number of states, its sale, use and distribution remains a felony under federal law. It all boils down to a key clause in the Controlled Substances Act that makes it illegal to use “any communication facility” to facilitate “any act or acts consisting of a felony under any provision of this subchapter.”

That puts any radio or TV station airing ads for marijuana “under the hook,” attorney Frank Montero said on the webinar. Broadcasters are “uniquely vulnerable,” compared to say a billboard company, because using a federal broadcast license to market an illegal substance could jeopardize their FCC license.

That’s why law firms like Fletcher, Heald & Hildreth caution broadcasters to steer clear of ads for marijuana, defined as a cannabis plant or derivative with a THC level greater than 0.3%. “As things currently stand, the advice we have received from the FCC is you’re best off not taking [marijuana] advertising,” Montero said.

And that those that do should “use diligence” to ensure the advertiser isn’t engaged in any serious Dept. of Justice violations, such as distributing to minors, connections to criminal enterprises or not being properly licensed in their state, added attorney Daniel Kilpatrick.

In addition, some states where recreational pot is legal have enacted laws governing how it can be advertised. In Colorado, for example, the advertiser must have “reliable evidence” that no more than 30% of the audience is reasonably expected to be under the age of 21.

But laws that govern marijuana and CBD products are in a state of flux. Legislation has been introduced in the House that would decriminalize and tax marijuana at the federal level. If passed, that could potentially open “a whole new realm of advertising that you could take without a significant risk” Kilpatrick said. With the torrid pace at which the cannabis industry is growing, there’s bipartisan pressure within Congress to decriminalize marijuana. “It’s kind of hard to put this wild horse back into the corral,” Montero said. But decriminalization at the federal level would likely come with its own set of advertising restrictions.

Hooray, CBD Is Legal. But…

For broadcasters looking to cash in on the exploding cannabis industry, there was a breakthrough in 2018 when the Farm Bill was adopted. It legalized and regulated certain hemp derivative products, including CBD oil, removing them from the blanket prohibition of the Controlled Substances Act. That essentially created two camps: marijuana (still illegal under the Act) and derivative CBD products unshackled by federal law. But accepting CBD oil ads without putting your station at legal risk involves a litany of steps and precautions that must be taken.

The good news is the 2018 Farm Act allowed CBD products that fall at or below the 0.3% THC level to be “produced, sold, used and advertised pursuant to an approved state plan or a default federal plan. The bad news is that’s just where the complications begin,” said attorney Seth Williams on the webinar. To protect themselves, the attorneys said broadcasters who accept ads for CBD oil should get the advertiser to sign a document stating that it is derived from hemp, not marijuana. The document should also include their state license number. They should also make sure the advertised product is produced under an approved state or federal hemp production plan and that it complies with FDA requirements and other truth in advertising requirements. Advertising claims about the ability to cure or treat illnesses or symptoms run afoul of FDA and FTC restrictions.

Making things even more complicated for broadcasters, the FDA prohibits the sale of CBD intended to be taken orally or marketed as a dietary supplement. Only topical applications are approved for sale.

“A lot of people got out a little far over their skis when the 2018 Farm Bill happened and they said, ‘Oh, CBD oil is legal. No, it’s not legal if it’s marijuana-derived and it’s not legal if you’re using it orally, in food or any sort of drug that’s intended to cure, mitigate or treat disease,” Williams explained.

With CVS and Walgreens stocking CBD-infused ingestible products, “the industry is starting to push beyond where the law is right now,” Williams said. “But it makes it really difficult on broadcasters and other people who are writing advertising because those are still illegal substances under the FDA.” Some states are cracking down on this, while others are looking at legalizing ingestible CBD, including California which has a pending bill to do just that.

And therein lies the conundrum faced by broadcasters. A massive new industry is sprouting up that is either off limits or ridiculously complicated to navigate. As Nielsen put it in a recent report, “While the regulatory roadmap remains ambiguous, one thing is clear: The next decade for the hemp-based CBD market has the potential to be a game changer for the traditional CPG [consumer packaged goods] and retail industry.”