As the United States Congress looks toward its end-of-year checklist, high in priority is the need to pass a new appropriations bill to fund the federal government for another fiscal year. Lawmakers recently passed a one-week extension to pass the bill, with a new deadline of Dec. 23.
Part of that bill may enact a change to Federal Communications Commission (FCC) spending that would in practice allow cannabis companies to advertise on FCC-regulated television and radio broadcast networks, such as CBS and Clear Channel.
In July of 2022, the U.S. House of Representatives passed a bill as part of its appropriations package that included a provision prohibiting the FCC from spending federal funding to stop cannabis companies from advertising in states with state-legal marijuana markets. The bill contains other provisions specific to the FCC approval process for broadcast companies and their advertising, but in short, the bill allows for advertising by cannabis companies on FCC-regulated television and radio networks.
The National Association of Broadcasters, a trade organization representing television and radio broadcasters, praised the bill when it passed. This is unsurprising given its passage would almost certainly unlock new advertising dollars for broadcasters. Advertising dollars spent on television and radio ads combined have fallen to about half the value spent on digital advertising in recent years. According to a report from PricewaterhouseCoopers, digital advertising in the U.S. is expected to be a $200 billion industry in 2025, while TV will account for just $81 billion, and radio a meager $19 billion. And the gap between digital ad spend and broadcast ad spend is only expected to widen.
Broadcast networks, however, will not have much competition for cannabis advertising dollars from digital advertising services, as the major players currently prohibit the marketing of drugs and paraphernalia. Amazon, Alphabet (the parent company of Google) and Meta all have advertising policies that block the cannabis industry from tapping into their platforms, which are currently some of the most popular advertising platforms. Amazon recently reported it increased its global ad revenue from $19 billion to $31 billion from 2020 to 2021, and the three platforms are estimated to receive nearly 50% of all advertising dollars, according to reporting from Digiday.
Given the restrictions on digital advertising, the cannabis industry is likely to welcome further advertising opportunities. Currently, not only are cannabis companies prohibited from advertising on federally regulated channels, but also states with legal recreational marijuana markets impose their own state-level advertising restrictions, and often local towns and cities further restrict marketing activities. This leaves a lot of the cannabis industry resorting to advertising techniques that have not been popular since the 1990s–local radio, pamphlets and billboards. Yes, some brands manage to use social media to a certain extent, but many brands have horror stories of getting locked out of their accounts or kicked off social media platforms. So, the addition of traditional FCC-regulated TV and radio as an advertising platform would indeed be the start of a major shift for advertising in the cannabis space.
Whether such a change happens will depend on the Senate, which is yet to pass any of its appropriations bills. Passage of this particular provision through the current Senate, however, seems unlikely given the numerous times it has turned down the SAFE Banking Act that would make it easier for federally backed financial institutions to serve the marijuana industry. The tease and fail of passage of the SAFE Banking Act has become somewhat of a joke among lawyers who track marijuana legislation in D.C. (In fact, Sen. Chuck Schumer was in the news at the end of October talking optimistically once again about the prospects of the SAFE Banking Act). If the Senate is finally able to pass the SAFE Banking Act, it would increase the chance that the advertising bill is passed.
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However, even if it does pass, looking to other similar industries, like tobacco and alcohol, shows the cannabis industry will likely only face further hurdles down the road.
Tobacco companies used to advertise on FCC-regulated broadcast channels, but such advertisements were banned in 1971. In 2009, the U.S. Food and Drug Administration took over the regulation of tobacco advertising and instilled further restrictions, such as the prohibition on a tobacco company sponsoring events or teams. Of course, many tobacco companies attempt to skirt these restrictions. (In one recent occurrence, Ferrari took up sponsorship with tobacco maker Philip Morris International through its “Mission Winnow” campaign earlier this year for its Formula I team.) For now, states such as Colorado still allow dispensaries to advertise by sponsoring events.
Alcohol advertising provides an interesting comparison to the cannabis industries because, like cannabis, many modern alcohol brands rose to prominence shortly after the end of prohibition. Radio advertisements of liquor were banned in1936 (when radio was a much greater share of advertising than its current status), and in 1958, television ads of liquor brands were similarly banned. These bans were in part orchestrated by the liquor industry itself, which feared that too much too quick could drag the country back into prohibition—a sentiment that has been raised by several individuals in the cannabis industry. The prohibition on liquor advertising ended in the late 1990s, but not without much controversy since.
For now, the cannabis industry seems to be following the self-policing practice of the alcohol industry. As the Chicago Tribune reports, several industry heavyweights, such as Cresco Inc. and Green Thumb Industries, have published their own guidelines for advertising. Whether these will be enough to prevent a public backlash against cannabis company advertisements streaming on federal airwaves is yet to be seen, but it is hard to imagine the federal government allowing such advertisements so long as marijuana is still a Schedule I controlled substance.
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Even if the bill passes, cannabis advertisers will still face two major hurdles. One: The legislation is tied to the annual federal budget, so it will expire unless passed on an annual basis or more permanent changes are adopted. And two: Broadcasters will still need to gauge other stakeholders’ palates for cannabis regulations. Long before the FDA prohibited tobacco companies from sponsoring events and teams, such sponsorship was already prohibited by major sporting leagues. Changes in federal law, such as the FCC changes proposed by the House of Representatives, in many ways will be just the start of a much longer discussion on how cannabis companies should be allowed to advertise.
Cameron Field is the co-leader of Michael Best’s cannabis group and is based in Austin, Texas. He focuses his practice on the cannabis industry, where clients rely on his legal advice to make strategic business decisions, weigh risks, and stay up to date in the rapidly changing hemp and CBD area. He guides clients through complicated regulatory processes and advocates for their interests in administrative, state, and federal courts.
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