Can a City Take Cannabis Revenue and Still Ban Cannabis Billboards? The First Amendment Just Said No.

States and municipalities keep acting like cannabis sits in some constitutional no-man’s-land where they can write any advertising restriction they can dream up and the First Amendment somehow doesn’t count.

We’ve seen this movie before. In Cocroft v. Graham a 5th Circuit decision out of the Northern District of Mississippi and in the Montana Supreme Court’s decision in Montana Cannabis Industry Association v. State, courts treated the Controlled Substances Act and the Supremacy Clause as if they erased state-law legality for purposes of commercial speech. The result was a cramped version of Central Hudson where the “lawful activity” prong died on the vine and little-to-no real First Amendment analysis ever happened.

A federal court in California just went the other way—and did the hard thinking those courts ducked.

In Lamar Central Outdoor, LLC v. City of Perris, the Court granted a TRO enjoining a city ordinance that banned cannabis advertising on off-premise freeway billboards in and around the city, even though the city fully embraced cannabis businesses within its borders.

The opinion is a straightforward Central Hudson analysis applied to truthful cannabis advertising in a state-legal regime, and it’s exactly the sort of reasoning cannabis regulators, advertisers, and operators should expect (and fear) as these systems mature. Here are the highlights…

The ordinance: cannabis OK in Perris, but don’t tell anyone driving by

Perris adopted two ordinances amending its municipal code to prohibit cannabis dispensaries and permitted cannabis operators from advertising on any off-premise sign:

• Any billboard or off-premise structure within the city
  
• Any such structure within a one-mile radius of the city limits
  
• And only if it’s within 660 feet of a freeway right-of-way—think I-215 billboards.

Meanwhile, the same city:

• Explicitly welcomes cannabis businesses.
  
• Runs a robust cannabis regulatory program.
  
• Expanded zoning in 2021 to create more cannabis-eligible property.
  
• Currently hosts at least eight operating dispensaries.

So Perris wants the tax revenue and local economic benefits, but not the billboard messaging that comes with a lawful industry.

The city’s stated interests are familiar to anyone who’s read a modern “we don’t like how this looks” ordinance (NIMBY adjacent if not outrightly so):

1. Billboard cannabis ads allegedly create a “negative perception” of Perris as a place to live, visit, or invest.
   
2. The ads supposedly create a “false public perception” that the city has nothing to offer but cannabis or too many cannabis businesses.
   
3. The city cites studies about “negative connotations”—drug use, crime, nuisance, health concerns, property values.
   
4. It claims cannabis ads near I-215 hurt economic development and “public welfare.”

In other words: we like cannabis businesses enough to license them, expand zones for them, and keep their tax revenue—but we don’t want people driving on the freeway to know they exist.

Lamar, which operates billboards in and around Perris, had cannabis advertising on 12 faces that were suddenly outlawed. It sought a TRO, arguing that the ordinances violated its commercial speech rights under the First Amendment and under Article I, Section 2 of the California Constitution.

The key move: cannabis advertising as speech about “lawful activity” and a state constitutional claim

The heart of the opinion sits in Central Hudson’s first prong: does the speech concern lawful activity and is it non-misleading?

Mississippi (through the 5th Circuit) and Montana both effectively answered “no” by treating federal illegality as dispositive: if the CSA says cannabis is illegal, then speech about cannabis sales can never satisfy the “lawful activity” requirement, even when the state has created a comprehensive regulatory regime and licensed the very activity being advertised.

The Lamar Court doesn’t go down that road.

Instead, the court:

• Recognizes that the Supreme Court hasn’t squarely addressed what happens when state law legalizes an activity that federal law still bans.
  
• Looks to New England Accessories (First Circuit) and Washington Mercantile (Ninth Circuit) for the basic principle that what matters under Bigelow is whether the transaction is legal where it’s proposed and will occur, not whether another jurisdiction disapproves.
  
• Distinguishes the Montana and Mississippi decisions because those plaintiffs relied exclusively on federal First Amendment claims and never invoked their state constitutions.

That last piece is critical, and it’s exactly what was missing in Cocroft and Montana Cannabis: in Lamar, the plaintiff brought parallel claims under California’s constitution, just as the plaintiff did under Washington’s constitution in Seattle Events v. State. The Washington court used that state-law hook to treat cannabis advertising as speech about lawful activity within the state’s regime—despite federal illegality—and this Court follows that logic.

The court notes:

• California’s Medicinal and Adult-Use Cannabis Regulation and Safety Act (MAUCRSA) creates a comprehensive regulatory framework.
  
• The ads at issue are for licensed California retailers proposing transactions in California.

On that footing, the Court holds that restricted cannabis billboard advertising “concerns lawful activity” for Central Hudson purposes and is not misleading, so it passes prong one and gets First Amendment protection.

That alone is a major course correction from the Mississippi and Montana line of reasoning and gives litigants a roadmap: if you want Central Hudson to apply in a cannabis case, you need to bring state constitutional free-speech claims alongside your federal First Amendment arguments.

“Negative vibes” and speculative harms aren’t “substantial interests”

After clearing the most important hurdle—recognizing that cannabis billboard ads are speech about lawful activity for Central Hudson purposes—the court turned to the remaining three prongs. And this is where Perris’s ordinance really unraveled.

The second prong asks whether the government has identified a substantial interest. This is where municipalities often try to win by hand-waving: invoke “community character,” imply vague harms like “nuisances” or “youth exposure,” and hope courts will defer. But Central Hudson doesn’t let them off that easily. The burden is on the government to articulate a real, non-speculative, evidence-backed interest that is actually weighty enough to justify restricting protected commercial speech.

Perris did not get close.

The city leaned heavily on the idea that cannabis billboards create a “negative perception” of the city—perhaps signaling to investors, visitors, or homebuyers that Perris is “only about cannabis” or has “too many” cannabis businesses. That’s not a substantial governmental interest. That’s a branding concern masquerading as a constitutional justification. And as the court rightly noted, the “harms” Perris invoked were not only unattributed to any empirical evidence—they were internally incoherent. The city:

• licenses cannabis retailers,
  
• expanded zoning to encourage more cannabis operators,
  
• and touts cannabis activity as part of its local economic plan.

If cannabis activity is lawful, welcomed, and actively regulated by the city, then the notion that people might notice the cannabis industry via a billboard cannot morph into a “substantial harm” supporting a speech ban.

Even more damning for Perris: the ordinance itself acknowledged that the supposed harms were “difficult to quantify.” That’s legislative code for: we don’t actually have evidence, just vibes and assumptions. Courts applying Central Hudson have repeatedly rejected exactly this sort of speculative justification. Governments can’t say “we’re worried these ads might make people think less of us” and call that a substantial interest. The Supreme Court has drawn a clear line between real harms (traffic safety, misleading advertising, youth-targeted content) and soft, aesthetic, or perception-based concerns that boil down to “we don’t like how this looks.”

If reputation management were a valid substantial interest, any town could ban any advertisement for any disfavored-but-lawful business—pawn shops, liquor stores, adult bookstores, political candidates, or just unpopular industries. That is precisely why courts require more than a list of hypothesized harms.

Perris provided no data, no studies tied to the city, no empirical evidence that cannabis billboards harmed health, safety, property values, or economic development in any measurable way. Instead, it offered conjecture and legislative throat-clearing—the kind of justification that fails Central Hudson every time a court really applies the test rather than rubber-stamping it.

In short: “negative vibes” don’t qualify as a substantial governmental interest under the First Amendment, and the court was right to call the city out for dressing up speculative fears as constitutional justification.

You can’t both embrace cannabis and blame the billboards

The third Central Hudson prong asks whether the restriction “directly advances” the government’s asserted interest. This is the point in the test where courts examine whether the law actually does anything, or whether it’s simply symbolic, arbitrary, or internally inconsistent. Perris’s ordinance fails this prong in spectacular fashion, because the city’s own cannabis policies make its stated justifications impossible to credit.

The court emphasized what should have been obvious: Perris openly embraces cannabis businesses. It licenses them. It expanded cannabis-eligible zoning in 2021 to encourage more of them. It actively administers a cannabis regulatory program. And it openly benefits from the tax revenue and local commerce that comes with that choice.

Given all that, the idea that a billboard—rather than the city’s own licensing decisions—would cause people to view Perris as a cannabis-friendly jurisdiction is nonsensical. If the presence of cannabis businesses within the city produces any “negative perception” (a claim already unsupported by evidence), that perception stems from the city’s regulatory design, not from a 14’ × 48’ vinyl advertisement facing I-215.

This is where the ordinance falls apart. The court points out that a speech restriction cannot “directly advance” an interest the government has already undermined through its own conduct. If you authorize cannabis retail, cultivate cannabis commerce, and publicly position the city as favorable to cannabis operators, you cannot then turn around and say: But a billboard about our legal businesses is the real problem.

The mismatch between the city’s policy choices and its speech ban is so glaring that the court didn’t have to work hard to connect the dots:

• The city allows cannabis retail:
  That directly signals to the world that Perris has a cannabis economy.
  
• The city expanded zoning to recruit more cannabis operators:
  That amplifies that signal.
  
• The city permits on-premise cannabis signage:
  That communicates the same message to anyone who drives through town.

Against that backdrop, restricting a handful of off-premise freeway billboards cannot meaningfully alter public perception—even if the city’s perception argument were valid, which the court already doubted. As the court put it, the city’s suggested causal chain was too “remote,” too “ineffective,” and too detached from any actual mitigation of harm.

This is classic Central Hudson reasoning: a regulation fails the direct advancement prong when the government’s own choices contradict its stated objective. Courts repeatedly strike down advertising bans when the underlying conduct is legal, visible, and actively encouraged. You can’t greenlight an entire industry and then claim an existential threat from a sign promoting that industry.

The Perris ordinance does not directly advance the city’s asserted interests because billboards are not the source of the message the city says it wants to suppress. Its own legislative decisions are.

And once you recognize that, the ordinance reads less like a public-welfare measure and more like an attempt to curate the city’s aesthetic or moral self-image by selectively silencing lawful speech. That’s the exact kind of imbalance the third prong was designed to expose.

A blanket off-premise ban is “more extensive than necessary”

The fourth Central Hudson prong asks whether the regulation is “not more extensive than necessary” to serve the government’s interest. This is not strict scrutiny—but it’s also not a free pass. The government must demonstrate a reasonable fit between ends and means. You cannot fix every perceived problem with a sledgehammer when the First Amendment requires a scalpel.

Perris, unfortunately, reached for the sledgehammer.

Rather than tailoring a restriction to any specific harm it claimed to fear, the city enacted a total prohibition on off-premise cannabis advertising:

• no cannabis billboards within city limits,
  
• no cannabis billboards within one mile outside city limits,
  
• and no cannabis billboards within 660 feet of the freeway right-of-way.

Stated plainly: if anyone in the general vicinity of Perris might see it from a road, it’s banned.

This kind of across-the-board suppression is precisely what Central Hudson warns governments they cannot do. Even if Perris had established a substantial interest (it did not), and even if the ordinance directly advanced that interest (it didn’t), the city would still have to show that its speech ban reflects a reasonable, proportionate approach to addressing the identified harm.

The court saw immediately that it did not. And it identified the fatal flaw: Perris chose to regulate speech, even though it had numerous non-speech alternatives available.

If the city truly believed cannabis activity posed harms to health, safety, or economic development, it could have:

• capped dispensary licenses,
  
• reduced cannabis-zoned land,
  
• restricted business hours,
  
• modified land-use criteria,
  
• increased enforcement around nuisance or loitering,
  
• or even prohibited cannabis businesses altogether under California law.

All of those are policy levers the city openly acknowledged it possessed. What the city cannot do is maintain a thriving, city-blessed cannabis sector while suppressing truthful advertising to hide that fact from people driving through on I-215.

And that disconnect matters. Under Central Hudson, the government must do more than craft a regulation that is “somewhat related” to the interest—it must choose a method that provides a reasonable fit, especially where less speech-restrictive alternatives clearly exist. Banning one of the most effective and constitutionally protected forms of commercial communication—billboards—while leaving all underlying cannabis activity untouched demonstrates the opposite of tailoring.

The Ninth Circuit has repeatedly struck down laws on this prong when governments attempted to silence commercial speech rather than regulate the underlying conduct. That is what Perris did here: it avoided politically difficult choices about its cannabis program by opting for the easy-but-unconstitutional path of censoring legal advertising.

The court also highlighted the geographic overbreadth of the ordinance. A one-mile halo beyond the city limits has nothing to do with municipal governance or mitigating harms inside Perris. It is simply an attempt to extend the city’s censorship regime into areas where it has no legitimate interest in controlling what messages appear. That’s not tailoring—it’s mission creep.

Even worse, because the ordinance bans all off-premise cannabis ads, regardless of message, placement, content, or context, it cannot possibly be said to “fit” any interest more narrowly than eliminating an entire channel of lawful expression. Courts have repeatedly held that eliminating a wholesale medium of advertising almost always fails Central Hudson’s final prong.

The result is a textbook failure of tailoring:

• Overbroad (bans more speech than necessary),
  
• Underinclusive (on-premise signs and cannabis storefronts remain),
  
• Misfit (does nothing about the conduct the city claims is harmful), and
  
• Avoidable (numerous non-speech alternatives exist).

When governments reach for the most speech-restrictive tool in the shed instead of the least, the Fourth Prong lights up like a warning flare. And Perris lit up the whole sky.

Why this matters beyond Perris: cannabis isn’t alcohol, and there’s no 21st Amendment shield

For cannabis regulators, this opinion should be a flashing warning sign.

Unlike alcohol, where the 21st Amendment sometimes props up otherwise shaky regulatory schemes and gives states added leeway on tied-house and advertising rules, cannabis has no similar constitutional carve-out. These programs live or die on ordinary constitutional principles:

• First Amendment commercial speech doctrine.
  
• Equal protection and due process theories.
  
• And, in more structurally aggressive programs, potential antitrust exposure.

The Perris ordinance is the sort of overzealous restriction we keep seeing in cannabis:

• Total bans on certain advertising channels.
  
• Vague appeals to “negative perception” or “community character.”
  
• Lists of alleged harms unmoored from evidence and undermined by the state’s or city’s own policy choices.

Lamar shows that when a court actually engages with Central Hudson—and doesn’t short-circuit the analysis on “lawful activity” by pretending the CSA erases state-law legality—these ordinances look very vulnerable.

It also reinforces a strategic lesson: if you’re challenging cannabis advertising restrictions in a state-legal market, you should almost always:

1. Bring parallel state constitutional free-speech claims, and
   
2. Frame your case squarely within the state’s chosen policy of legalizing and regulating cannabis.

That combination lets courts follow Bigelow and the Washington cases, rather than the Supremacy-Clause-heavy reasoning in Montana Cannabis and Cocroft.

Takeaways for operators, advertisers, and regulators

For cannabis brands and billboard companies:

• If you’re being pushed off particular media channels in a state-legal market by broad, moral-panic-styled ordinances, Lamar is a blueprint for how to build a record and litigate.
  
• Focus on truthful, non-misleading commercial speech about licensed activity in the same state, and make sure your pleadings invoke both federal and state constitutions.

For regulators:

• You can’t have it both ways—embracing a robust, tax-generating cannabis sector while claiming that the mere sight of a cannabis billboard is such a threat to public welfare that it justifies a speech ban.
  
• If you truly have a substantial interest (youth access, traffic safety, concrete health harms), you’re going to need evidence and tailored restrictions, not blanket bans and vague references to “negative perception.”

For everyone watching how these systems mature:

• Lamar is one of the first opinions to really take seriously the question of how Central Hudson applies to cannabis advertising in a state-legal framework.
  
• As more of these cases arrive, expect to see courts split between the Mississippi/Montana Supremacy-Clause approach and the Washington/California state-constitutional approach. The latter is far more coherent and far more protective of speech.

In the meantime, cities that want cannabis businesses but don’t want cannabis advertising should assume that the “we like your tax dollars, but keep your billboards out of sight” strategy won’t hold up for long under the First Amendment. 

And for goodness sake, someone please start a cottage industry in Section 1983 litigation going after nonsensical restrictions like not showing a picture of a cannabis leaf.