Localities Taking the Initiative in Regulating the Next Billion-Dollar Industry: CBD

The Vape Guide  | Flickr Creative Commons

The Vape Guide | Flickr Creative Commons

In 1986 Nancy Raegan took to the stage to warn parents of the scourge of drugs and to implore American secondary-school children to “Just Say No” to the noxious substances they may be tempted to try, chief among them marijuana. Over thirty years later on Jun. 25, 2018, after rigorous scientific study prompted by accounts of parents administering cannabis derivatives as medicine to their own children, the Food and Drug Administration (FDA) approved Epidiolex, a drug comprised of cannabidiol (CBD) an active ingredient "derived from the marijuana plant,” to treat rare forms of epilepsy “in children under two.” In addition to marking a historic, albeit limited, move by the federal government to loosen its draconian prohibitionist regulations against cannabis, the move by the FDA fits within the context of a growing public acceptance of medicinal and recreational cannabis use, as well as an acute societal emphasis on personal health. Nowhere is this growing popularity for cannabis felt more than in the demand for CBD, a derivative of the Cannabis Sativa L. plant that has been touted for its incredible medical benefits and championed by many due to its non-psychotropic effects.

Indeed, with some caveats, CBD is now available over the counter in most U.S. jurisdictions and has been infused into a plethora of consumables from topical ointments to gummy worms and macchiatos, thereby firmly grasping the public consumer’s conscience. CBD is so popular that the industry as a whole was valued at over half a billion dollars in 2018 and is expected to rise to over $2 billion in 2020. Bullish estimates even predict an astronomical increase to $22 billion in 2022, growth that would outpace the rest of the marijuana industry. As a result of the increased demand and perceived economic success of CBD, many non-medicinal outlets have begun selling CBD supplements and the like to the general public, often lacking any of the credentials of traditional pharmacies and making many believe that CBD is entirely legal. However, rather than being strictly licit commerce, CBD has in fact suffered from regulatory dearth and a pattern of benign neglect by local, state and federal regulatory agencies.

Regulating the Status Quo

Early in 2019, this period of neglect came to an end as localities around the country began reigning in their respective industries by targeting the unsanctioned use of CBD additives in food. In New York City, a place routinely referred to as the “marijuana arrest capital of the world,” the local health authorities issued an “embargo” on CBD food additives, entering private businesses to seal up their CBD reserves and threaten restauranteurs with fines up to $650 should they not cease their cannabidiol commerce by July. Similarly, in Los Angeles, the largest city in the first state to legalize medicinal marijuana, the Department of Public Health - Environmental Health Division warned business owners engaging in CBD edible commerce that they would deduct two points from their food inspection report if they were found to be in violation of the county’s own prohibition after July 1, 2019. Comparable regulatory efforts have been felt across the country in states as diverse as Maine, Ohio and North Carolina and all in anticipation of expected federal regulations to be imposed on the industry.

What is and is not acceptable to infuse with consumable products in the United States is largely governed by the FDA, a regulatory organ that also has a say how medicinal drugs are scheduled as per the Controlled Substances Act of 1971. As a result of this prerogative, the FDA is largely responsible for developing the rules and regulations surrounding CBD at the federal level. As of yet, the FDA has taken a noncommittal approach to CBD products, considering them illegal but ignoring their dissemination in U.S. commerce. Indeed, their harshest recorded action has been the transmission of Warning Letters (with decreasing frequency) to those they discover to be in violation of their regulations. As with most other regulations, states take their cues from federal bodies and the recent state crackdowns on CBD consumables must be taken to indicate that a less passive change is anticipated in FDA rules, as the agency hinted in its recent statement concerning CBD regulations.

The revision of the status quo has largely been prompted by the ostensible claims of extravagant health benefits made by many CBD product manufacturers and hyped up by the media. While CBD has been scientifically proven to alleviate certain health issues such as childhood epilepsy and insomnia, many other health claims, such as anti-inflammatory relief and anxiety reduction, are less grounded in fact. Despite the lack of scientific data for these more common afflictions, however, many consumers, motivated by the era’s emphasis on personal health and wellness, are attracted to these purported benefits and risk using a product that is not well-understood at a medico-scientific level. Indeed, with the explosive popularity and unconfirmed benefits that range from cancer curing to separation anxiety relief in pets, it seems only natural that a federal agency concerned with human and animal public health would reevaluate its previous position of benign neglect.

Legal Developments and the Future of CBD in America

In addition to exaggerated health claims, the most pertinent catalyst to the renewed emphasis on CBD rules is the recent passage of the Agricultural Improvement Act of 2018, also known as the Farm Bill. Among the provisions of the nearly $1 billion bill is a stipulation legalizing the industrial cultivation of hemp and its derivatives in the United States. Industrial hemp, a multi-use crop derived from the same Cannabis Sativa plant as marijuana, is characterized as having a delta-9-tetrahydrocannabinol (THC) level lower than 0.3 percent and is the main source of commercial CBD. As such, the rescheduling of hemp should necessitate the rescheduling of CBD, a perceived logical connection that has led to the aforementioned explosion in the compound’s accessibility. However, as with most issues related to political jargon, the legality of all CBD products is not guaranteed by this provision, with only those made from CBD provisioned by licensed growers being theoretically sanctioned by the law.

The issue of the legality of CBD consumables is further complicated by the regulatory authority of the FDA. Under the FD&C Act of 1938, the agency retains authority over rules regarding CBD in food, beverages and drugs, ensuring that all CBD products with the exception of supplements fall under the aegis of their rulemaking power. The authority of the FDA also extends to regulating the interstate commerce of food and its additives, which further muddles matters relating to the domestic importation of CBD products and consumables and stymies the effectiveness of the industry. As per the FDA itself, Congress “explicitly preserved the agency’s current authority to regulate products containing cannabis or cannabis-derived compounds” making their prohibition of CBD and the state-led crackdowns permissible under U.S. law despite the provisions of the Farm Bill. Furthermore, with CBD products often exceeding the legal limits of THC content, the issue of CBD consumables overlaps with the authority of the draconian Drug Enforcement Administration (DEA), which has consistently taken a hostile approach to the regulation of CBD.

With CBD increasingly targeted by regulatory authorities and with the DEA-FDA currently administering a convoluted regime that hampers effective research, the future of CBD in America is very uncertain. While the FDA has “assured” the public that its growing affinity to the product will be taken into account, it appears that the most substantial federal rule change concerning cannabis since the Controlled Substances Act will not have the intended liberalizing effect. Rather, the Farm Bill may just provide the impetus to the FDA to concretely re-evaluate its regulatory regime and do away with its previous policy of benign neglect, a scenario that has already altered the status quo by forcing state agencies to take the initiative in undermining an otherwise growing industry.