By Tiffiny Fox

Every cannabis-related enterprise working to build a legitimate business in California must operate within the regulations established by the Department of Cannabis Control (DCC). This includes the recent restrictions placed on billboard advertising by the Bureau of Cannabis Control (“BCC”) pursuant to the ruling in Farmer v. Bureau of Cannabis Control & Lori Ajax by the San Luis Obispo County Superior Court, which ruled California Code of Regulations, Title 1116, section 5040(b)(3) invalid on January 22, 2021. And just last week, Gov. Gavin Newsom vetoed legislation that would have allowed cannabis products to be advertised on freeway billboards in most of California, a bill that sought to negate a court order in November that had banned the signs.

The change comes as California’s three, state-run cannabis programs were merged to form a single new department called the Department of Cannabis Control (“DCC”), which will now provide singular regulatory oversight to the cannabis industry. DCC regulations were established to ensure product safety and public protection. Without this oversight, no one in the cannabis industry has the legal authority to conduct business, so ensuring compliance with all regulations is an absolute necessity.

Prior to Farmer v. Bureau of Cannabis Control, all outdoor signs, including billboards, advertising, or marketing materials featuring cannabis and cannabis-containing products, were allowed on interstate highways if they were not within fifteen feet of the border to another state pursuant to Cal. Code Regs. tit. 16, § 5040(b)(3) (“Advertising Placement Regulation” or “Regulation”).  Matthew Farmer filed a petition for a permanent injunction challenging the regulation and for a declaration that the Advertising Placement Regulation was invalid on the basis that (1) it was inconsistent with Business and Professions Code § 26152(d) (“Advertising Placement Statute” or “Statute”), which provides that a licensee shall not advertise or market on a billboard or similar advertising device located on an interstate highway or on a state highway which crosses the California border;  and (2) it was void because the BCC was promoting interests inconsistent with the protection of the public.

The court agreed with Farmer and ruled that the BCC exceeded its authority in promulgating the Advertising Placement Regulation, finding that the regulation was inconsistent with the Advertising Placement Statute, which improperly expanded the scope of permissible cannabis advertising to most of California’s state and interstate highways in direct contravention of the statute.

Following the decision in Farmer, the BCC announced that a licensee can no longer place advertising or marketing on a billboard, or similar advertising device, anywhere on an interstate or state highway that crosses the California border, in conjunction withBus. & Prof. Code, § 26152(d). The impact of this ruling is that licensees can no longer place new advertising or marketing on anyinterstate or state highway that crosses the California border. In addition, licensees are also required to remove all advertising and marketing to comply with the statute.

Although no deadline was established for the removal of all billboards with prohibited cannabis advertising or marketing, it is always a best practice for any cannabis business to act promptly and follow the most current rules and regulations.

If you are unsure whether you currently have a billboard with prohibited advertising or marketing, consider whether your billboard includes cannabis-related language and/or graphics within the definitions provided by Bus. & Prof. Code, § 26150:

(b) “Advertisement” includes any written or verbal statement, illustration, or depiction which is calculated to induce sales of cannabis or cannabis products, including any written, printed, graphic, or other material, billboard, sign, or other outdoor display, public transit card, other periodical literature, publication, or in a radio or television broadcast, or in any other media.

(c) “Advertising sign” is any sign, poster, display, billboard, or any other stationary or permanently affixed advertisement promoting the sale of cannabis or cannabis products which are not cultivated, manufactured, distributed, or sold on the same lot.

(d) “Health-related statement” means any statement related to health and includes statements of a curative or therapeutic nature that, expressly or by implication, suggest a relationship between the consumption of cannabis or cannabis products and health benefits, or effects on health.

(e) “Market” or “Marketing” means any act or process of promoting or selling cannabis or cannabis products, including, but not limited to, sponsorship of sporting events, point-of-sale advertising, and development of products specifically designed to appeal to certain demographics.

As the cannabis industry continues to expand and legalization on the federal level is imminent, regulations are likely to become even more restrictive in the interest of public safety.  That is why it is imperative to not only stay informed about this ever-evolving area of the law, but also retain skilled attorneys who can help to ensure you are complying with all current rules and regulations governing the cannabis industry.