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Will Marijuana Ads Make License Renewals Go Up in Smoke?

Broadcasters don’t know it yet, but recent actions by the Department of Justice suggest that the federal government may be moving closer to raining on their upcoming license renewals. The reason? Medical marijuana advertising. While it seems like a recent phenomenon, the first state laws permitting medical marijuana go back some 15 years. The movement by states to permit the use of medical marijuana has grown steadily since then, with half the states in the U.S. (and the District of Columbia) now having medical marijuana laws on the books or under consideration.

Of course, when an entrepreneur sets up a medical marijuana dispensary, the next step is to get the word out to the public. In the past few years, these dispensaries began approaching broadcast stations in growing numbers seeking to air advertising. In the depths of the recent recession, medical marijuana dispensaries were one of the few growth industries, and many stations were thrilled to have a new source of ad revenue.

However, marijuana, medical or otherwise, is still illegal under federal law. When we first began receiving calls a few years ago from broadcast stations asking if they could accept the ads, the federal government’s position was ambiguous. Many stations, and in some cases, their counsel, concluded that as long as the activity was legal in the state in which the station was located, airing medical marijuana ads was fine. In 2009, the Department of Justice gave some comfort, if not support, to this school of thought when it internally circulated a memo to some U.S. attorneys suggesting that the DOJ was not interested in pursuing medical marijuana businesses as long as they operated in compliance with state law.

In responding to clients, I noted that there were still several risks involved in running the ads. First, if you have worked in Washington long enough, you know that the federal government’s attitude toward any activity can change markedly over time (remember prohibition?). A station accepting medical marijuana ads today could always be prosecuted tomorrow if attitudes toward enforcement of federal marijuana laws shifted. Second, broadcasters are uniquely at risk, as broadcasting has always been deemed an interstate activity subject to federal law. Indeed, it is the interstate nature of broadcast transmissions that is the basis for the FCC’s jurisdiction over broadcast stations.

It is that last fact which raises the third, and most worrisome, risk. Unlike a local medical marijuana dispensary, broadcast stations live and die based upon whether the federal government renews their broadcast license. The DOJ doesn’t have to come to the station’s door to prevent medical marijuana ads from airing, as the station has to obtain permission from the FCC just to continue operating. Not long ago, the FCC received its first complaint about a station airing medical marijuana ads, and with the next license renewal cycle beginning on June 1 of this year, likely there will be many more. These complaints won’t necessarily come from opponents of medical marijuana use. Many will be filed by someone that just has an axe to grind against a particular station, with the medical marijuana issue merely being a convenient hook upon which to hang their complaint.

But if, as the 2009 DOJ memo suggests, the feds aren’t that concerned about medical marijuana activity that complies with state law, what’s the problem? Well, there has indeed been a recent change of attitude on the part of the federal government. The first indication came in a February 2011 DOJ letter to the City of Oakland, California, which was soliciting applications from parties interested in establishing “industrial cannabis cultivation and manufacturing facilities” in Oakland. While taking care to note that the DOJ did not intend to expend its resources pursuing “seriously ill individuals” using medical marijuana, the DOJ otherwise reversed its 2009 position, noting in the letter that it “will enforce the [Controlled Substances Act] vigorously against individuals and organizations that participate in unlawful manufacturing and distribution activity involving marijuana, even if such activities are permitted under state law.

In April, the DOJ sent similar letters to governors or other state officials in Washington, Montana, Colorado, and Rhode Island, all of which were considering the adoption or implementation of medical marijuana laws. The letters, while similar, are not identical, and they expand upon the concepts initially set forth in the Oakland letter. For example, in the letter to Governor Gregoire of Washington state, the DOJ noted that if if Washington adopted a pending bill to legalize medical marijuana in the state, the DOJ would enforce the federal laws against marijuana production and distribution regardless of whether those activities complied with the Washington law. The DOJ also noted that it could bring to bear a variety of federal statutes to prosecute such activities, including “Federal money laundering and related statutes which prohibit a variety of different types of financial activity involving the movement of drug proceeds….” The DOJ threatened civil and criminal legal actions, even against state employees charged with implementing the law. Not surprisingly, the Washington governor vetoed the bill.

So how does this affect broadcasters? Well, the federal government is certainly not feeling ambiguous about activities related to the sale of medical marijuana any more, and the letters make clear that compliance with state law offers no “safe harbor” from federal prosecution. In addition, the DOJ is not limiting itself to prosecuting just those who produce and sell medical marijuana. The Rhode Island letter, for example, notes that “Others who knowingly facilitate those individuals and entities who set up marijuana growing facilities and dispensaries, including property owners, landlords, and financiers, should also know that their conduct violates federal law.” Previously, in the context of ads for Internet gambling sites, the DOJ suggested to broadcasters that running such ads “facilitates” the illegal activity being promoted, and could lead to federal prosecution for “aiding and abetting” such illegal activities. The DOJ is likely to take that same position on medical marijuana ads.

Far more likely than widespread prosecutions of media organizations accepting medical marijuana ads are headaches for stations seeking license renewal at the FCC. In processing license renewal applications, the FCC must determine whether, in light of the station’s past performance, renewal of its license will serve the public interest. It is an admittedly ambiguous standard, and if the federal government, via the FCC, wants to use the license renewal process to pressure broadcasters to reject all future medical marijuana ads, it is not a difficult task. Fines and the threat of non-renewal can be very effective persuaders. By severing the link that advertising offers between medical marijuana producers and the patients who use their product, the federal government might feel that it can suppress demand for that product. In reality, the advertising would likely just shift from broadcast stations to other media not so dependent upon the federal government. Regardless, broadcasters whose license renewals are caught in the middle of this power struggle between the state and federal governments will be the ones feeling the heat.