Cannabis in the metaverse: what retailers and marketers need to know
Thinking about expanding your cannabis brand into the metaverse? Here’s a quick look at how to stay on the right side of the law.
Cannabis dispensaries could soon be coming to the metaverse / Adobe Stock
Thousands of pages of disparate marijuana guidelines, rules and regulations exist in various jurisdictions across the United States, and the drug remains a Schedule 1 substance under the Controlled Substances Act of 1970. The current regulations, however, make little to no references to the metaverse. Luckily, cannabis companies are also no stranger to ambiguous or non-existent regulations, and most successful cannabis companies have been bred to live with gray areas of the law.
Cannabis companies seeking to leverage the metaverse to market or sell their products should first understand a few key legal points to ensure their activities in the virtual space don’t violate any regulations.
Cannabis advertising and marketing regulations today
Most if not all states throughout the country have some form of cannabis marketing regulations already in place. These marketing and advertising regulations typically prevent cannabis companies from performing a number of activities, including targeting or appealing to minors and making false or misleading statements. Most marketing and advertising regulations also take common media outlets off the table, such as TV, radio and outdoor advertising. New Jersey even goes so far as to ban cannabis businesses from advertising through location-based devices, such as augmented reality (AR) technology.
Despite this minefield of regulations, the metaverse is a shining opportunity for cannabis companies that are seeking to gain a competitive edge.
Until states adopt or implement specific regulations, the best existing model for cannabis brands hoping to expand into the metaverse are the existing restrictions on online marketing, advertising and sales practices. Some states, for example, prohibit cannabis advertising and marketing beyond their borders. Others require reliable evidence that no more than a certain percentage of the audience for a specific website is reasonably expected to be under the age of 21.
Selling weed in the metaverse
Online retailers have ingrained in us the idea that everything is just one click away. Cannabis companies have recently followed suit, and online cannabis purchases skyrocketed during the throes of the Covid-19 pandemic. Today, depending on the state, consumers can visit their local dispensary’s website, browse a menu, make a purchase and have it delivered to their door. It’s easy to imagine how a similar model could be adopted in the metaverse.
It’d be possible, for example, for a third-party cannabis marketplace to host a product menu in the metaverse, assuming they’re based in a state where doing so online is already legal. Difficulties could arise when cannabis brands try to facilitate a sale of a cannabis product, or gather sensitive personal information from a customer, in the metaverse. These sensitive parts of the process might be handled by directing customers away from the metaverse and on to a company’s website when they’re ready to make a purchase or submit personal information. On the website, visitors can simply follow the typical online shopping protocol from checkout to delivery or pick-up. Hyperlinking outside the metaverse on to a cannabis company’s website heightens data security and makes it easier for customers to make a purchase.
Other legal considerations
Terms of service: Before purchasing metaverse land parcels, cannabis companies should take note of a metaverse platform’s terms of service or other legal documents. These documents spell out the rules that any person or enterprise wishing to interact with a particular platform must adhere to. Vetting these documents can save time and headaches; violations could result in a ban, similar to what many cannabis companies have faced by violating social media sites’ “community guidelines.”
Restricting minors: Cannabis companies are strongly advised to only partner with metaverse platforms that can verify user identity at scale. Regulators take advertising and marketing to minors seriously, so cannabis companies that partner with metaverse platforms that have user identity protocols in place will be able to rest a little easier at night. That said, it’s important the platforms allow the cannabis companies to receive detailed audience composition data to show that reasonable steps were taken to restrict underage users or users from other states and countries. And on that note, any mechanism that can combat users masking IP addresses via virtual private networks (VPNs) can also help to protect cannabis companies that are establishing their presence in the metaverse.
As the metaverse evolves, so too will the legal landscape that surrounds it. More regulations are sure to come, and cannabis companies looking to make the jump into the metaverse would do well to pay careful attention.
Vijay Choksi is an attorney with Fox Rothschild LLP. He focuses his practice on cannabis law and handles the commercial and regulatory needs of clients in the medical and adult-use marijuana industries. He also serves as outside general counsel for Cannaverse Technologies Ltd.
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