And Best Democratic Experiment Goes to . . . (Legal?) Weed at the Oscars

MarketWatch ran an article last week on how this year’s Academy Award swag bags “are packed” with “legal” cannabis. I’m always happy to see an article like this because it means California legalization is working. And yet, these glam-o, cannabis friendly goodie bags are a good reminder to cannabis businesses (and the ancillary businesses that support them) that even if an A-list celebrity is consuming your cannabis or CBD products on or after the red carpet, California’s Medicinal and Adult-Use Cannabis Regulation and Safety Act (“MAUCRSA“) (and federal law) still apply.

According to MarketWatch, this year’s “treasure trove of over-the-top gifts for the acting and directing nominees is packed with cannabis chocolates, CBD beauty products and a year-long VIP membership to L.A.’s first cannabis-friendly social club. Marketing company Distinctive Assets has been gifting the Oscar’s swag for the past 17 years and company founder, Lash Fary, told MarketWatch their 2019 gifts are “directly tied to the broad legalization of cannabis in California last year.”

As much as I hate being a party-pooper – especially for a party as big as the Oscars — as a Los Angeles based cannabis business lawyer, I cannot resist mentioning my own legal concerns about these swag bags. Under MACURSA and Prop. 64, individual adults 21 and up can gift up to an ounce of cannabis (or its infused equivalent) without fear of state or local prosecution so long as there’s no financial compensation. But this gifting rule is far more complicated for cannabis business licensees. MAUCRSA is clear that cannabis licensees “shall not give away any amount of cannabis or cannabis products, or any cannabis accessories, as part of a business promotion or other commercial activity” and cannabis retailers “cannot provide free cannabis goods to any person” other than a medical cannabis patient as defined by Section 11362.71 of the Health & Safety Code.

This means that if the cannabis in the swag bags is given by cannabis businesses as part of “a business promotion or other commercial activity,” those businesses probably will violate MAUCRSA. I say this because this cannabis swag is probably being given to the Academy Award attendees and Hollywood A-listers as a “business promotion,” especially since a marketing company is involved in the gifting, and I assume the entire point is to elevate the profile of the companies involved amongst powerful circles of potential future consumers.

A lot of cannabis “brand” power is also contained in these Oscar bags, which is pretty interesting given the legal challenges posed by Section 5032 of the Bureau of Cannabis Control (“BCC”) regulations. If any of the cannabis products in the bags utilize a third party’s intellectual property (“IP”)–and luxury branding (or really any branding) in cannabis remains huge– there may end up being issues under Section 5032. Still, the BCC will not say whether this rule requires cannabis IP licensors to have their own commercial cannabis license in California. The BCC’s own comments to this rule indicate that it does not apply to manufacturers, but the rule itself clearly encompasses manufacturing activity and manufactured products (as well as flower). Since many (most?) California cannabis companies hold their IP in separate companies and/or license their IP from well-known operators in other states, section 5032 may or may not cause serious legal headaches here.

These swag bas also contain CBD products, which could get people in trouble with the California Department of Public Health Food and Drug Branch. MarketWatch mentions that some of the CBD products are topicals and beauty products, which the infamous California FDB FAQs (see also here) do not address and which the Federal Food and Drug Administration may also deem unlawful because it generally considers hemp derived CBD to be unlawful under the Food, Drug & Cosmetic Act. And if there are foods or beverages in those bags that contain CBD, they also violate both state and federal laws according to the FDB and the FDA.

Finally, seeing as how the City of Los Angeles does not yet allow onsite consumption at MAUCRSA-licensed retail or microbusiness facilities within the City, I also wonder to what the MarketWatch article was referring when it mentioned “L.A.’s first cannabis-friendly social club” offering VIP memberships in the goodie bags.

Though I have my doubts about the legality of this cannabis swag under California state law, and even though the gifting and receipt of the bags is undoubtedly federally illegal drug trafficking, I cannot help but applaud everyone behind these cannabis gifts: it’s brave and it’s bold. When a nationally significant and hugely watched event like the Oscars is willing to take the risk of openly gifting cannabis and CBD on one of the world’s biggest stages, you know there has been a major, positive societal shift regarding cannabis.