The cannabis industry went wild in 2018. Brand and companies were rushing into the investment markets through public offerings on the Toronto Exchange. Some were opting for raising funds in the U.S. through Regulation A+ Equity Crowdfund campaigns.
Then the cannabis market became the true Wild Wild West once the Farm Bill was passed late last year. Since the new legislation went into effect, cannabis companies have been rushing to get their products into the nationwide markets.
But how does the Farm Bill really affect cannabis?
What does this mean for cannabis companies?
Or CBD companies?
Or hemp companies?
What does it mean for the cannabis consumer?
We’re going to dive into the Farm Bill and explain why it brings such a significant impact to cannabis, and what it all means for you.
2018 Farm Bill Overview
The Farm Bill was a significant event and achievement for the cannabis industry nationwide. Among many things, it widens the door for legal cannabis on a federal level and brings us one step closer to taking cannabis off Schedule 1 once and for all.
When did the Farm Bill come into effect?
The Farm Bill went into effect in December 2018. So, currently it is the law.
What does the Farm Bill address?
Before the Farm Bill, FDA and the DEA’s position were that hemp was part of the cannabis plant, which is on Schedule 1, and therefore a controlled substance. There was some legal disagreement regarding this position, which was settled in court in 2018. The DEA won that decision, and the courts found that hemp was considered a controlled substance.
In 2018, the Farm Bill resurfaced those discussions by including provisions that took cannabidiol (CBD) off the Controlled Substances Act, along with the relevant portions of federal law. So under the Farm Bill, hemp, which is considered the cannabis plant with less than 0.03% THC, is no longer considered a controlled substance.
How does the Farm Bill affect cannabis companies?
Basically what’s happened is the plant and all the derivatives of the plant, including CBD or cannabidiol, are no longer controlled substances. The Farm Bill essentially resets the regulatory environment that controls cannabidiol and hemp, which is non-THC cannabis.
Now the major issue at hand is that CBD is being considered as either dietary supplements or food ingredients, and FDA is trying to grapple with how they’re going to regulate the market. This is going to be more difficult with FDA Commissioner stepping down.
However thus far, FDA has decided they have regulatory authority over all hemp or CBD put in food, and currently there are no regulations. So essentially there’s no legal pathway to put CBD in food at the moment.
The Farm Bill opens the door for CBD as a legal ingredient in food, but it hasn’t reached the stage yet where we know exactly how that is going to progress with FDA.
What does this mean for companies currently selling CBD products?
Well, it gets tricky.
If your company is selling CBD products that people are ingesting, you are likely not compliant with FDA regulations.
Does that mean you should stop selling your products? Probably not.
FDA has not aggressively enforced its regulations against CBD companies. Only companies that make bold medical claims for CBD run the immediate risk of finding themselves in FDA crosshairs.
With any ingested products, they need to be cautious with making claims that are unsubstantiated, as well as products that aren’t manufactured with standard manufacturing practices that would be required on any other dietary ingredient.
Basically if you’re selling CBD, the first thing to do is comply with all the other regulations with regard to dietary ingredients.
You will be much less likely to be enforced against by FDA.
What does the Farm Bill timeline look like?
What you will probably see is very little enforcement for quite a while. Maybe two years of lax enforcement. Some states will be different, but the timeline is going to be probably at least two years of limbo.
During this time, CBD companies will basically have to try to substantially comply with regulations. This means keeping a profile so you don’t catch attention from FDA by how you present your product, what you put in your product, and how you make your product.
However, there are other concerns CBD companies must worry about past FDA. The bigger danger lies with plaintiffs’ attorneys suing CBD companies based on their claims and reactions to the product.
Companies selling CBD should be worried about FDA, but they should also worry about lawsuits.
How should consumers approach the CBD market when buying products?
For consumers, there is nothing illegal about consuming CBD. So, consumers can safely buy CBD and take it.
The only regulations are applied to the manufacturers. None of the manufacturers are truly in compliance with federal law. But consumers will still be in compliance with federal law when buying CBD.
If you see CBD sold somewhere, just be aware of who is selling the product. Investigate the company, where it’s sold, the price, and the sourcing of the ingredients.
You must be very careful with how CBD is sourced, because when you concentrate the hemp flowers, you will always have the concentration of the impurities as well.
If those come from places that don’t take the proper environmental steps to control the quality of the plant, they are going to have adulterated CBD and that isn’t a good situation.
Basically consumers should make informed purchasing decisions by knowing
- Where the CBD comes from
- Where the hemp comes from
- The company selling it
But feel free to explore the CBD markets. There’s nothing illegal about buying or using CBD or hemp.
How should CBD companies avoid legal issues?
For CBD companies, the biggest risk right now is probably lawsuits. With uncertainty lingering within FDA now and a new Commissioner on the way, companies should be focused on their compliance process to avoid an unwanted lawsuit.
This can be mitigated throughout your entire process:
- How you present the product
- Your manufacturing processes
- Whether it meets manufacturing standards
- Your suggested dosages
- How you tell people to use the product
- What goes into the product
- Whether it has been adequately tested
You should leverage an attorney to look over your processes, as well as quarterback and make strategic calls on the path forward.
For example, it’s very likely that CBD isolate may not be used as a dietary supplement. However, hemp and full spectrum hemp extractions of the flower might be.
Those types of decisions can be very strategic in the murky legal environment, and must be made at the top level with your general counsel at very early stages.
About the Author
Jared Coleman is an attorney practicing law in California in the area of botanical supplements, including hemp and CBD. Mr. Coleman represents companies that are raising money, as well as structuring their business strategy for compliance with federal law.