This Week in CBD: December 6, 2019

It was Thanksgiving last week, but the good folks at the FDA were hard at work, wringing their hands over the CBD industry. Several new warning letters went out to CBD companies, most of which were calling attention to unfounded claims of CBD’s benefits on company websites.

But more potentially damaging to the industry at large was the agency’s Consumer Update, somewhat clumsily entitled: “What You Need to Know (And What We’re Working to Find Out) About Products Containing Cannabis or Cannabis-derived Compounds, Including CBD.”

The update comprises a strongly worded reminder to the public that  “many unanswered questions and data gaps about CBD toxicity exist, and some of the available data raise serious concerns about potential harm from CBD.”

The FDA’s concerns center around many of the unknowns about CBD (for example, the effects of long term usage or impacts on developing brains) as well as the potential for liver toxicity and drug to drug interactions.

The update also explicitly states that it is currently illegal to market CBD by adding it to a food or labeling it as a dietary supplement. Many cannabis stocks that are involved in the CBD trade fell in share price in the wake of the new warning. Whether it has an effect on public consumption remains to be seen.

The latest round of FDA warnings has also exposed the potential vulnerability of CBD companies to lawsuits from unhappy customers.

One of the leaders in the CBD industry, Charlotte’s Web, was made aware this week of a class action lawsuit filed against them in California. The lawsuit was initiated by Michele McCarthy, who claims she bought a bottle of CBD oil mislabeled as a dietary supplement. The FDA has stated that CBD products cannot be marketed as dietary supplements.

Charlotte’s Web quickly released a statement declaring that they are complying with the law. “The Company believes that its products are accurately labeled and that the claims are without merit. The Company intends to vigorously defend itself against any such suits.”

This is the second class action lawsuit filed in California against a CBD company for allegedly mislabeling their products.

On the other hand, this week also brought good news for the CBD industry, when federal financial regulatory agencies collectively announced that banks no longer have to file extra paperwork for hemp businesses.

This doesn’t change the way banks are required to deal with marijuana businesses. That’s because marijuana has not been legalized at the federal level and is still classified as a Schedule I substance.

Nor does the announcement mean that banks are required to serve hemp businesses. Essentially it just clarifies that hemp business should be treated the same as any other business when it comes to banking.

Senators Mitch McConnell and Ron Wyden took joint credit for working with the federal agencies to update the financial guidance. “Slowly but surely federal regulators are starting to catch up,” said Wyden in a press release, “and these new banking guidelines are an important step toward giving hemp businesses the certainty they need.”

Senate Minority Leader Chuck Schumer spoke out this week, asking the US Department of Agriculture to extend its public comments period for the proposed hemp regulations.

During a visit to an organic hemp farm this week, he said that the proposed rules are a step in the right direction, but too restrictive when it comes to THC levels.

“There are all kinds of issues, and some people believe the [THC] level they set is way too low, because it’s way below the harmful level,” Schumer said. “You put all that together and they need to look at these rules and re-examine them.”

Last week, Senators Ron Wyden and Jeff Merkley also sent a letter to the head of USDA listing five recommended changes to the proposed regulations.

The public comments period is due to end on December 30.

Though South Dakota Governor Kristi Noem maintains her anti-hemp stance, lawmakers are ready to take on hemp legalization in the state during the 2020 legislative session.

This week the legislative Industrial Hemp Study Committee approved a draft bill that will be introduced in January. The bill includes an emergency clause that would immediately legalize hemp in South Dakota — but the bill would require a two-thirds majority to pass both the House and Senate.

South Dakota is one of three states who haven’t yet legalized industrial hemp.

We’ve been following the saga of Green Angel CBD, whose shipment of hemp from a Vermont farm was seized by the NYPD in October. The officers of the 75th Precinct then posted photos of the intercepted shipment on social media, calling it 106 pounds of marijuana “destined for our city streets.”

It quickly became clear that the bags of green plant material were not marijuana, but legal hemp en route from an industrial hemp farm to a CBD business. Brooklyn District Attorney Eric Gonzalez’s office then put the word out that the charges (of felony marijuana possession) would likely be dropped.

Instead, when the owners of Green Angel appeared for their court date, they found that the charges had not been dropped, but that they had been scheduled a court hearing in May. And there’s no word on whether their $30,000 shipment of hemp will be returned.

“This is definitely going to put me out of business,” owner Oren Levy told Gothamist following the hearing. “I’m borrowing money to take care of this, because they can’t just say, ‘You know what, we made a mistake.’”