Ruling on medical marijuana ads could be ‘total game-changer’

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Ruling on medical marijuana ads could be ‘total game-changer’

Arkansas Judge May Rule Cannabis Advertising Limits Unconstitutional.

A new advertising landscape could await the state cannabis industry in 2024 if a Pulaski County judge rules in favor of a Pine Bluff cultivator arguing that the state’s limitations on medical marijuana ads are unconstitutional. 

At a Dec. 7 hearing, Pulaski County Circuit Judge Chip Welch said he planned to issue a ruling by the end of 2023 in a case brought nearly two years earlier by Good Day Farm. 

“It would be a total game-changer,” said Elizabeth Michael, an owner of a Little Rock cannabis advertising firm.

Good Day Farm has argued that cannabis advertising is commercial speech concerning a lawful activity, since medical marijuana is legal in Arkansas and effectively lawful under federal law. State regulations prohibiting cultivators from advertising to the public violate First Amendment protections on free speech, they say.

Arkansas Attorney General Tim Griffin’s office, representing state agencies that regulate the industry, has argued that cannabis is still illegal federally. That means Arkansas cultivators and dispensaries are not due the commercial speech protections they are seeking, Griffin claims. 

Welch ruled on part of the case earlier this year when he said the state legislature lacked the authority to make changes to the constitutional amendment approved by voters in 2016 that authorized medical marijuana in Arkansas. The judge struck down 27 modifications to the law made by state lawmakers in the years since. Griffin quickly announced his intention to appeal, but he’s been prevented from doing so until the court rules on the advertising issue as well. 

The case hinges on the “Central Hudson” test, a standard set by the U.S. Supreme Court and adopted by the state Supreme Court regarding the government regulation of commercial speech. First, the test says the speech must concern lawful activity. If it does, there must be a substantial government interest in regulating the speech, the regulations must advance the government’s interest, and the regulations must be no more extensive than necessary.

During oral arguments in December, Noah Watson of the state attorney general’s office argued that cannabis businesses are not engaged in lawful activity because marijuana remains illegal federally. Thus, the businesses’ speech would not be constitutionally protected and the state can regulate their advertising. 

Watson said cultivators are not allowed to market their products to the general public because the public is not allowed to purchase products directly from them. Cultivators are allowed to market their products to dispensaries, which purchase products from cultivators, Watson said. 

Dispensaries also face restrictions upon marketing their products to the general public, which Watson argued furthers the state’s interest in protecting children. Dispensaries are prohibited from advertising on television, on radio, in print media or on the internet unless they have reliable evidence that no more than 30% of the audience viewing the ads will be under the age of 18, according to rules established by the state Alcoholic Beverage Control Division. 

Gary Marts, an attorney for Good Day Farm, said the state’s position on marijuana is conflicted because it opposes cannabis in one sense but also regulates the industry and has received more than $100 million in tax revenue related to medical marijuana. 

Marts said cannabis businesses’ speech is protected because cannabis is legal on the state level and is effectively lawful federally as well. Since 2014, Congress has prohibited the U.S. Department of Justice from using funds to enforce federal cannabis laws in states where cannabis is legal on the state level, Marts said. 

Marts disputed Watson’s argument that advertising should be restricted for cultivators because cultivators don’t sell to the general public. Marts said the brewer that makes Budweiser advertises its beer in Arkansas, although it is not a licensed retailer in Arkansas. The brewer’s ads for Budweiser are meant to tell consumers to purchase the products at retail outlets, Marts said. 

Marts also argued the case would need to enter the discovery phase to understand how restricting marijuana advertising impacts the state’s interest in protecting children. 

Advertising in Arkansas 

Michael, an owner of Little Rock-based cannabis advertising firm Bud Agency, said the industry faces a variety of limitations on advertising, from state and federal regulations to rules set by social media companies. 

From Michael’s perspective, medical marijuana patients are disadvantaged by the state’s rules, particularly when cultivators are prohibited from educating the public about their products. 

“That poses a big problem for the industry as a whole since the cultivators have a lot of the knowledge about the actual products that they are producing and no one will speak more passionately than the person who is making it,” she said. 

Dispensaries are allowed to advertise to the public but must keep in mind the rule about ad audience composition. Many digital platforms can verify that more than 70% of their users are adults and can accept dispensary ads. 

It’s harder to nail down the demographics on who is viewing outdoor advertising or print media. If a dispensary were to place an ad on a billboard, it would also have to contend with restrictions against advertising within 1,000 feet of certain places like schools, Michael said. 

Beyond the state restrictions, Michael said cannabis businesses must also deal with public perceptions. Some companies view cannabis as “risky” and don’t want to accept what they believe to be “dirty cannabis money” because it is still technically prohibited under federal law. Michael said the number of businesses in that category is shrinking. 

Alan Leveritt, publisher of the Arkansas Times, which Michael described as a “cannabis-friendly” media outlet, echoed the Good Day argument that breweries market beer to consumers without selling to them directly. 

“Why shouldn’t a cultivator be allowed to promote its brand to medical marijuana cardholders even though the customer buys the product from a dispensary?” he said.   

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Region: Arkansas

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