Cannabidiol Law & Business

Cannabidiol Law & Business

An Unofficial Roadmap for Tomorrow’s Creative CBD Entrepreneurs

The complexity and paradox of cannabidiol law has no shortage of frustrated consumers.  Take a little bit of time and try to find what state or country allows CBD (cannabidiol) and you will often find very dense references to cannabis laws and confusing statements from various governmental organizations.

But those with the most frustration are the driven entrepreneurs that wish to capitalize on this hungry monster of a market for all-things-CBD.  Therefore, when the landscape of cannabidiol law is opaque, it can help to follow a roadmap so that one can hedge their investments and stand clear of enforcement actions that typically come with regulatory uncertainty.

1. State and Local Cannabidiol Laws

This can be tricky for some but much of the enforceability of cannabidiol law regulation will occur at this level.  Many rejoiced when the Farm Bill passed in 2018 but this would eventually start the confusing series of events that have lead us to where we are.

After the Food and Drug Administration (FDA) announced that CBD is an adulterated ingredient and may not be added as a food additive for consumption, a handful of states echoed the same sentiment and reacted accordingly.  In California, Maine, and NYC, regulators banned any CBD additive and made efforts to seize from dozens of businesses their CBD stockpiles so as to prevent any adding into consumable items.  Business owners were shocked and many who wanted to enter into the market lost incentive and were scared off from moving forward.

However, in states that are far more welcoming to the industry, no such raiding took place by local health department enforcement bureaus.  That should  give a pretty clear signal to any business that is thinking about where to operate out of but it’s not the end of the story.  Many states and some municipalities have cannabidiol laws on the books that are pending and may open up some markets overnight.  The regulatory verbiage can be confusing for those who aren’t used to reading proposed bills but can often be deciphered with language that includes “cannabis” and “cannabidiol”.

Ultimately, the phenomenon of businesses selecting ideal venue is likely to continue based on how some states have made it a point to take a chance on emerging industries to feed more agile and hungry workforce.  The concept resonates with many and is eloquently discussed in an interesting book called the Fate of the States by Meredith Whitney.  Without going into too much detail, Whitney describes how central corridor states have been well-positioned to take advantage of tax incentives and training workers to create marketplaces to thrive.  Sounds a lot like some CBD-friendly states to me.

2.  Labeling and Health Claims

It seems that nothing gets under the skin of the FDA like conflated health claims and deceptive labeling.  Entrepreneurs who want to navigate cannabidiol laws should plan early with marketing and packaging. Businesses should take notice that mislabeling can lead to all kinds of trouble with both federal and local agencies–which ultimately spells doom for their reputations and bottom-line.

The FDA and Federal Trade Commission are no strangers to sending cease and desist letters to CBD businesses that overstate the medicinal claims of cannabis-derived or hemp-derived extracts.  This is likely going to continue as we see more and more companies muscling for rank in such a hungry market for all-things-CBD.

One word of caution, there is a  broad spectrum of language one can use to connote that CBD has health benefits and another where it can heal or combat certain health conditions.  Read enough webpages and it will be hard to distinguish puffery from prudent information.  Therefore, if you or your business is willing to invest in the rigorous journey of conducting clinical trials, be careful with what your product can do for the end user.

3.  Hemp vs. Cannabis Derived Products

For those already familiar with the cannabis marketplace, many CBD products already exist in various forms at your local retail dispensary.  Much to the satisfaction of your given state regulatory agency, these products stem from manufacturers, distributors, and wholesalers that have paid the cost and effort in becoming licensed businesses to operate in the medicinal or adult-use markets.  Hence, these are cannabis products and end up in the consumer’s hands from a very taxed and regulated market.

But despite being the non-psychoative sister of THC, cannabidiol does not get same treatment as a vapor or smoke that is ingested into the lungs.  It helps to draw this distinction before jumping into what additives and ingredients can be put into foods.

So does cannabidiol law distinguish between hemp or cannabis derived extractions?  No.  It doesn’t matter what plant it came from according to the FDA and state health agencies.  So why are there so many hemp seed oils available on the Internet?

The answer could be a combination of some answers that anyone can empirically prove.

(1) These could be CBD products that have simply labeled themselves as “Hemp Oil” and just waiting out the market while they make a buck.

(2) Some or many of these products may not be CBD at all (as many have learned about the Journal of the American Medical Association (JAMA) research findings for CBD derived products and the disappointing results.

(3) Hemp seed oil is perceived as the “safe bet” for many businesses since the FDA has noticed three hemp seed ingredients as Generally Recognized As Safe (GRAS) and can be marketed for its intended use.

To clarify what the FDA meant as hemp seeds meeting GRAS standards, the three ingredients (hemp seed protein powder, hulled hemp seed, and hemp seed oil) could be used and marketed in products if they (a) are manufactured in a way that is consistent with the FDA’s notice and (b) meet the listed specifications used as the ingredients in food.

Cannabidiol Laws on the Horizon

It might be too hopeful to assume that the entire CBD market will be fixed overnight.  Spokespersons for the FDA have reiterated several times that a true regulatory scheme could take years.  This could also be sped up by lawmakers who have expressed serious frustrations with how foreign sourced CBD products have enjoyed little restrictions while US companies are kept at bay from competing.

In the long run, CBD products and cannabidiol laws will continue to evolve over time as more research and markets influence the agricultural, manufacturing, health, supplement, and food industries–and potentially those we have not yet contemplated.