Cases We’re Watching: Constitutionality of State Restrictions on Cannabis Advertising

By Paul Josephson and James Hearon

State cannabis advertising bans are getting their day in court, albeit before the federal Fifth Circuit, a court that has been increasingly hostile to regulation.

In February 2022, Mississippi enacted the Medical Cannabis Act, legalizing medical marijuana within the state. The Act granted the Mississippi Department of Health (“MDOH”) authority to establish and promulgate rules and regulations governing the advertising of medical cannabis.

The Act made clear that any proposed rules or regulations could not prohibit a cannabis operation from engaging in certain types of marketing and advertising, including displaying appropriate signage on the licensed premises, listing in business directories and other publications, or displaying logos or other branding materials.  In promulgating its proposed regulations, MDOH prohibited licensees from advertising or marketing in any form of media (i.e., broadcast, electronic, print, etc.)

In November 2023, Tru Source Medical Cannabis, LLC challenged MDOH’s advertising restriction as a violation of the First Amendment. In January 2024, the Northern District of Mississippi federal court upheld the advertising ban and dismissed the lawsuit, entitled Cocroft, et al. v. Graham, et al., in its entirety. The district court relied extensively on the Montana Supreme Court’s analysis in Montana Cannabis Industry Association v. State of Montana, 368 P.3d 1131 (Mont. 2016), rejecting a similar challenge to cannabis ad regulations. The district court agreed that “an activity that is not permitted by federal law—even if permitted by state law—is not a ‘lawful activity’” and, thus, does not qualify for commercial speech protection.  Tru Source appealed this ruling to the Fifth Circuit.

We are closely watching the Fifth Circuit’s decision to see whether antipathy for cannabis or regulatory overreach will prevail. The circuit, which embraces Texas, Louisiana and Mississippi, has been making headlines lately for rulings hemming in the authority of federal agencies. In recent cases, the Fifth Circuit rejected FDA rules permitting use of the abortion-inducing drug mifepristone (just overturned by the Supreme Court late last week), tossed out the SEC’s system for adjudicating enforcement cases, and declared the Consumer Financial Protection Bureau’s funding mechanism unconstitutional (also reversed by the Supreme Court). The Fifth Circuit has been in the legal spotlight, and its rulings have been keeping the Supreme Court busy.

The Fifth Circuit’s decision is also likely to implicate a much broader and unsettled legal question; that is, whether constitutional protections apply to state-legal, but federally prohibited, conduct. In 2022 and 2023, we saw a number of constitutional challenges to residency requirements in state cannabis regulations alleging that such requirements discriminate against out-of-state operators and violate the Dormant Commerce Clause.

Several courts, including the First Circuit and the Eastern District of Michigan, have held that discriminatory residency requirements likely violate the Dormant Commerce Clause. Other federal courts, such as the Western District of Washington and the District of Maryland, have found that, because cannabis is federally illegal, the Dormant Commerce Clause likely does not apply—the same rationale relied on by the district court in Cocroft.

The Fifth Circuit’s recent history as a venue where regulators have fared poorly suggests Mississippi’s outright ban on commercial speech by state-legal businesses will get a hard look. Briefing will be complete shortly, and we would expect oral argument and a decision before year end.

Selling Cannabis: A Look at Advertising Practices as Pa. Considers Adult-Use Legalization

On Friday, April 23, 1999, the lights went out in Times Square—and in countless locations coast to coast—for tobacco advertising. That was the date by which the largest tobacco companies in the country agreed to ensure all cigarette advertisements were removed from billboards, transit locations, malls, stadiums, arenas and just about every other public place, in accordance with a settlement agreement involving most every state and territory in the United States.

The so-called Master Settlement Agreement resolved lawsuits between the country’s largest tobacco companies and more than 50 state and territorial attorneys general. Among its principal features was the imposition of significant restrictions on the marketing activities employed by tobacco companies, particularly any advertising and promotion practices that might target or appeal to young people.

Read The Legal Intelligencer article by Patrick Smith and Deanna Lucci on the Duane Morris website.

New York State Advertising Rules Effective Today

Effective March 22, 2023, New York’s cannabis advertising rules are now in place. These rules aim to protect public health, particularly minors, and ensure that cannabis advertising is truthful and not misleading.

    •  Cannabis advertisements cannot be displayed within 1,000 feet of a school or daycare center.
    • Ads cannot target individuals under 21 years of age or depict minors, toys, characters, or cartoons.
    • Advertising cannot claim cannabis is safe or healthy or that it has curative or therapeutic effects unless supported by substantial evidence.
    • Ads cannot contain false, misleading, or deceptive information.
    • The warning statement “This product may be intoxicating and may be habit-forming” must be included in all cannabis advertisements.
    •  Promotions, such as giveaways or coupons, are prohibited except in licensed dispensaries.
    • Advertising cannot be displayed on any public transportation or property owned or leased by the state or local government.
    • All ads must include the New York State Department of Health’s “Know the Facts” educational campaign website address.

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The opinions expressed on this blog are those of the author and are not to be construed as legal advice.

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