Broadcasters Seek New Business Opportunities Amid Legalization of Industrial Hemp Products (Including CBD Oil)
There's a green wave coming in the form of expanding marijuana legalization across the US, and many of the people trying to take advantage of this green wave are also trying to turn it into another kind of green: money. Broadcasters are also looking to take advantage of these new revenue opportunities, but because marijuana remains illegal at the federal level, Fletcher Heald has continued to advise its clients not to advertise marijuana or marijuana derived products. Federal law also prohibits using a radio or TV station to commit or facilitate a felony. With the sale of marijuana remaining a felony under federal law (even if enforcement is deprioritized) broadcasters could be charged with a felony for using their station to facilitate - through advertising - the sale of marijuana. If convicted, a broadcaster would have to disclose the conviction to the Federal Communications Commission ("FCC" or the "Commission") and would likely lose the ability to hold an FCC license (in addition to being convicted of a felony).
However, broadcasters now have a silver lining in the rush to take advantage of new "marijuana adjacent" industries, particularly cannabidiol ("CBD") oil. CBD oil can be derived from marijuana, but it can also be made using hemp. Hemp is a variety of cannabis with significantly less tetrahydrocannabinol ("THC"), a psychoactive ingredient, than marijuana. In the US, hemp is defined as containing a THC concentration of no more than .3 percent on a dry weight basis
Historically, hemp has been tightly regulated along with marijuana. The U.S. effectively made industrial hemp illegal with the Marihuana Tax Act of 1937, and hemp was later added to the schedule of controlled substances when the Controlled Substances Act went into effect in 1971. However, the federal government legalized the industrial production of hemp last year. Among other things, the Agriculture Improvement Act of 2018 (the "2018 Farm Bill") allows hemp production pursuant to yet-to-be-created state regulatory plans approved by the Department of Agriculture. If a state does not submit a hemp regulatory plan, producers in that state will be able to rely on a default set of regulations to be created by the Department of Agriculture.
Now, before you go out and start soliciting CBD oil advertisements (or start your new CBD oil business), there are some important caveats broadcasters need to keep in mind, and some questions that still need to be answered. We would recommend holding off temporarily on advertising CBD oil until the appropriate regulatory frameworks are in place. That said, we do anticipate that broadcasters could start advertising CBD oil in the relatively near future.
The 2018 Farm Bill essentially legalized industrial hemp, but the law required the establishment of a regulatory framework that is not yet in place. Under the new law, states and the federal government will share regulatory responsibility. The Department of Agriculture will create regulation for industrial hemp production that can serve as a default in states that don't adopt their own hemp regulations. For states that choose to regulate industrial hemp production on their own, they must first submit a regulatory plan to the Department of Agriculture, which must accept or reject the plan within 60 days.
So far, the Department of Agriculture's regulations are not in place; only Pennsylvania and Kentucky have filed plans of their own. We are recommending that broadcasters hold off on advertising CBD oil until the necessary regulatory frameworks are in place. Hemp remains illegal in a number of states, as one Colorado company found out when it shipped a truck load of hemp from Oregon through Idaho (where a species of cannabis remain illegal). Therefore, broadcasters will also need to be cognizant of state laws related to CBD oil advertisements. That said, it looks like several other states are preparing to file regulatory plans that will allow broadcasters to air CBD oil advertisements soon.
In addition to regulatory issues, there are several other issues broadcasters should keep in mind. First, because marijuana remains illegal federally, broadcasters will need to take precautions not to run advertising for CBD oil derived from marijuana, as opposed to hemp. It remains to be seen what safeguards broadcasters will need to put in place to guard against this risk, but at the very least, broadcasters must avoid advertising marijuana-based products, as opposed to hemp-based products. Second, CBD oil proponents often advocate the health benefits of their product, but health claims in advertising are closely scrutinized by the Federal Trade Commission and, to some extent, the Food and Drug Administration. If broadcasters run CBD oil advertising that makes health or medical claims, they should make sure there is evidence to support those claims.
For now, broadcasters may want to continue to take a cautious approach to CBD oil advertising, but the day is fast approaching where broadcasters will likely be able to take advantage of this new advertising opportunity. Until then, keep an eye on CommLawBlog for more broadcast advertising updates.