Will FCC Bend Rules for Marijuana Internet Advertising?

By Cheryl Lee

Marijuana has been legalized for recreational use in Alaska, Colorado, District of Columbia, Oregon, and Washington, while medical marijuana has been legalized in 23 states and the District of Columbia. About a dozen more states are expected to legalize marijuana in some form in the coming years. Industry experts expect annual marijuana sales revenues in Washington and Colorado to hit $2.5 billion by 2015. To help capture this revenue opportunity, many marijuana business owners are exploring Internet advertising. Indeed, the home delivery of marijuana is currently advertised on the Internet through various websites.

But marijuana is still illegal under federal law, and current federal laws make it illegal to advertise the sale of illegal drugs. Violations of those laws can be expensive. In 2011, Google agreed to pay a $500 million settlement to avoid federal prosecution for accepting illegal advertisements from Canadian online pharmacies. Due to these legal restrictions, online giants like Facebook, Google, Yahoo and Twitter have internal policy strictly banning marijuana ads.

Even in states that have legalized recreational use, the state rules for marijuana advertising are burdensome and highly restrictive. For example, Colorado’s Marijuana Enforcement Division bans marijuana advertising unless the ad sponsor can provide reliable evidence that no more than 30% of the audience is reasonably expected to be under the age of 21. This naturally makes Internet advertising the default choice—by asking for website visitors’ ages, advertisers comply with the 30% rule. While advertisers may be complying with state rules, they may still be violating federal law. The Federal Communication Commission (FCC), which regulates the ways companies can use telecommunications to advertise to consumers, has been silent on the issue.

In light of growing acceptance of cannabis legalization for both medical and recreational use, it will be interesting to see whether the FCC will bend its rules just as the Treasury Department did with its banking rules. U.S. financial institutions, like banks, credit unions, and money services businesses, were previously not allowed to service marijuana businesses. But the Treasury issued a new set of guidelines in February 2014 that will allow such institutions to service marijuana businesses. And in July 2014, the House of Representatives voted to allow banks to provide traditional banking services to marijuana businesses that are legal under state law.

With increasing acceptance and legalization of cannabis within the states, pressure will increase for amending the federal ban of marijuana. In the meantime, marijuana advocates and advisors will continue to pressure the FCC to bend its advertising rules.