Despite Legalization, Cannabis Retailers Still Face Telecom Backlash

Goodwin

On March 31, 2021, New York became the 16th state in the U.S. (with New Mexico poised to become the 17th any day now) to legalize the recreational use of cannabis by people 21 years old or older, paving the way for the emergence of a multitude of cannabis dispensaries looking to cash in on what may become one of the nation’s largest markets. 

Dispensaries around the country are looking to grow their businesses using marketing tools commonplace in the retail space, and we would expect dispensaries in New York to do the same. These tools include cloud-based communication platforms, such as Avochato, which allow companies to quickly and efficiently promote their products to consumers via text message.

Recently, however, cannabis retailers have encountered a major roadblock in direct customer outreach via technical solutions. Certain messaging platforms and telecom companies alike are refusing to support any cannabis-related advertising on their services, including business-to-consumer SMS communications.

Earlier this month, the Empire Health & Wellness cannabis shop in Modesto, California — a state that’s pioneered cannabis legalization — found half of its customer communications blocked without notice or explanation. The company discovered that its messaging platform, Avochato, dropped it after facing pressure by T-Mobile to do so. T-Mobile’s justification for the ban was that “[c]ommercial text campaigns on T-Mobile’s network must operate according to all applicable federal and state laws and regulations.” The wireless carrier elaborated that “[t]he content must be legal across all 50 states for it to be delivered” through its services.

The law at issue is likely the federal Controlled Substance Act of 1970 (“CSA”), which prohibits “any person to place … any written advertisement knowing that it has the purpose of seeking or offering illegally to receive, buy, or distribute” a Schedule I substance such as cannabis. 

T-Mobile and Avochato are not the only service providers to prohibit cannabis-related content. Similar to Avochato, communications platform Tatango cites wireless carrier restrictions as an impediment to cannabis marketing: “At this time, marijuana is still illegal at the federal level. Since wireless carriers regulate wireless communications in the [U.S.], they comply with federal regulations. This means SMS marketing can’t be used to promote marijuana-related products and brands.”

As more and more marketing platforms close their doors to cannabis retailers, businesses will need to seek alternative — and potentially more burdensome and/or less effective — ways to reach customers, at least until cannabis is legalized or decriminalized at the federal level.  A spokesperson for Empire Health & Wellness jested, “[t]ry and tell your grandma to go download the Signal app,” demonstrating the frustration businesses are facing as they lose access to services that would provide a more seamless customer experience. 

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

© Goodwin | Attorney Advertising

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