The first television commercial for a cannabis product was scheduled to air on Denver-based ABC affiliate KMGH this month but the network’s owner, E.W. Scripps Company, pulled it at the last-minute, citing “concerns about the lack of clarity around federal regulations that govern broadcast involving such ads.” If marijuana is legal in Colorado, why can’t its television stations broadcast advertisements of legal products?
Like most legal issues in the cannabis industry, much of the problem stems from marijuana still being illegal under federal law. Section 843 of the Controlled Substances Act specifically prohibits using “communications facilities” to transmit advertisements for the sale of Schedule I drugs. Violating this provision is a felony.
The Federal Communications Commission regulates and licenses television broadcasters, issuing licenses on an annual basis. There is no FCC regulation expressly prohibiting a televised advertisement of cannabis products in states with legalized cannabis. The FCC, however, renews broadcasters’ licenses each year based, in part, on whether they served the “public interest” during the preceding year. It could be more difficult to satisfy this criterion if broadcasters (arguably) committed a felony by violating Section 843 of the Controlled Substances Act.
At best, airing pot ads could mean that the licensing renewal process could become much more onerous. However, unlike other federal agencies, such as the DOJ, FDA, Treasury, SEC, and the IRS, the FCC hasn’t yet weighed in on cannabis. Without any guidance broadcasters are left guessing how much fuss federal regulators will put up, even if states like Colorado and (probably) Oregon do not prohibit the ads.
Given the lack of regulatory clarity, the potential marijuana ad spends do yet not justify the potential expense, time, and risk to broadcasters. In other words, for virtually all television stations the potential transaction costs are likely just too high to make running marijuana ads a sound business judgment. The alcohol industry spends roughly $2 billion on advertising per year, $500 million on television alone. The cannabis industry can’t hold a candle to that, at least not yet. Banks currently face similar issues with providing accounts to cannabis businesses, though to a somewhat lesser extent.
It’s ultimately a matter of when, not if we’ll start seeing cannabis products advertised on television, but until federal laws soften and until the industry reaches a critical mass, you should not start holding your breath for this. In the meantime, you can watch the banned Colorado ad here.