By: Steve Masur and Kristen Kennedy
Cannabidiol, or CBD, has been making headlines the past few years for its potential to deliver many health benefits. Proponents claim that CBD can, among other things, relieve pain, ease anxiety and depression, and even benefit pets. This summer, the FDA approved the first CBD-based drug, and sales of CBD in forms like edibles and oils are expected to pass 1 billion dollars in 2020. Understandably, many people are interested in doing business in the CBD space, but one question stands in the way: is CBD legal? It depends on two things: the state(s) it’s being bought and/or marketed in, and the source of the CBD.
Every state has its own rules regarding CBD, found naturally in the cannabis plant, and THC, CBD’s psychoactive cousin found in marijuana. At the more permissive end of the continuum, states like California and Nevada have given the green light to adult use of cannabis for either medical or recreational use. In the middle of the spectrum are many states that have medical cannabis laws, which may also include the use of CBD. The least-permissive states provide no protection whatsoever for CBD sellers or purchasers. However, CBD continues to be widely sold and purchased in many states which do not permit it, and enforcement on the whole is sporadic. Therefore, the crucial first step in establishing a CBD business is to become well acquainted with the law in your state and any state you plan to do business in.
Know the Source
A big part of operating within the law is determining the source of the CBD being offered for sale. Ensuring the CBD is either sourced from industrial hemp or portions of the cannabis plant exempt from the definition of “marijuana” in the Controlled Substances Act (CSA) is crucial to staying within the law. Sellers of industrial hemp, defined as any cannabis plant containing less than 0.3 percent THC, must confirm that the cultivator is operating within a state that has an agricultural pilot program, complying with Section 7606 of the 2014 Farm Bill. (Industrial hemp is widely expected to be removed from the CSA and thus become fully legal with the passage of the 2018 Farm Bill, so this pilot program requirement will no longer exist in the future.) Sellers of CBD derived from exempt plant material must verify that the CBD was derived from mature stalks or seeds incapable of germination, as exempted from the CSA. These distinctions should be laid out in a carefully-worded purchase and sales agreement between you and your supplier, with representations and warranties to this effect to protect your business.
Find a Reliable Supplier
The importance of using a reputable supplier can’t be overstated. In a study carried out last year, researchers found that less than one-third of CBD products purchased online contained the amount of CBD they claimed to have. It may be in your best interest to source CBD from a state where marijuana is regulated, as CBD companies in states like Washington are required to test their products and accurately label them. Some things to look for in a wholesaler include a certificate of analysis that provides information on the levels of CBD, THC, and other compounds in a CBD product, what sorts of claims they make on their web site, and what type of extraction method they use.
Don’t Overstate the Claims
Once you set up your CBD business, be sure not to make unfounded claims about what it can do. The FDA has warned companies that have made dubious claims, such as that CBD could combat and prevent the spread of cancer and inhibit cancer cell growth. References to legitimate medical studies, however, are a safe way to highlight CBD’s potential benefits, as are third-party testimonials that don’t stray into the realm of unfounded medical claims. And be sure to include an FDA disclaimer on your web site, which is required by law.
Draft Clear Legal Policies
As you build your CBD business, be sure to stay within the bounds of the law in other ways. Draft legal policies that let your users know how you collect and use their data, and create clear, user-friendly terms and conditions that are easy to find on your web site. It’s also not a bad idea to include a basic and up-to-date statement of CBD laws, which may put customers who are uncertain of the legality of CBD at ease.
We would like to thank our intern Kristen Kennedy for her contribution to this article.