- Earlier in December, Trump signed the US Farm Bill into law. It legalizes hemp, a plant that’s roughly identical to marijuana and is a key source of the highly touted wellness ingredient CBD.
- Hours after the law was passed, regulators released a statement emphasising their power to police CBD retailers, which already make up a roughly $US1 billion industry.
- Analysts called the move a “warning shot” to the thousands of cafes and stores selling CBD drinks, snacks, and supplements.
A plant that’s nearly identical to marijuana became legal to grow in the US earlier this month.
As a result of the US Farm Bill, which President Trump signed into law at the end of December, American farmers will be able to plant and harvest hemp, a strain of the same plant species from which marijuana originates.
Shortly after Trump signed the Farm Bill that made hemp farming legal for the first time, US regulators from the Food and Drug Administration sent out a statement underlining their powers to manage a selection of cannabis products, including drugs, foods, and supplements made with hemp-derived CBD.
“In short, we treat products containing … cannabis-derived compounds as we do any other FDA-regulated products,” FDA commissioner Scott Gottlieb said in the statement, “meaning they’re subject to the same authorities and requirements as FDA-regulated products containing any other substance.”
That could come as a surprise to the millions of nascent businesses that are preparing to take advantage of hemp’s new legal status, according to industry analysts. CBD derived from hemp already makes up a growing industry worth roughly $US1 billion, and entrepreneurs expected the new law to prime those businesses for a boom.
But the path to a lucrative boom may not be as straightforward as expected. In a recent policy note, analysts with the investment bank and research firm Cowen called the FDA’s move a “warning shot” to the CBD industry.
A ‘warning shot’ to the nascent $US1 billion CBD industry
Released just hours after Trump signed the Farm Bill, Gottlieb’s statement emphasised the FDA’s power to police hemp and CBD products when they are sold across state lines. Analysts called the statement a “warning shot” because it underlines the agency’s ability to crack down on retailers that are selling certain CBD products without FDA approval.
Those items fall into two main categories: products with “therapeutic benefits” and ones that are foods, drinks, or dietary supplements.
- CBD products with therapeutic benefits must get FDA approval. Any CBD product sold with claims that it can treat disorders, such as anxiety and depression, or diseases, such as diabetes and cancer, must undergo review and approval by the FDA, according to the statement. “Selling unapproved products with unsubstantiated therapeutic claims is not only a violation of the law, but also can put patients at risk,” the statement reads.
- CBD foods, drinks, and dietary supplements are illegal to sell across state lines. Any foods or drinks made with CBD are illegal to sell across state lines, according to the statement. In addition, it is illegal to market CBD products “as, or in, dietary supplements,” the statement reads.
In a policy note issued after the FDA’s statement, Eric Assaraf, a Cowen analyst and the director of the firm’s Washington, DC, healthcare division, said the move could “come as a disappointment to CBD manufacturers.”
Thousands of retailers that sold everything from CBD lattes and bottled teas to canned beer-like drinks and gummies before the Farm Bill’s passage are subject to the FDA rules. However, as long as CBD products are sold without therapeutic claims and within state lines, they appear to be considered legal.
How CBD products will be managed going forward
CBD products existed in a legal grey area before the Farm Bill was signed. That’s largely because the nation’s strictest drug law, called the Controlled Substances Act, did not actually include the word “hemp” in its section on marijuana. As a result, thousands of manufacturers and entrepreneurs glommed on to the CBD wellness trend, infusing everything from coffee to dog treats with the compound.
But shortly after Trump signed the Farm Bill – which appeared to legalise hemp – dozens of entrepreneurs said they expected the CBD trend to really take off.
“The passing of the farm bill will most certainly open up the marketplace for hemp products, specifically hemp extracts that are high in CBD,” Josh Hendrix, the director of domestic-product business development for cannabis company CV Sciences, told Business Insider.
“The era of hemp prohibition is over,” Jonathan Miller, legal counsel for a lobbying coalition of over 60 hemp companies called the US Hemp Roundtable, told Business Insider.
According to Assaraf, the FDA’s announcement may cloud some of that optimism because it highlights the power of the agency to police certain CBD products.
Still, Assaraf wrote that the statement isn’t all bad news, as the agency also “appears open to engaging with industry players.”
In addition to clarifying his powers to police hemp products, Gottlieb also announced several moves to increase awareness about the hemp industry and work with entrepreneurs and business owners who sell hemp products. Those moves include the announcement of a future public meeting with hemp stakeholders and plans to maintain a website specifically dedicated to the FDA and cannabis called “FDA and Marijuana: Questions and Answers.”
“We’re committed to pursuing an efficient regulatory framework for allowing product developers that meet the requirements under our authorities to lawfully market these types of products,” Gottlieb wrote in the statement.
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