How the World's Largest Cannabis Market Is Setting the Rules for CBD Products
Expect big things when California legalizes the sale of industrial hemp and hemp-derived consumer products.
California, the largest cannabis market in the world, is poised to legalize the sale of industrial hemp and hemp-derived consumer products, subject to requirements that will help ensure those products’ safety and accurate labelling.
AB-45, which passed both houses of the state legislature in early September, is expected to be signed by Gov. Gavin Newsom early this month.
What this means for the market
That’s spectacular news for a CBD entrepreneur like Stuart Tomc, vice president of business development for San Diego-based CBD products company CV Sciences. “AB-45 finally opens the legal door for high-quality hemp-derived products to be sold next to other dietary supplements,” Tomc said in a phone interview.
“It’s really interesting to have AB-45 pass three years after the same department [the California Department of Public Health] came to our door and said, ‘You can’t sell this stuff,’” Tomc added. His reference was to the state’s ban on ingestible hemp-derived products, announced in 2018
At the federal level, Tomc said, “The Food and Drug Administration is saying, ‘It’s not a lawful ingredient until Congress tells us,’” but that too seems about to change. “So, we’re on the precipice of CBD realization and science realization.”
California and CBD
It’s a big, big precipice: California, whose legal cannabis market was valued at $4.4 billion in 2020, was one of the pioneering states for legalizing both its recreational and medicinal sectors. Yet while the Golden State has a legal framework for cannabis, it lacks any such framework for CBD.
Until now. California’s proposed new law, which becomes effective as soon as the governor signs it, will allow industrial hemp and hemp extracts to be used in foods, beverages, supplements, cosmetics and pet food. The CBD bill will also impose lab-testing standards, as it already does for the recreational and medicinal markets, to guard against harmful ingredients like pesticides, mold and heavy metals. And it will impose those same standards on out-of-state products. The bill further appears to ban hemp-derived “artificial” THC products like delta-8.
Among its specific provisions:
- Manufacturers of dietary supplements and foods made from industrial hemp must register with the California Department of Public Health (CDPH). Other, specified products may be required to be registered, as well.
- Manufacturers must demonstrate that all parts of the plants they use are agricultural hemp and come from a state or country with a program that inspects or regulates hemp under a food safety program.
- Advertising or marketing of CBD products containing false health claims will be a crime. Labels and posted potency levels must be accurate.
- Inhalable hemp products may not be sold for the time being until the state determines a tax to be imposed on them.
The law, interpreted
By Tomc’s interpretation, the proposed new law requires registration and puts the brakes on smokable products specifically to deal with current infighting over vaping and to keep out of the market “homemade” products like hemp-derived smokable “ditch weed.” “No one had predicted that the smokable hemp market was potentially going to compete with the high-THC potential cannabis market,” in California, Tomc said. In fact, he said, it’s a booming business sector.
He further interpreted a phrase in the bill describing derivatives “with a delta-9 tetrahydrocannabinol concentration of no more than 0.3 percent” dry weight as banning delta-8.
As an executive of a public company, Tomc also extoled the investment opportunities the proposed law provides. “A lot of the small CBD companies like CV Sciences have not yet been able to participate in the cannabis rush,” he pointed out.
Not that CBD sales have been entirely curbed. CV Sciences sells its PlusCBE brand’s gels, gummies and tinctures online. There’s also been limited CBD activity in the state: “I want to tell you – it’s no secret here – that we and everybody else have been selling anywhere we could,” Tomc acknowledged.
Those sales have produced confusion. California dispensaries, for example, have been allowed to sell CBD derived not from hemp but from legal cannabis only, in spite of the fact that hemp containing no more than 0.3 percent THC has been legal at the federal level since the Farm Bill of 2018.
Health food stores, on the other hand, have been skittish since the 2018 ban on ingestible CBD. “Retailers weren’t comfortable with the CDPH going into stores telling them, ‘You’re not allowed to sell CBD,’” Tomc explained. Nevertheless, some small stores have persisted in selling those products, he said.
Tomc proudly pointed out that such strictures haven’t stopped CV Sciences, founded in 2012. The huge demand for CBD and the company’s implementation of good manufacturing practices, audited by Europins Scientific, helped it realize online sales in 2019 of $50 million in sales (a figure which dropped in 2020, Tomc said, due to increased CBD competition). That put CV Sciences up there with the likes of Charlotte’s Web and Nestle’s Garden of Life brands, Tomc said.
What other states are doing
The proposed new law’s safety measures could help the company grow even more; other states have realized this too. Colorado, another major cannabis market, in July passed particularly stringent legislation requiring testing, for example, of 106 pesticides. Tomc said that that level of stringency stemmed from Colorado’s lack of a THC-cannabis framework, which California, of course, already has.
“We think that not only does AB-45 support consumers who are looking for natural alternatives, looking for anti-inflammatories, looking for anti- anxiety and anti-pain medications,” Tomc said, “it will open the floodgates for investors to make smart bets with smart companies.”