While industry growth projections can vary significantly, there’s no denying that market growth for legal cannabis is rising rapidly across the United States. New Frontier Data, a data analysis pioneer in the cannabis industry, reported an expected compound annual growth rate of 14% for future years, and expects the industry worth for legal sales in the U.S. to be $30 billion by 2025.
Medical marijuana is currently legal in 33 states, as well as in D.C., while recreational marijuana is now legal in D.C. and in 11 states, including Maine and Massachusetts. The true definition of “legal,” however, has proven difficult to pin down for business owners with respect to their daily operations. Just as there have been accounting and financial roadblocks and gray areas throughout the legalization process, marketing cannabis and related products also presents its own set of unique challenges.
Marketing your business is, of course, a means for getting your name out there and creating a reputation, based on your products and services, that brings in new business and keeps your current clientele coming back. But it also provides businesses with important benchmarking opportunities that answer questions like: How am I doing compared to my competition? What ad and sales strategies are others using? Are my branding and my message in line with industry standards? The cannabis industry is rife with advertising restrictions which prevent companies from reaping these benefits, even though they are standard benefits for businesses across other industries. Companies like Weedmaps are aiming to improve marketing options for cannabis businesses, but their strides haven’t been without legal consequence. Luckily, Section 230 of the Communications Decency Act of 1996 has provided website owners defense against state, civil, and criminal liability for their third-party content. As a technology company by trade, all ads posted by Weedmaps, for example, are technically third-party content, which has kept them out of the “weeds” so far.
Why are cannabis companies missing out on the benefits of marketing?
Since the start of the sweeping legalization of marijuana in the U.S., some of the greatest business challenges have been with the clarity of existing laws, the need for amendments to others, the need for new legislation where none exists, and navigating state and local laws that directly contradict federal laws. According to the Controlled Substances Act (CSA), marijuana is classified as a Schedule I drug, making it illegal under federal law – regardless of state and local laws. The CSA also prohibits the use of “any communication facility in committing or in causing or facilitating the commission of any act or acts constituting a felony,” such as delivering, distributing, or dispensing a controlled substance. The Act defines “communication facility” as “any and all public and private instrumentalities used or useful in the transmission of writing, signs, signals, pictures, or sounds of all kinds and includes mail, telephone, wire, radio, and all other means of communication.” Arguably, this legislation was originally intended to control illegal drug operations, and is in dire need of reconsideration. So, while medical and recreational marijuana are now legal in Maine… many cannabis businesses are feeling like advertising just isn’t in reach.
There are some industry advertising “no-no’s” that are pretty standard across every state that has legalized marijuana: No advertisements targeted toward children and young adults under 21, no advertising across state lines, and no including misleading, or potentially harmful information, or false claims about health or physical benefits. And in Maine, ads cannot be placed within 1,000 feet of a public or private school. Sounds reasonable so far, right? But if we revisit the CSA, it also prohibits taking payment for an ad that is intended to promote a violation. As this legislation stands as current law, ad agencies, web and email providers, social media platforms, and several other marketing and communication avenues are facing a conundrum: Does the potential revenue for services outweigh the risk of running your ad? The answer is certainly a confirmed “no” (or at least a “no, for now”) for some of the most popular options available to other business types.
Google and Facebook, which (according to eMarketer) account for 57% of the U.S. digital advertising market share, have policies against cannabis advertisements. The Google AdWorks terms don’t allow ads involving “buying or selling illegal or prescription drugs (even if legal in your region).” The Google policy on “keeping it legal” extends to users of Gmail as well. Facebook terms explain that “ads must not promote the sale or use of illegal, prescription, or recreational drugs.” As of Facebook’s 2012 purchase of Instagram, same goes. Twitter, Reddit, Pinterest, and Amazon have similar policies. If marijuana becomes legal federally, the hope here is that company policies will change, as the threat of legal action is taken away. The State of Maine prohibits both unsolicited advertising on the internet and internet-based sales.
Some additional, traditionally used advertising methods are governed by federal agencies and guidelines. The United States Post Office, for example, will advise clients when mailers are considered “nonmailable.” Cannabis-related flyers advertise a federally illegal drug and are considered nonmailable items. You may insist they be mailed, and they will proceed with your mailing – but they are technically authorized to notify authorities. In Maine, unsolicited ads are definitely not the way to go, and all opt-in marketing must “permit an easy and permanent opt-out feature.” Distributing flyers in a public area is also prohibited in Maine.
Television and radio fall under FCC guidelines, but, while they may still choose to adhere to federal laws on marijuana, The Communications Act prohibits the FCC from censoring broadcasted information. It is ultimately up to each network or station. In TV, ads cannot show growing marijuana, smoking it, or discuss its benefits, but deciding to run a clean ad is the network’s prerogative. CBS and ABC, for example, have both publicly chosen to reject cannabis-related ads.
What legal advertising options does that leave for Maine cannabis businesses?
Despite the gray area the industry operates in currently, there is a silver lining. There truthfully isn’t as much restrictive legislation in Maine in comparison to some other states with legalized marijuana, and more and more legislation will come about and evolve the longer legal sales are available. For now, a good rule of thumb is to focus on marketing your BUSINESS, as opposed to directly marketing your PRODUCTS. Legal issues come about when you try to facilitate transactions through ads, but it can pay off to redirect your efforts to educational materials and industry updates that feature your company name and contact information. Many companies create branded merchandise – items completely unrelated to cannabis or paraphernalia – that can be used to increase exposure to the company name. Others sponsor radio segments. Stations may be willing to mention your name as a sponsor, even if they can’t run a full ad. Research local print publication policies. If the target audience is adults over 21, they may be more apt to run an ad. There have been companies that sponsor sporting events and concerts, but, again, trouble can arise if the event isn’t geared toward adults. Maine does not allow cell phone text ads, but you are permitted to create a mobile app as long as it provides age verification and an opt-out feature. If you are unsure on any advertising matters, the best practice is to consult with an industry specialist.
Navigating murky legal territory is tricky to say the least. The ARB Cannabis Services Group is a pioneer and trusted advisor in your industry. Whether your business is hemp, medical marijuana, CBD, or looking ahead to recreational marijuana, our team is here to help cultivating, packaging, distributing, and sales businesses with compliance issues. And not only those related to technical accounting requirements. We collaborate with attorneys and consultants on industry-specific matters, including marketing matters. Contact us for more information, or for any other accounting and advisory needs you may have.