04/06
The Evolution of Regulation

The Evolution of Regulation

The CBD industry has skyrocketed this past year with the overall market evaluation for 2019 reaching $5 billion, a 7x increase from 2018 according to the Brightfield Research Group. A term being googled more than Kanye West, a product being sold in major retailers nationwide, CBD has truly become a world-wide name. So just how did this industry reach such astronomical numbers in just a year? Well we’ve decided to help unravel that story through a comprehensive look at the industry this past year in the first-ever volume of our


State of the Union: CBD Edition.

The Journey BeginsTime to AdvertiseNew Opportunities Attract Big BusinessEducate, Rinse and RepeatScience and Regulation2018 Farm BillExecutive BiosSources

The Journey Begins

In order to accurately recap this year’s progress and takeaways, let’s first look back at 2014, when CBD was truly beginning to appear on everyone’s radar. Until the signing of the 2014 Farm Bill, hemp cultivation had been illegal in the U.S. for decades. Not only did the 2014 Farm Bill open the doors for hemp cultivation, it also established the guidelines to differentiate hemp from marijuana. To be legally classified as industrial hemp, the plant must contain .03 percent THC or less. While this was a huge win for industrial hemp advocates everywhere, it was still extremely difficult for businesses to begin product offerings.

Further handcuffed by the DEA’s opinion that industrial hemp remained on the list of federally banned substances, businesses had serious difficulties with establishing common business practices; access to traditional banks and financing, industrial extraction, merchant processing, Enterprise Resource Planning (ERP) software and relationships with mass retailers remained difficult if not completely unattainable.

Four long years later, this whisper of an industry evolved into a roar with the passing of the 2018 Farm Bill. While the 2014 Farm Bill brought industrial hemp cultivation back to American soil, it was the 2018 Farm Bill that explicitly removed hemp from the Controlled Substance Act (where it was classified under the umbrella as marijuana, LSD and heroin). This in turn removed hemp from the Drug Enforcement Agency’s (DEA) jurisdiction and their ability to interfere with congressional intent.2 It’s important to remember that CBD’s legal status is dependent not only on federal law but also on the state in which you reside. This Federal descheduling truly opened the door for the industry to begin to flourish.

“The 2018 Farm Bill was like the key that finally unlocked the handcuffs. Unshackled and free to roam, the industry was finally able to start adding color to the grey area surrounding it.” -Chase Terwilliger, CEO for Balanced Health Botanicals

The passing of this monumental bill created a snowball effect allowing other significant legislation to follow. For example, the House of Representatives recently made considerable progress on the to follow. For example, the House of Representatives recently made considerable progress on the Secure and Fair Enforcement (SAFE) Banking Act, which would provide banks and credit unions with additional clarity when servicing cannabis companies that want to open accounts for transactions such as paying for operating invoices. This is an important federal legislative advancement that will differentiate the CBD industry from the marijuana industry, enabling financial institutions previously unwilling to work with industrial hemp companies for fear of association with the marijuana business, to open their doors to the CBD industry.

With CBD business practices federally legal across the nation, even Federal agencies known for their strict policies like the Transportation Security Administration (TSA), were compelled to update their practices and policies. In an advisory statement for travelers, the TSA said, “products that contain hemp-derived CBD oil, or are FDA-approved, are generally legal and can fly.” They also updated their “What’s okay to bring?” website page to include more guidelines for acceptable forms of hemp derived-CBD oil.17

While the 2018 Farm Bill provided support for many components of the CBD industry, provisions in the law as related to the U.S. Food and Drug Administration’s (FDA) authority over all cannabis and cannabis-derived products continues to cause considerable confusion, particularly when determining whether a product is sourced from marijuana or hemp. The FDA maintains regulatory oversight of food, cosmetics, drugs and other products within its jurisdiction that have CBD, or the cannabis plant itself as an additive.

According to survey data compiled by the US- based Grocery Manufacturers Association (GMA), roughly three quarters (76%) of Americans may falsely believe that the FDA approves commercial CBD products. Consumer confusion grows as they presume that thousands of new products are marketed with FDA approval.12 Though the FDA is still working on developing its regulations, the agency’s primary concern centers on monitoring unsubstantiated medical claims and working in conjunction with the Federal Trade Commission to stop deceptive marketing practices.

The agency is committed to taking enforcement action against any companies making medical claims, selling its products as a supplement, or adding CBD to food. Hemp-derived products are not approved by the FDA as a medication or cure for any disorder (with the exception of the prescription Epidiolex, approved in 2018), and legality is left to the discretion of individual states.

New Opportunities Attract Big Businesses

With businesses now having access to banking and standard merchant processing through future bills such as the SAFE Banking Act, industrial extraction partners, software developers and traditional mass retailers took notice and decided to get involved.

When the federal government lifted restrictions on hemp cultivation, there was a significant increase in the number of industries incorporating industrial hemp and hemp-derived products into their business model. Farmers were converting their fields from traditional crops to industrial hemp; skincare companies were offering hemp-infused products to their customers and vape companies began opting for private label CBD. This all led to an increase in the number of retailers expanding their inventory to include CBD.

In 2014, when the industry was new, CBD sales generated $49 million. By the end of 2018, that number was $264 million.


A 2016 article posted in the Hemp Business Journal estimated sales could top $2.1 billion by 2020 with predictions for the industry overall from the Brightfield Group seeing numbers as high as $22 billion by 2022.


Just a few of the many retailers selling or planning to sell CBD products include:

6 Albertsons Ulta

Neiman Marcus

CVS Pharmacy

Walgreens

Kroger

Vitamin Shoppe

GNC

Sephora

TJ Maxx

A huge concern for consumers purchasing their products from these retailers comes from the lack of education on regulation. To combat this, retailers currently selling CBD products are vetted to ensure that the FDA’s stringent guidelines are followed. Certifications like ISO-9001, which covers quality standards for manufacturing, and U.S. Hemp Authority™ Certification, which provides the high standards, best practices and self-regulation for consumers and law enforcement to ensure that hemp products are safe, must be obtained by the CBD companies. Many industry professionals believe with clear, consistent FDA regulatory guidelines, product quality will standardize and benefit the industry as a whole, but the process will take time. Currently, various government organizations are working on:

A regulatory path for the use of CBD in food and dietary supplements (FDA)8Determining the safety of continued and cumulative exposure to CBD (FDA)8Developing organic practice guidelines for hemp production (USDA)9Assessing the integration of hemp into cropping systems (USDA)9Developing clear, reliable THC testing standards (USDA)

https://www.thecbdistillery.com/2019-cbd-state-of-the-union/?utm_source=newsletter&utm_medium=email&utm_campaign=12.26.19%20State%20of%20the%20Union%20Part%201&utm_content=Read%20Blog&sc_src=email_191099&sc_lid=12203233&sc_uid=tYIUEiJonh&sc_llid=275953&sc_eh=864e8ddcf01360d81


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