Four Things Cannabis Businesses Must Know Before Using Celebrity Endorsements

Endorsements from celebrities can boost a business’ sale through increased exposure and brand credibility. To that end, cannabis-based businesses have increasingly utilized celebrities to endorse their products through testimonials and other marketing efforts. Although the potential of these initiatives is undeniable, they do not come without risk.

Cannabis currently operates in a legal grey area since it remains classified as a federal Schedule 1 drug. Thus, states that have legalized cannabis cultivation, processing, and consumption are operating outside of the confines of federal law. Cannabis businesses that aim to bolster their brand with celebrity endorsements must be aware of the Federal Trade Commission’s (FTC) guidelines that not only oversee this specific form of marketing, but also prescribe additional criteria to ensure that advertisements are truthful and not misleading.  Here are four key issues to be aware of before utilizing a celebrity, or any, endorsement of your cannabis-based product.

  1. Any claims made about a product, whether through endorsement or testimonial, must be substantiated. Claims related to health and safety demand an even higher level of substantiation based on “competent and reliable scientific evidence” in accordance with the FTC’s guidelines. This high level of substantiation involves tests, studies, and other objective scientific research based on the expertise of professionals in the field. But because cannabis is federally illegal, there have been limited studies into its effects with results that would pass the substantiation factor under the FTC guidelines.
  1. Endorsements must reflect the honest opinions, findings, beliefs, or experience of the endorser.  An endorsement may not convey any express or implied representation that would be deceptive if made directly by the advertiser. Since there is little reliable data on the efficacy of cannabis, the claims made through an endorsement or testimonial may be subject to scrutiny by the FTC.
  1. Advertisers are subject to liability for false or unsubstantiated statements made through endorsements. This includes failing to disclose material connections between themselves and their endorsers that could affect how people evaluate the endorsement. This requirement means that the nature of the relationship such as payment or free products to the endorser must be disclosed.
  1. Although significant oversight in this area comes from the FTC, don’t forget about state regulations. Along with FTC guidelines, advertisers must also comply with the consumer protection laws and regulation of each state in which they operate or sell their product. In the cannabis industry, these can vary drastically.

The intense regulatory scrutiny in advertising cannabis-related products may subject advertisers and endorsers to liability and result in significant financial penalty or even revocation of a license. Cannabis businesses should implement comprehensive guidelines for the creation and execution of their marketing and advertising initiatives, as well as obtain a legal review of content to ensure all federal and state regulatory demands are being met.