The passage of the 2018 Farm Bill capped off a momentous year for cannabidiol, or CBD, a non-psychoactive derivative of cannabis.  As we wrote about here, the year kicked off with the rescission of the Cole Memo, the DOJ’s policy statement regarding enforcement in states where cannabis is legal.  The feared enforcement uptick never materialized, though.  By mid-year, FDA approved Epidiolex, a prescription drug made from CBD isolate for treatment of rare forms of epilepsy.  Later in the year, Sen. Majority Leader McConnell (R-KY) saw opportunity with the Farm Bill update to expand industrial hemp legalization at the federal level.  Following conference committee work to iron out differences, the House and Senate passed the final version in mid-December and the President signed it on December 20.

As companies consider the business opportunity, it’s important to separate the myths regarding what the Farm Bill did from the realities.

Myth #1:  CBD Is Fully Legal Since It’s Not A Controlled Substance Anymore.

It’s more complicated than that.  Regulation exists at the federal and state levels.  At the federal level, the 2018 Farm Bill de-schedules industrial hemp and various derivatives thereof, including CBD, from the Controlled Substances Act when produced in compliance with a state hemp program.  Industrial hemp is defined as cannabis (Cannabis sativa L.), and derivatives of cannabis with extremely low (less than 0.3 percent on a dry weight basis) concentrations of the psychoactive compound delta-9-tetrahydrocannabinol (THC). This means that the DEA no longer has jurisdiction over CBD from industrial hemp because it is no longer illegal under federal law.  DEA retains jurisdiction over CBD from marijuana because it remains a Schedule I substance.  The DEA isn’t the only relevant regulator, though.  The FDA and the states also have jurisdiction.  Read on.

Myth #2:  FDA Has Approved CBD So The Claims I’m Seeing Online Must Be Substantiated.

FDA has only approved Epidiolex for treatment of rare forms of epilepsy.  This approval does not mean that other CBD claims are approved or that FDA agrees that CBD can be lawfully used in other products.

FDA’s position is that CBD from any source is an active drug ingredient.  FDA has voiced this position in warning letters and reiterated it just last week.  The agency also highlighted its continuing concern about consumer safety and disease treatment claims featured on unapproved CBD products. Finally, FDA acknowledged the public’s growing interest in CBD’s potential therapeutic capabilities and expressed a commitment to consider whether there are circumstances in which certain cannabis-derived compounds might be permitted in a food or dietary supplement.  Although not specific to CBD, FDA announced that three hemp ingredients – hulled hemp seeds, hemp seed protein and hemp seed oil – may be legally marketed in foods under the conditions set forth in their respective GRAS notices.

Myth #3: The 2018 Farm Bill Preempts All State Laws.

On the issue of preemption, Section 10113 of the 2018 Farm Bill expressly does not preempt laws that are more stringent than those found in the Bill regarding the production of hemp. See Sec. 297B(a)(3)(A) (“No Preemption. – Nothing in this subsection preempts or limits any law of a State or Indian tribe that (i) regulates the production of hemp; and (ii) is more stringent than this subtitle.”).

However, Section 10114(b) of the 2018 Farm Bill does provide: “No State or Indian Tribe shall prohibit the transportation of shipment of hemp or hemp products produced in accordance with . . . Section 10113[] through the State or the territory of the Indian Tribe, as applicable.” Section 10114(b) thereby clearly preempts any state law prohibiting shipment of industrial hemp through a State or territory of an Indian Tribe.

It also arguably preempts any State law prohibiting the sale of industrial hemp in a State or territory of an Indian Tribe, so long as the hemp was produced (in another state) pursuant to the requirements of Section 10113. Unfortunately, it is not clear whether Section 10114(b) of the Farm Bill preempts State laws disallowing sales of industrial hemp. It will likely take litigation to decide the extent of the preemption, if any, regarding sale of industrial hemp in States which have laws disallowing such sales.  The National Conference of State Legislatures maintains a helpful chart of states that have established such programs here.

In addition, there is a patchwork of state-level product considerations.  For example, California expressly follows FDA’s position that CBD cannot be lawfully be used in foods or dietary supplements.  By contrast, New York expressly allows CBD in dietary supplements when the products meet other program requirements.  Companies should consider these types of regulations on a state-by-state and product-by-product basis.

Myth #4:  Since CBD is Legal, There Is No Risk in Selling It

While the 2018 Farm Bill provided needed clarity as to the status of industrial hemp at the federal legal, this remains murky territory.  There has been localized enforcement in many states, frequently involving confusion about the product.  Companies seeking to sell CBD should consider their specific products in conjunction with the other federal and state considerations discussed above.

The year ahead will bring more changes.  Companies should be sure to stay informed to properly evaluate the risks and opportunities.