Legal uncertainty was a prominent theme in the 2019 CBD market, and unfortunately it has continued into 2020. The 2018 Farm Bill removed hemp from the Controlled Substances Act, but it maintained the U.S. Food and Drug Administration's (FDA) authority to regulate hemp and CBD. As of November 2018, here’s what the FDA had to say on the matter:
- “The FDA has approved only one CBD product, a prescription drug product to treat two rare, severe forms of epilepsy."
- “It is currently illegal to market CBD by adding it to a food or labeling it as a dietary supplement."
- “The FDA has seen only limited data about CBD safety, and it points to real risks that need to be considered before taking CBD.”
The agency has offered no timetable on when—or if—it will create a legal pathway for ingestible CBD products to enter the market.
Some had hoped that Congress would get involved and instruct the agency to speed up the process as supported by Senate Majority Leader Mitch McConnell (R-Ky.) and others. But that didn’t happen: The Senate Appropriations Act of 2020 did not put the FDA on a deadline, instead requiring the agency to issue a “progress report” 60 days into the new year.
Another option quickly emerged through the introduction of a bipartisan bill—the Peterson Bill—that would amend the Federal Food, Drug and Cosmetic Act to include CBD in the definition of dietary supplements, therefore allowing CBD to be marketed in food, beverages and nutritional supplements.
“The bipartisan-sponsored Peterson bill is very encouraging: This is a bill that could get support because it will clear up the legal ambiguities created by the 2018 Farm Bill,” says Miguel Martin, president and CEO of Natick, Mass.-based Reliva, a top-selling CBD brand. “CBD’s a compelling topic because so many farmers are growing it. As they say in D.C., the farmers always win.”
That said, the proposed bill has a long way to go before offering any regulatory clarity for retailers. Scott Sinder, partner with Washington, D.C.-based Steptoe & Johnson LLP, warns that even in the best-case scenario, the bill likely wouldn’t pass until close to the end of the year.
“It’s the first shot across the bow on this, so it’s very hard to say,” he says, “especially at a moment when very little legislative activity is expected.”
Given the slow nature of action on the federal level, the more pressing legal concerns for both retailers and manufacturers remain at the state and local level. Some states, such as Texas, have passed laws permitting the cultivation and sale of hemp products. Others, like California, have passed laws stating that CBD, even noningestible products, can be sold only in cannabis dispensaries. Even in the states with CBD-friendly laws on the books, there’s a patchwork of requirements when it comes to CBD manufacturing and sales.
“Make sure [your CBD partners] have the legal resources to support this dynamic category,” Martin says, pointing specifically to the ongoing updates at the state level.
As more states pass laws to permit CBD sales, experts believe pressure will only mount for something to be done at the federal level.
“The 2018 Farm Bill’s legalization of hemp cultivation, and the subsequent moves by several states to push ahead without the FDA’s approval of CBD as a food additive or supplement, made it clear just how fast the market is likely to grow,” wrote Tom Adams, editor-in-chief of Arcview Market Research and managing director of industry intelligence for BDS Analytics, in a research note.