Big tech platforms inch closer to cannabis acceptance after rescheduling

Key points:

• Federal medical cannabis rescheduling does not lift advertising restrictions on major technology platforms.
• Federal agencies like the Food & Drug Administration will continue to monitor – and take action – on medical and therapeutic claims.
• But 280E relief could improve medical operators’ cash flow and fund more advertising spending as well as brand-building, events and education.

In the days after the Trump Justice Department eased federal restrictions on medical cannabis, some major Silicon Valley search and social media platforms contacted Dan Serard to find out what marijuana rescheduling means for advertising.

Allowing cannabis operators to use platforms such as Google and Instagram like normal businesses could be a monumental shift.

But according to Serard, founder of Boston-based digital marketing agency Cannabis Creative Group, big tech platforms are waiting for when adult-use marijuana is legalized, not just medical-only rescheduling.

“They’re not making any changes now, but they are open to it,” said Serard, who was asked not to disclose which platforms he spoke with.

While federal medical cannabis rescheduling could give marijuana companies more room to market themselves, marketing executives, lawyers and public relations advisers say moving medical cannabis to Schedule 3 of the Controlled Substances Act won’t change strict cannabis advertising rules by itself.

Instead, they expect a slower shift in which some state-licensed medical operators gain cash flow from relief under Section 280E of the Internal Revenue Code, earned media becomes easier to secure and brands invest more in education, search visibility and local outreach.

“What the cannabis industry should know is that they’re positioning themselves for when this happens and are supportive of allowing for advertising when it does,” Serard added.

Can cannabis operators advertise on Instagram after federal marijuana rescheduling?

For now, Serard is telling clients they should continue “business as usual” and stick with the conservative approach to advertising on Google, Facebook and TikTok that they’ve followed for years.

That means cannabis companies can’t offer promotional deals or show cannabis products in their advertisements – restrictions that the tech platforms impose even in markets such as Canada, where adult-use cannabis is fully legal.

Neither Meta, TikTok nor Google responded to MJBizDaily requests for comment.

Is the path clear for cannabis advertising?

Although advertising was not addressed in the April Justice Department rescheduling order, some observers expect it will be addressed in hearings scheduled to begin June 29. The hearings are expected to provide a “legally compliant pathway to evaluate broader changes to marijuana’s status under federal law,” according to an April 23 news release.

The 280E tax situation has been punishing, forcing operators to pay federal tax rates above 70% because they can’t deduct normal business expenses. Relief from punitive taxation means cannabis companies will have extra cash that they can use to resume marketing and promotion, said Jason Heller, senior vice president of public relations firm 5WPR.

“That money has to go somewhere when it’s freed up,” Heller said. “Look at sports betting after PASPA: invisible one year, DraftKings ads everywhere two years later.

“Rescheduling won’t flip a switch, but it removes the legal foundation for the bans and frees up the capital to actually do something.”

Social media and search engines’ restrictions are likely to ease because the platforms already are equipped with compliance infrastructure like age-gating technology and geographic targeting to allow for advertising promoting alcohol.

“What they’ve been missing is the legal justification to apply it to cannabis,” he said.

Will the FDA regulate cannabis advertising?

Christine Baily, a cannabis attorney and former general counsel for Massachusetts regulators, said that a broader regulatory gray area remains even after medical cannabis’ reclassification.

Federal agencies, including the FDA and Federal Trade Commission, are likely to play major roles – especially around health and therapeutic claims, Baily said. The agencies have already acted against cannabis and hemp companies that they believe made unsupported medical claims or used problematic packaging.

Last week, an Illinois attorney filed a federal class-action lawsuit on Monday against three major cannabis multistate operators, alleging the MSOs used “deceptive marketing” to mislead consumers about the drug’s health benefits, court records show.

“Until the research is in place and there’s a level of confidence, they don’t want cannabis or hemp companies to make claims about medicinal or therapeutic effects of marijuana,” Baily said.

“We’re still in somewhat of a holding pattern.”

There also are questions surrounding where cannabis products can be advertised. Some fear that if someone younger than 21 sees a billboard advertising cannabis, they may be encouraged to use it, Baily said.

“It stems from case law around tobacco and the settlements states reached on advertising restrictions,” Baily said. “[States] want to protect vulnerable children from cannabis advertising.”

Billboard advertising regulations vary by the states in which cannabis is regulated, and although the federal government may want to have a role in determining the future of advertising, Baily said, “It might not be practical to regulate every type of advertising activity.”

Broadcast stations, which are federally licensed, must remain especially cautious because under federal law, the plant is still illegal, according to the Broadcast Law Blog.

Rather than big ad buys, rescheduling means more cannabis events

Annie Star Davis, a cannabis growth strategist with experience in wellness branding, said the long-term picture still points toward a national brand landscape and eventual interstate commerce.

But advertising rules will continue to be shaped state by state, especially because adult-use cannabis remains heavily regulated, even if medical marijuana sees some federal relief. Until interstate commerce is a reality, federal rescheduling isn’t likely to change that.

And until then, big ad buys likely won’t make sense.

“Most brands are hyperlocal, so it doesn’t make sense to pay for an advertising campaign that’s national,” Davis said.

Davis said one of the near-term effects could be felt in event marketing, particularly for state-licensed medical cannabis businesses that would see relief from 280E.

With more cash flow, she said, some companies may be able to restore spending on brand-building efforts that have become hard to justify in a low-margin industry.

“Now they can keep a greater percentage of profits to use toward attending trade shows and sponsoring consumer cannabis festivals,” Davis said.

“Companies used to be able to spend $100,000 to sponsor a music festival to reach consumers because they had venture capital. Now it’s hard to eke out a $25,000 booth sponsorship to reach consumers.”

Will rescheduling legitimize cannabis advertising?

Although consumers largely accept cannabis, the advertising infrastructure still hasn’t caught up, so the category is not yet treated like mainstream consumer products, Heller said.

Rescheduling will help normalize the industry, but it’s still unlikely that cannabis marketing will look like alcohol advertising any time soon.

“Will we see cannabis Super Bowl ads tomorrow? No,” Heller said.

“But it gives platforms and broadcasters a reason to start asking whether the reputational risk is really still there – and for most of them, the honest answer is increasingly no.”

Margaret Jackson can be reached at margaret.jackson@mjbizdaily.com