By Jeffrey L. Wax, AEGIS Law (jwax@aegislaw.com)

CBD products are everywhere. But what is CBD? Why is it suddenly ubiquitous? And is it legal? (The answer to the last question may surprise you.)

CBD is a chemical compound derived from the cannabis plant and is short for cannabidiol. Unlike tetrahydrocannabinol (THC), which is also derived from cannabis, it is not psychoactive. CBD is reputed to have anti-inflammatory and other therapeutic effects, but this is based on anecdotal evidence because very little, if any, formal scientific research has been done.

The reason you suddenly see it everywhere is because of the 2018 Farm Bill, which was signed on December 20, 2018. It is commonly perceived to have “legalized hemp” and therefore CBD, but this is not entirely accurate. What it did is this:

Prior to the Farm Bill, all cannabis plants were classified as “marijuana” and included on Schedule 1 under the Controlled Substances Act. The Farm Bill created a category of cannabis that contains not more than 0.3% THC, called it “hemp,” and removed it from Schedule 1. (All other cannabis is still “marijuana.”) Thus, it became legal—generally speaking—to grow and sell “hemp.” What has been overlooked, however, is that all other federal laws and regulations still apply. This includes the Food, Drug & Cosmetic Act, which the FDA says covers products derived from hemp, such as CBD.

So here’s the surprise: according to the FDA, selling CBD as a dietary supplement or in food is illegal under the Food, Drug & Cosmetic Act because the FDA has not approved it. The FDA considers products containing CBD to be a drug because they are intended to have a therapeutic or medical use or to affect the structure or function of the human body. The only CBD-containing drug approved by the FDA is Epidiolex, which is used to treat some forms of epilepsy. See https://www.fda.gov/news-events/public-health-focus/fda-regulation-cannabis-and-cannabis-derived-products-including-cannabidiol-cbd (last checked Oct. 29, 2019).

 

Nevertheless, exuberance has overwhelmed the law. CBD products are being marketed like crazy, and the FDA is playing catchup to regulate it. A lengthy public hearing was held on May 31, 2019. Enforcement by the FDA has come in the form of warning letters regarding marketing claims, but not many have been sent.

 

A few states have barred or limited CBD sales. In Missouri, the question has arisen whether the state Department of Revenue (DOR) can issue sales tax licenses to retailers selling CBD products. This is due to a state law limiting the production of hemp products to two entities for the production hemp oil to treat epilepsy. According to the St. Louis Post-Dispatch, the Missouri Attorney General’s Office issued an opinion letter to the DOR on the subject, but has not made it public. In the meantime, state tax officials are not approving sale tax license applications mentioning CBD, but applications not mentioning it have been approved even if the retailer is selling CBD. https://www.stltoday.com/news/local/govt-and-politics/missouri-cultivates-don-t-ask-don-t-tell-tax-policy/article_99473c47-90a5-59d1-9fbf-61259de2daff.html (last checked Oct. 29, 2019).

CBD products appear to be here to stay, but we can expect them to come under increasing regulation within the next two years. Businesses should be cautious about selling CBD products and making claims about them. Consumers should be cautious about their effects, side effects, and effectiveness, as well as the quality of the products they purchase.

AEGIS Law is a leader in working with cannabis industry clients in Missouri and other states. If you are interested in becoming part of the emerging cannabis industry in Missouri, contact AEGIS Law today.