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FCC Guidance?

Attorneys Don't Expect Big Shifts on Sports Betting and Marijuana Ads

Broadcast attorneys don’t expect seismic shifts in the sports betting and cannabis advertising landscapes soon, according to two virtual sessions convened Monday by the Federal Communications Bar Association. FCC guidance on whether broadcasters can advertise recreational marijuana use “would offer some great clarity,” but the likelihood of the agency issuing it while cannabis is classified as an illegal drug “is absolutely zero,” Wilkinson Barker broadcast attorney David O’Connor said. Orrick attorney Behnam Dayanim said, “It’s looking grim, at least in the immediate future” for shifts toward legalizing sports betting in states that haven’t already done so, such as Texas and California. Dayanim represents sports betting company Draft Kings.

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Many broadcast attorneys counsel their clients not to run advertising related to marijuana products even in states where they are legal because marijuana remains a Schedule One illegal drug at the federal level. Attorneys face an additional barrier in counseling broadcast clients on marijuana ads in that their codes of professional ethics often bar them from counseling clients to take illegal action, O’Connor said. Only Colorado’s bar association has issued guidance allowing attorneys to counsel clients on matters related to that state’s legalization of adult use of marijuana, O’Connor said.

Since broadcasters hold federally granted licenses, there are concerns that running the ads would leave them open to FCC enforcement, most of the panelists said. The FCC hasn’t issued guidance on the matter but also hasn’t issued warning letters or gone after licenses of broadcasters who run such ads, said Foster Garvey broadcast attorney Brad Deutsch. In addition, the FCC hasn’t seen an influx of complaints against broadcasters who carry marijuana advertisement. Deutsch has a “hunch” that the FCC will treat marijuana ads as it does indecency complaints, acting against only the most egregious violations. Gray Television Assistant General Counsel Claire Ferguson said that FCC guidance on marijuana advertising “would move the ball” on possibly allowing broadcasters to take more ads and that there is high demand among broadcasters to carry cannabis advertising.

Proposed reclassification of marijuana to a lower level of controlled substance (see 2309080071) could lead to guidance from the FCC, DEA and other federal agencies such as the FTC that would mitigate the risk of carrying cannabis ads, but it’s not clear how that process will play out, O’Connor said. When the DEA removed hemp from Schedule One, it issued guidance clarifying it would no longer be treated as an illegal product, O’Connor said. However, if marijuana were reclassified to a less restrictive schedule, broadcast ads for recreational use could still be hampered by Congress, Deutsch noted. Cigarettes are currently legal but broadcasters are barred from carrying ads for them, he said. “Certainly for smokeable weed, I can very much imagine that Congress would step in and fill that space and regulate it,” he said.

The 2024 Presidential election could also influence the issue, Ferguson said. Under President Donald Trump, policies discouraging federal prosecutors from pursuing marijuana prosecutions were rolled back. A second Trump administration wouldn't be seen as friendly to marijuana advertising, she said.

In states where sports betting is legal, rules about carrying sports betting advertising are less murky, panelists said. Gambling on sports is legal to some degree in 39 states, the District of Columbia and Puerto Rico, said Dayanim. Congressional or executive action to try to roll back sports gambling isn't seen as likely, said Covington broadcast attorney Gerard Waldron. FCC regulations are widely understood to prohibit sports gambling ads only in the jurisdictions where the gambling is illegal, Dayanim said.

The line between fantasy sports that involve gambling and legalized sports betting can be unclear in some states, but federal agencies such as the FTC have historically gone after only sports betting advertising that was clearly, expressly illegal at the time, said Dayanim.

Since most states have legalized sports betting, broadcasters have largely seen a falloff in sports betting ads, according to their earnings calls. Gambling companies initially made big ad pushes on broadcast stations in states that had recently legalized gambling, but they then pulled back, said Joe DiScippio, senior vice president-FCC legal & business affairs for Fox. Now, broadcasters tend to see bumps in sports gambling ads around the start of a sports season or championships, DiScippio said. Five years ago, before the U.S. Supreme Court decision Murphy v. National Collegiate Athletic Association allowed states to decide the legality of sports gambling, such revenue was “zero,” Waldron pointed out. Now “it's a steady contribution.”