NBA Players face risk when partnering with Cannabis Companies
The relationship between professional sports and cannabis has long been complicated, with leagues and teams often taking a hardline stance against marijuana use by players.
But times are changing, and the NBA is at the forefront of this shift by shattering the grass ceiling.
On April 26, the NBA and National Basketball Players Association reached a deal on a new collective bargaining agreement. Taking effect on July 1, it runs through the 2029-2030 season unless either side opts out after 2028-2029. This CBA reflects the first time marijuana won’t appear on the Prohibited Substances List for NBA athletes.
However, it’s noteworthy that the CBA allows players to promote cannabidiol companies and/or invest in cannabis companies, opening up a whole new world of possibilities for athlete-driven investments, endorsements, and sponsorships. As the legal cannabis industry booms and attitudes toward marijuana continuing to rapidly evolve, the NBA’s decision to loosen its restrictions on cannabis will have major implications for both the league and its players.
But this new policy still brings potential pitfalls for players. Players seeking to capitalize on the NBA’s policy change should be aware of potential risks associated with partnering with cannabis companies.
Risk to reputation. While attitudes toward cannabis are changing, the drug is still illegal at the federal level and carries stigma in some circles. Players who partner with cannabis companies risk being seen as promoting drug use, which could harm their reputation and potentially affect their future endorsement deals. This is particularly important when reviewing morality clauses in past and future contracts to ensure they aren’t overly generic or broad to flat-out prohibit “illegal drug use.”
Legal concerns. Despite the increasing legalization of cannabis across the US, there are still some risks . The risk of legal repercussions exists for players and cannabis companies alike, as players could face legal repercussions if they invest in companies that operate in states where marijuana remains illegal. Cannabis companies could run afoul if they sell athlete-sponsored products in states with specific laws surrounding celebrity endorsements, marketing and strict “attractive to children” provisions.
Regulatory issues. The cannabis industry is still relatively new and highly regulated, with complex laws governing everything from cultivation to distribution. Players who partner with cannabis companies could face regulatory challenges or even run afoul of the law if proper precautions aren’t taken, especially taking ownership interests in multiple cannabis companies, as some states prohibit this practice.
Potential conflicts of interest. If NBA players invest in or partner with cannabis companies, they risk financial interests conflicting with the league’s policies or rules. For example, a player who promotes or holds a controlling interest in a cannabis company that sells THC products could violate the CBA.
Lack of experience. While NBA players may be experts on the basketball court, many may have limited experience with investing or business partnerships. Players who enter into partnerships with cannabis companies could find themselves in over their heads if they don’t have the right advisers or support.
The CBA doesn’t grant carte blanche for players to partner with all cannabis companies. Regarding cannabis investments, a player could invest in a company that makes CBD products and hold an active and controlling interest in a CBD-producing company. However, under the CBA, players are still prohibited from holding active, controlling interests in marijuana-producing companies (products above 0.3% THC). Therefore, if a player wants to invest in a typical state-licensed medical and/or adult-use marijuana company (above 0.3% THC), that interest must be passive and non-controlling.
With respect to promotion of this industry, players may promote a company that makes CBD products but will continue to be prohibited from promoting marijuana companies that sell or market products containing THC above 0.3%. Attitudes towards cannabis continue to shift, and the league sees significant potential in embracing the cannabis market that is projected to be worth over $73 billion by 2027.
Many NBA players have expressed entusiasm at this change in policy—who see it as a positive step toward destigmatizing marijuana use and embracing new opportunities for sponsorship and branding. Players such as Kevin Durant and Jaylen Brown have already expressed interest in partnering with cannabis companies, and with the new CBA in place, more players are sure to follow suit.
