Cannabis and NFTs: Collector’s Art or Regulated Advertising?

When I was a regular columnist for Above The Law in 2015, I wrote a piece called “Cannabis Advertising: Is Pot Obscene?” This article focused on common language issues related to cannabis advertising. We have also written over the years about how various social media platforms ban just about any speech using the word “marijuana” and sometimes even CBD.

Fast forward to 2021 and we still haven’t seen the Fed take serious action against advertisers of cannabis and / or cannabis companies, and we probably never will at this point (though the USPS does a thing or two about cannabis ads The mail has to say in, although it probably won’t do anything about it). Social media headaches aside, the biggest problem with commercial speeches for cannabis companies constantly has to comply with the myriad of labeling, marketing, advertising, and promotional laws and regulations created as part of government legalization regimes. However, a new and fun topic related to public speaking and advertising is the emergence of cannabis NFTs.

Photo by Elsa Olofsson via Unsplash

NFT stands for Non-Fungible Token. An NFT is a unit of data that is stored in a digital ledger known as a blockchain that certifies a digital asset as unique and therefore not interchangeable. NFTs can be used to represent items such as photos, videos, audio, and other types of digital files. “Translated, NFTs are different tokens in the blockchain that justify the ownership of digital collectibles such as digital art. NFTs are undoubtedly part of an emerging sub-industry that includes blockchain technology. This year in particular, there has been a marked spike in buying and selling NFTs (e.g., Jack Dorsey’s first tweet, NFT, which sold for more than $ 2.9 million). Certain companies and ventures in the federally legal cannabis industry were quick to adopt NFTs to promote a variety of products, companies, industry influencers, cannabis culture, and even “strain art.”

The problem with NFTs from a cannabis regulatory compliance perspective is whether it is marketing, promotional, or promotional material that must comply with a variety of laws and regulations in the patchwork quilt of state legalization. One point in case is Lava Coin, that is “. . . A bag of cannabis that is only available online and is linked to blockchain technology for “authenticity”. “

RELATED: Why Is Social Media Still Banning Cannabis?

The Peakz company is behind Lava Coin per Forbes. Apparently, when you buy Lava Coin, Forbes says: “[y]You can’t smoke it, but as a bonus, if you buy the “First Digital Cannabis Strain Ever Available” and are based in Oregon or California, you also get “real” physical marijuana. “For me as a compliance attorney in the California cannabis space, a concept like Lava Coin can have some interesting issues when it comes to compliance with California’s medical and adult cannabis regulation and safety law (“ MAUCRSA ”) and its very strict ones Regulations goes marketing, advertising and promotional regulations, starting with the NFT concept itself.

In California, a cannabis advertisement includes:

. . . Any written or oral statement, illustration or representation intended to encourage the sale of cannabis or cannabis products, including written, printed, graphic or other materials, billboards, signs or other outdoor displays, public transport maps and other periodical literature, publication or in a Radio or television broadcast or in other media.

Apparently an NFT, even if it is only intended to function as “art”, ie as a “representation intended to encourage the sale of cannabis or cannabis products”, is interpreted as advertising under MAUCRSA, which then means it must be related to a variety of other laws Meet the distribution, age of the consumer audience and content (including the fact that it cannot target minors in any way and the license number of the associated cannabis business must be included in the advertisement). If the purchase of an NFT results in adult cannabis (which is not approved in California by a licensed pharmacy or unlicensed business) or being given away by a licensed cannabis company for a discounted sale of cannabis, this may be additional potential evidence that the NFT is actually advertising, marketing or promotional material.

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While NFTs and cannabis investigate an interesting marriage, NFT makers must keep in mind that their creation can be construed as a cannabis advertisement that is subject to extensive laws and regulations, especially if the creator works with a cannabis company to ultimately promote sales to consumers through NFT Purchases. And don’t forget that if an intellectual property license or agency work agreement is associated with a cannabis licensee, the NFT creator may actually need to be notified to state regulators.

At the same time, a cannabis NFT might well just be a collector’s item that has nothing to do with advertising or promoting a cannabis business or brand – the question is whether the NFT is primarily designed to induce commercial cannabis sales or promote. Ultimately, it will be up to regulators to decide where the appropriate line of enforcement lies, but the NFT manufacturers and the cannabis companies or brands they work with should make sure they know which side of that line they are on. before diving headlong into the company.

Hilary Bricken is a partner at Harris Bricken. This story was originally published on the Canna Law Blog and republished with permission.