CBD

6 Things You Must Know In Order To Navigate The Legal Perils Of CBD

Although the CBD market is expected to become a billion-dollar industry, strict FDA regulations are still in place. Here are helpful tips to avoid arrests and injunctions.

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6 Things You Must Know In Order To Navigate The Legal Perils Of CBD
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Contributor
Manager at Guidant Law Firm
8 min read
Opinions expressed by Entrepreneur contributors are their own.

Despite the CBD fanfare in 2019, the Food & Drug Administration still considers unregulated cannabidiol sales unlawful. At issue is whether CBD is “generally recognized as safe” (GRAS). So far, the FDA is flexing its jurisdictional muscle and saying, no.

President Trump just supported this notion in the 2021 budget proposal. In it, he asks for an additional $5 million next fiscal year to help the FDA regulate cannabis and its derivatives, including CBD.   

RELATED: To Get Into the CBD Game, You Must Know These 8 Things

Until the FDA revises its regulations, CBD cannot lawfully be added to food or marketed as a dietary supplement. So what now?

Here is the history, context behind its complexities, and 6 tips for cannabis entrepreneurs to keep in mind as they navigate the CBD market.

1. How did the biggest CBD issues begin?    

Many in the CBD industry equated hemp’s return to legality with hemp’s byproducts sharing that same status. Unfortunately, it wasn't that easy. By the end of 2018, the Drug Enforcement Administration was saying one thing, the FDA another. Congress’ passage of the 2018 Farm Bill had an effect like opening a window adjacent to a table of loose papers on a windy day. 

At the start of 2018, the DEA held to the argument that hemp and marijuana were the same and that all marijuana extracts, psychoactive or not (I’m talking to you, CBD), were illegal.     

Come June 2018, the DEA issued a clarifying statement that it was going to acknowledge a distinction between hemp-derived CBD and cannabis-derived THC, CBD or any other cannabinoid. The DEA was still going to regard all extracts from marijuana as Schedule 1 narcotics (CBD included), and the DEA would not regard CBD derived from hemp as the same thing as CBD derived from marijuana.

The DEA’s stance was that even though it was the same chemical, the sourcing is what mattered. The FDA’s approval on June 25, 2018 of Epidiolex, the nation’s first scheduled CBD drug, forced the DEA's hand. It remains the only FDA-approved CBD drug.

By September 2018, the DEA issued a memorandum announcing that drugs including CBD with THC content below 0.1 percent would be rescheduled from Schedule 1 to Schedule 5. Rescheduling allowed CBD medicines such as Epidiolex to be sold through traditional pharmacies with a doctor’s prescription.

RELATED: What Does the New Farm Bill Mean For Legal Cannabis?

The DEA’s September 2018 re-classification of CBD to Schedule 5 meant CBD products derived from lawful hemp were now exempt from the DEA’s authority. 

Then, courtesy of the 2018 Farm Bill, signed on December 20, 2018, the federal government altogether removed “industrial hemp” its derivatives with less than 0.3 percent THC – including CBD products – from the Controlled Substances Act. To some in the industry, they thought this meant that CBD products were no longer an inherently illegal substance under federal law, so long as they contained less than 0.3 percent THC. They were wrong.

2. So, CBD derived from hemp became legal, right? No.    

In wake of the 2018 Farm Bill, the FDA issued its own clarifying statement in December 2018. It said that interstate commerce of CBD products, “marketed with a claim of therapeutic benefit, or with any other disease claim,” without the product first having been “approved by the FDA for its intended use," was illegal.

This rule also applies to any other product marketed as a drug for human or animal use. Basically, same as all those “secret formula herbal diet pills” you see advertised on late-night TV, CBD products that make health claims must acquire FDA approval for human or animal use before they are marketed in the U.S.  

3. As long as I don’t make health claims, I can sell CBD-infused products? No

In that same statement, the FDA explained FDA’s basis for regulatory authority over CBD. In a hat tip to Epidiolex, then-FDA Commissioner Scott Gottlieb, M.D. cited that there was now a scheduled CBD drug and reminded that it remained illegal to add CBD to any food products:

“Additionally, it’s unlawful under the FD&C Act to introduce food containing added CBD or THC into interstate commerce, or to market CBD or THC products as, or in, dietary supplements, regardless of whether the substances are hemp-derived. This is because both CBD and THC are active ingredients in FDA-approved drugs and were the subject of substantial clinical investigations before they were marketed as foods or dietary supplements. Under the FD&C Act, it’s illegal to introduce drug ingredients like these into the food supply, or to market them as dietary supplements. This is a requirement that we apply across the board to food products that contain substances that are active ingredients in any drug.

Under the FD&C Act, the FDA defines a drug as any product intended to treat a disease or have a therapeutic or medical use, as well as any product — other than a food — intended to affect the structure or function of the body of humans or animals. The FDA noted that, unlike drugs approved by the agency, it hasn’t evaluated whether these CBD products are effective for their intended use, what the proper dosage might be, how they might interact with FDA-approved drugs, or whether they have dangerous side effects or other safety concerns. In addition, the manufacturing process of unapproved CBD drug products has not yet been subject to FDA review.

4. Players took to the field and so much money got invested in CBD in 2019, it must be fully legal, right? No. 

In May 2019, the FDA held its first hearings on CBD. Although not much resulted from the CBD hearings, current FDA Director Dr. Ned Sharpless did make things unambiguously clear that FDA intends to regulate cannabis-derived medicines and food additives. 

By the end of 2019, the FDA sent CBD-related to cease and desist letters to 22 of the nation’s largest CBD manufacturers. Established, legitimate companies in the CBD space face serious legal risks. 

5. The FDA is not backing down thus far in 2020. 

In addition to the raft of cease and desist letters it issued in 2019, FDA also issued at the end of 2019 an amended Consumer Update. Once again making clear its intention to regulate CBD, the FDA explained the health concerns surrounding unregulated CBD use, including irreversible liver damage and impacts on male fertility including testicular shrinkage. By June 2019, the news was widely reported on a study that linked concentrated CBD use to liver damage.  

Giving further credence to the FDA’s side of the argument, the vape pen crisis at the end of 2019 did CBD no favors. Class action lawsuits have commenced. Local law enforcement has begun to crack down aggressively on illicit vape cartridges being produced by unlicensed extractors. Although appearance is that the use of certain Vitamin E in the cartridges may be the culprit in multiple deaths and damaged lungs, the Centers for Disease Control is still investigating. 

6. What to do now? Working within the current regulatory framework.

As the CBD industry is populated by risk-tolerant personalities, it is reasonable to assume that the trend towards what is expected to be a billion-dollar CBD market will continue to march forward and not wait for FDA to catch up.

Does this mean raids, arrests, and court injunctions? It could, but thus far FDA has not expressed an intent to employ the full measure of its authority. While awaiting what most hope is the inevitable acceptance of CBD by FDA, here are some tips that might help:

  • Recognize that while CBD’s popularity is unavailing, it does not matter to the FDA.
  • CBD science is new and unsettled. CBD intentionally added to food is subject to premarket review and approval by FDA, and that recognition requires supporting science. 
  • The more your CBD activities draw attention, the greater the likelihood that you will receive FDA’s attention. Internet marketing, especially with faulty claims, is low-hanging fruit for lawsuits as well as for  FDA regulators to exploit.
  • If it is possible for your business, refrain from adding CBD to food and drink.
  • Do not make any health claims associated with CBD.
  • Only source CBD and hemp lawfully. If acquiring hemp to process, know who your vendors are and don’t just take a broker’s word for it. Demand to be given evidence of USDA and state hemp program compliance. Demand to be given batch test results of THC content, as material too high in THC creates a set of worse problems.
  • Maintain excellent documentation, in case anyone ever questions your sources or THC levels.

Gary Michael Smith is an attorney and founding member of the Phoenix Arizona-based Guidant Law Firm. He is also a founding director and current president of the Arizona Cannabis Bar Association and board member of the Arizona Cannabis Chamber of Commerce. He can be reached at Smith@Guidant.law

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