Cannabis companies pursuing influencers on Instagram create a legal grey zone

Allana Blumberg is used to getting pitched by wellness companies that want to use her social-media presence of 27,000 followers to promote their products.

But, in the last year, the Toronto-based “influencer” has been bombarded by companies in the cannabis sector wanting her to showcase their cannabidiol products. 

“CBD companies reached out to me a lot during the pandemic,” said Blumberg, who is among the likely thousands of influencers approached by CBD companies on the app.

By law, Canadian cannabis companies are not allowed to work with influencers. But unregulated companies, which are already operating illegally, are flouting the regulations that ban influencer marketing as well. Additionally, American companies, which operate under different laws, also reach out to people like Blumberg.

This leaves influencers in a grey area if they do not realize the practice is illegal or that the products they are promoting are not regulated by the Canadian government. Often, it can be difficult for those outside the industry, like Blumberg and other influencers, to spot what is a regulated or unregulated cannabis company.  

This grey area has sparked a debate. Some experts believe the promotion of unregulated CBD by influencers can be unsafe for consumers who are not aware of the differences between regulated and unregulated cannabis. But others point to the similarities between the two markets and emphasize the difficult process for companies to become regulated. 

How did Canada end up with two cannabis industries? 

The reason for the confusion is cannabis legalization didn’t stop the unregulated cannabis market. That already established market continues to thrive, effectively creating two streams within the same industry: the regulated market that operates legally and the unregulated market that does not. 

That, in turn, produced two very different approaches to marketing and packaging products.

The federal government explicitly wanted to deter new users from starting to buy cannabis. The Cannabis Act included regulations aimed at making the product look as plain as possible, in an effort to pull only existing users into the licensed market, said Michael Armstrong, a business professor at Brock University. 

“Most of the regulations on packaging, advertising, and so forth, are designed to discourage new users [from using cannabis] … and to make it difficult for companies to bring in new customers,” he said.

“It’s that balancing act that drives a lot of the regulations in Canadian, federal, and provincial laws.” 

Provincial regulations also add additional limitations to control what products are allowed across the country. Restrictions range from not allowing specific types of edibles, such as gummies, to controlling the potency level of the cannabis sold. 

Because the legal industry is so limited, many consumers looking for a variety of edibles still purchase from the unregulated market. A survey from 2019 found that 40 per cent of Canadians have bought cannabis from an unregulated supplier since legalization. 

Many Canadians say affordability and perceived quality of products not available in the regulated market are why they purchase unregulated products since the government regulates the amount of CBD and tetrahydrocannabinol (THC) in legal cannabis products.

But CBD, which is one of the two major components of cannabis, has become a popular health remedy over the past few years. While large-scale scientific evidence to support CBD as a health treatment does not yet exist, experts say there is promise it can help pain, anxiety, and sleep. This makes CBD products appealing for health and wellness influencers to promote. 

As a result of all that, the Canadian rules are unclear for people like Blumberg. She assumed that CBD was regulated differently than other cannabis products since it does not result in a “high” the way THC-based products do.  Compounding the confusion, she has been approached by American companies which operate legally in accordance with their state laws — which may allow fancy packaging, edibles, and high CBD doses — but not Canadian ones. 

In the U.S., CBD derived from plants with less than 0.3 per cent THC is known as hemp-derived CBD and is not regulated the same way as other cannabis products. Just south of the border, hemp-derived CBD companies can use influencers to market their products. 

Alexis Zacharko, a cannabis marketing specialist at Kaden Ave Communications in Edmonton, said this is not the case in Canada. Here, CBD, hemp-derived or otherwise, is regulated like any other cannabis product.

“Anything that has CBD in it, Canada has regulated as cannabis, and it can only be sold in licensed cannabis retail stores or by the government,” she said.

Experts say the success of unregulated companies using influencers is expected. Without abiding by the existing regulations, the unregulated market can promote their products in ways that are strictly prohibited for licensed retailers.

Luring new customers to the unregulated side 

CBD companies with nicer packaging can entice influencers into working with certain brands because Instagram influencers rely on their branding to gain business opportunities.

Zacharko believes this is why unregulated companies tend to succeed on Instagram. They do not abide by the government restrictions on packaging or promotion, thus they create products that appeal to a wide variety of consumers. 

“[On] the unregulated side, your beautiful brands [are] out there, like these brands, have been developing themselves for decades,” Zacharko said. 

Unregulated companies can also further blur the lines between the two markets by making their websites and products resemble the legal industry. 

This places the responsibility on either the company to disclose its regulated status to the influencer or on the influencer to already know the regulations around promoting a cannabis-derived product, like CBD, in Canada. 

The risks of promoting the unregulated cannabis market

The promotion of CBD through the use of influencers can be risky for companies and consumers. 

While Zacharko says government regulators are more interested in targeting unregulated growers and cultivators, Instagram itself does flag unregulated retailers and takes their pages down. This business model can be precarious, and many companies rely on backup accounts in case they are removed. 

From the consumer point of view, one expert warns that buyers should still be cautious of unregulated cannabis products being promoted on Instagram.

“We have a pretty good handle on what the regulated market looks like because Health Canada is involved and they set pretty transparent standards,” said M-J Milloy, professor of cannabis science at The University of British Columbia. “The same sort of regulations that regulated licensed producers have to go through are generally not applicable in the unregulated market.”

Zacharko feels differently. From her experience, she has seen unregulated companies using the same testing labs as the regulated industry. She also noted there was a recent investigation by Health Canada looking into inaccurately labeled potency levels for some products sold by licensed cannabis producers. 

 “If there’s no actual process for the people testing, what makes the regulated side different from the unregulated side other than the regulated side is way harder to get into and way harder to operate?” she said.

Federal government to review regulations soon

Armstrong said Health Canada is currently asking for feedback on aspects of the regulations, such as packaging. However, a bigger change may be coming this fall, as the federal government will be looking into the entire legislation of the Cannabis Act. 

“They’re currently reviewing some of the regulations,” said Armstrong. “I do suspect that we will see some relaxation on the packaging regulations.” 

With fewer restrictions, licensed retailers may compete better with the unregulated market. It may also entice unregulated sellers to become regulated.

Until then, using Instagram influencers to promote CBD remains illegal in Canada. This grey area in understanding the regulations can put their reputations at risk as well. 

“[The companies I work with] are a reflection of me. It’s an extension of my brand and what I want to portray. I have my followers’ trust in my hand …. working with one wrong company can make them lose trust in me,” said Blumberg.