May 20, 2021
To our Clients and Friends:
Texting? Texting? We’re Talking About Texting and Cannabis Companies Here?
Companies that operate in the cannabis industry are well aware of the operational problems caused by their state legalizing cannabis businesses yet still being included on Schedule I of the Controlled Substances Act (CSA). We have previously noted the difficulty with opening a bank account, obtaining insurance, advertising or dealing with different tax treatment for business expenses at the state level vs. the federal level [9th Circuit Declines to hear Constitutional Objections to Section 280e (April 23, 2021) and SCOTUS to Decide Whether to Hear Section 280e Cannabis Case (March 5, 2021).]
The National Cannabis Industry Association, of which we are a member, notes a few SMS platforms, including AT&T, Twilio, Avochato, & T-Mobile, have announced they won’t do business with cannabis companies, with Twillio (a digital marketing company) going as far to extend the ban to cannabis-related companies and CBD companies. (CannabisIndustry.org Text Messaging Crackdown Impacting the Cannabis Industry)
Although this issue is just now gaining national attention, it is nothing new. Back in March, Travis Miller, co-owner of Empire Health & Wellness in Modesto, California, announced he was kicked off a text marketing platform that used Twilio after T-Mobile told the platform it could be banned from using the carrier for working with a cannabis company.
Outside of the State/Federal mismatch, there may be two other reasons for this action.
Many cannabis businesses are facing class actions lawsuits from people suing over unwanted text messages under the Telephone Consumer Protection Act (TCPA). If successful, a plaintiff can recover between $500 and $1,500 per text if they did not consent to being contacted. A cannabis marketing firm was also sued under the TCPA and eventually settled out of court.
There may, however, be a more business-related reason why the carriers are using the State/Federal mismatch as an excuse to weed out cannabis companies.
T-Mobile and AT&T are both launching a new system for application-to-person text messaging called A2P 10DLC. The system requires businesses using an application to register their brand and to advise the application what they will be messaging about before they can be approved to send marketing related text messages. And since both T-Mobile and AT&T currently ban cannabis businesses, saying who you and what you want to say will lead a cannabis company being banned from using the system.
Given the difficulties in operating within the current State/Federal legal mismatch, the cannabis industry relies on access to more creative forms of reaching its potential customers. Shutting down access to texting, and potentially all social media, would be problematic for many cannabis companies since that rely on social media and texting not only to advertise but also to allow their customers to order products within the rules of their local jurisdiction.
As of now, we and groups like the National Cannabis Industry Association are gathering information to determine the exact scope and breath of the texting ban, and we will continue to monitor developments with this latest assault against legally operating business.
For further information or any questions on this issue, please contact Marvin Miller (firstname.lastname@example.org), Head of CMX’s Cannabinoids and Psychotherapeutics Practice Group.
Crath Miller & Xistris LLP
Offices: New York
For further information, please contact us at email@example.com.