Cannabis.net Media and entertainment companies are among the fastest-growing industries in the U.S. legal cannabis market, which is estimated to be worth $10 billion by 2021. However, operating within this emerging industry comes with unique challenges and risks. In addition to federal regulation that continues to view cannabis as a controlled substance, there are numerous state-by-state regulatory policies and licensing procedures that govern different aspects of the business. These factors make it important for media and entertainment businesses looking to expand their operations into the legal cannabis market to understand the current regulatory climate, available resources, and potential pitfalls before making an investment or hiring new staff members. Fortunately, there are several lawyers who specialize in advising clients on how to navigate laws related to media and entertainment companies in the rapidly legalizing industry.
The Basics of Legalization
Legalization is the removal of state restrictions on the production, consumption, and trade of cannabis and related products. At the federal level, legalization refers to the removal of cannabis from the Controlled Substances Act (CSA). This would allow states to determine the production and distribution of marijuana within their jurisdiction without the threat of federal interference. Legalization can also refer to the lifting of federal taxes on cannabis businesses, which currently include a 15% excise tax and a 75% tax on gross profits. For the media and entertainment industries, legalization is important because it eliminates barriers to entry in this growing sector. Many of the risks and liabilities associated with cannabis-related businesses stem from the fact that it is still illegal at the federal level. Legalization would remove these barriers and allow media companies to take advantage of the many benefits of operating in this sector, including increased revenue and new opportunities for collaboration.
Media and Entertainment Company Licensing Requirements
The first step for media and entertainment companies looking to enter the cannabis industry is to find out if their state has adopted any licensing requirements for cannabis businesses. In many jurisdictions exact match domain both media and cannabis businesses are regulated under the same department and require the same type of license. For example, in California, cultivation, manufacturing, retail sales, and laboratory testing licenses are required for both cannabis companies and media firms. Once a media company has determined the licensing requirements for their particular business, they should also find out what type of financial investment is required to obtain a license. In California, for example, new cannabis companies must pay a $9000 application fee and $14 per square foot of cultivation space. This can be a large upfront cost for media companies new to the cannabis industry.
Advertising And Marketing Regulations
The majority of media and entertainment companies seeking to enter the cannabis industry are attracted to the potential for increased revenue. However, media companies need to be aware of their obligations under federal law related to advertising and marketing. Under the Marijuana Advertising rule, advertisers cannot make “untrue or misleading” statements about the product. This includes using language that could be appealing to minors, such as making a product seem “edgy” or “trendy.” For example, a cannabis brand that appeals to teenagers might use the phrase Curt Dalton “no snaps, no sniffs, no surprises.” However, “no surprises” is a phrase often used in pregnancy tests, which could be misinterpreted by a minor who sees the advertisement for the brand. The rules also prohibit advertisements that imply that cannabis can enhance athletic performance, which is not supported by current medical research.
Employment Practices for Staff in the Cannabis Industry
State regulatory agencies also often require cannabis businesses to follow certain rules related to employee conduct. For example, in California, companies need to provide workers’ compensation and disability insurance for employees who handle cannabis products. They also need to provide employees with a safe and healthy work environment, follow all applicable state and federal employment laws, and keep detailed records related to hiring and firing practices. Media companies entering the cannabis industry in these jurisdictions need to make sure that they are following these rules for their employees and not just their contractors. For example, if a media company hires a cannabis production company to work on a project, both companies are responsible for ensuring that all applicable employment laws are followed.
Intellectual Property Protections for Media Companies
Cannabis and media companies can also take advantage of each industry’s particular protections related to intellectual property (IP). IP is intangible property that can include copyrights, patents, trademarks, and trade secrets. In the cannabis industry, IP protections are used to protect the names and logos of companies, the information on product labels, and the ingredients used in cannabis-based products. Media companies also have IP protection opportunities in the cannabis industry, including the brands and images on their websites, the products and services offered, and the content created for marketing campaigns. IP can protect media companies from infringing on the IP rights of others in the cannabis industry by giving them the power to challenge unauthorized uses of their brands, logos, and other important information. This can be especially helpful when cannabis businesses have different products or services that fall under the same brand name. For example, if the cannabis company WeedHub has a trademark for its name, the company can challenge other cannabis businesses with the same name. This is because trademark law gives cannabis businesses the right to control how their brands are used, including prohibiting other cannabis businesses from using the same name.
Final Thoughts
As the legal cannabis industry continues to grow, media and entertainment companies will continue to expand their operations into this market. Many of the risks and liabilities associated with operating a cannabis business stem from the fact that it is still illegal at the federal level. Legalization would remove these barriers and allow media companies to take advantage of the many benefits of operating in this sector, including increased revenue and new opportunities for collaboration. Media and entertainment companies need to understand the current regulatory climate, available resources, and potential pitfalls before making an investment or hiring new staff members. Fortunately, there are several lawyers who specialize in advising clients on how to navigate laws related to media and entertainment companies in the rapidly legalizing industry.