CBD

CBD Is Legal But Still Not Federally Regulated. Here's Why.

And what the industry can do to ensure regulation in the near future.
CBD Is Legal But Still Not Federally Regulated. Here's Why.
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Entrepreneur Leadership Network Writer
Founder & CEO of Bluebird Botanicals
6 min read
Opinions expressed by Entrepreneur contributors are their own.

It's been over a year since the 2018 Farm Bill legalized the commerce of hemp and CBD. Yet, CBD is still not regulated as a dietary supplement by the FDA.

This may come as a surprise to many people who’ve already incorporated CBD into their lives. Among the 14 percent of Americans who use CBD, most believe those products are FDA regulated. 

The FDA wants to regulate CBD, too. Over the past five years, the agency has issued reports to Congress on their assessment of the marketplace and CBD's safety. They've also issued dozens of warning letters to companies mislabeling their products. 

Still, the FDA still hasn’t issued formal regulations for the CBD industry. Why?

CBD is the new kid on the block

There are many factors at play here. The biggest reason is that CBD is simply very new. In its current form, CBD is considered a New Dietary Ingredient (NDI), and the review process is slow for NDI notifications. This process may include conducting lab tests and research studies, submitting data to the FDA for evaluation, and potentially many rounds of feedback and revisions. 

But, in the case of CBD, the agency appears to be moving even slower than usual. There are thousands of CBD companies now operating within the country, but the FDA’s most recent round of random sample testing included only 30 total CBD products. The agency also has not disclosed which channels they obtained these products from— a necessary detail to identify the most common source of mislabeled products. The lack of significant data presents an obstacle for the FDA's industry-wide guidance. 

New drug preclusion

Another factor is the investigational new drug (IND) preclusion, this means if the FDA is investigating a substance as a new drug,  it cannot be marketed as a dietary supplement. There is an exception, though, for dietary supplements that included the substance before drug investigations were authorized. To date, the FDA has only approved one pharmaceutical drug containing CBD. Epidiolex was authorized for clinical testing in 2014 and approved the final drug in 2018. However, many companies marketed dietary supplements with CBD before the Epidiolex trials, and believe they can continue to market their products legally.

Related: Now that Epidiolex Is FDA Approved, What Does That Mean for the CBD Business?

Likewise, the FDA has the authority to overturn an IND preclusion at their discretion through notice-and-comment rulemaking. 

The FDA has never overturned an IND preclusion before. This novel challenge could be partly to blame for the delayed guidance. To regulate CBD in supplements and food in this manner, the FDA is navigating uncharted waters. 

These challenges are understandable, but they still highlight an urgent need for FDA or Congressional action in the CBD industry. Without regulation, shady CBD companies are proliferating at the expense of consumers. They also damage the reputation of the industry as a whole. 

So what’s next for CBD companies?

It’s hard to say as there are many potential outcomes. The FDA could declare that CBD is not permitted for dietary supplements, food, or beverages. This formal opinion would be the worst-case scenario. But, even then, their final determination would not be able to stop the train that is the CBD industry. Stephen Hahn, the FDA commissioner, said that any attempt to shut down the CBD industry would be “a fool’s errand.” 

If the agency were to issue a final determination against CBD's use, it probably would not be legally binding right away. For the FDA to shut down companies, they would have to go through the U.S. Department of Justice and the judicial system. During this process, a court could review all the evidence collected on the IND preclusion and related regulatory and legal matters. This could take years, and during that time, shady companies would still be able to grow. All said this would be the longest and most ineffective way to regulate the sales of CBD.

The FDA could also permit companies to use CBD in dietary supplements, but not food or beverage. Or, they could establish guidelines that set the daily limit for CBD at a very low level. These would both be unfavorable outcomes, too. For example, setting the limit at 4 mg of CBD per day would be far below the industry standard. This would force many companies to reformulate products and develop new marketing strategies. They could also lose customers who are already accustomed to higher amounts of CBD. 

The best-case scenario is that the FDA will issue guidance or rulemaking for CBD in supplements, food, and beverage. Ideally, they will uphold scientific research and current industry standards already applicable to food and supplements for selling safe and effective CBD products. This would be the quickest way to protect consumer interest while keeping companies in line with a defined set of rules.

What CBD companies can do

If the FDA continues to stall, then Congressional action will be the best path forward. Fortunately, Bluebird Botanicals and other hemp companies have been working on a bill to prepare for this. This bill would allow Congress to step in and amend the IND preclusion to make an exception for CBD and other hemp-derived ingredients, which may also force the FDA to finish their work in a more timely manner. 

In the meantime, CBD business leaders can take action immediately. It’s up to every company to show that their products are safe and trustworthy, and the U.S. Hemp Authority certification program serves this very purpose. This certification is the industry’s initiative to provide high standards, best practices, and self-regulation to companies, giving consumers and retailers confidence in hemp and CBD products. Hemp companies can and should earn this certificate to demonstrate to both consumers and regulators that their products meet federal and state standards for manufacturing, safety, labeling, and more.

Its small steps like these that could lead to a giant leap of full Federal regulation for CBD. 

Related: It's High Time To Clean Up The CBD Industry

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