Since the passage of the 2018 Farm Bill, the CBD market has boomed. Hemp production soared in the United States and beyond, with the global market valued at over $553 million. However, despite the surging industry, the U.S. still lags in its oversight of the CBD products sector.
Despite becoming legalized by federal lawmakers, CBD continues to be under-regulated by the U.S. Food and Drug Administration (FDA). This assessment comes from many in the CBD space. However, recently, the same sentiment came from Capitol Hill after the FDA responded to its ongoing rulemaking for the nascent industry.
“It was difficult to study CBD before the 2018 Farm Bill was passed in December 2018, because cannabis-derived CBD was a Schedule I controlled substance. Thus, limited systematic data exist to inform our approach,” stated the FDA’s report. It added, “As more data on CBD become available, we will be able to refine — and, perhaps in some cases, revise — our thinking and approaches.”
While the FDA continues to refine its rules, the market struggles to provide consumers with reliable products. A few bad actors continue to sour the bunch with mislabeled items or outright fictitious claims about their hemp products. Despite most operations acting in good faith, the effects of faulty products continue to be felt in sales and public trust.
Pictured: Most CBD companies self-regulate. But, copycats and improper labeling may persist until firm regulatory standards are put into place.
A Myriad of Pain Points Without Adequate CBD Oversight
“With no oversight of CBD products, consumers are faced with a sea of false claims and hidden dangers,” said CannaSafe CEO Aaron Riley. Due to the current lack of oversight, Vanguard Scientific’s Matthew Anderson sees parallels between CBD and nutraceuticals, or supplements. In the absence of federal oversight, Anderson says trade groups have stepped in to install some sense of uniformity in the space.
However, the end goal is for CBD to receive federal rules and regulations. CannaSafe’s Riley forecasted to Green Flower Media about such a scenario. “If CBD becomes regulated and third-party lab testing is required, the entire CBD supply chain will be responsible for the safety, quality, and integrity of their products.”
Currently, however, that is not the case for consumers. This lack of consumer assurance became that much more concerning during the 2019 EVALI lung crisis, with the majority of dangerous products coming from the illicit market. “With regulations in place, consumers will have the ability to access clean and safe CBD products at licensed dispensaries,” Riley noted.
Despite operating in a largely unregulated market, most CBD companies are playing by the rules, attempting to hold one another to industry standards. Matthew Anderson, CEO of extraction tech company Vanguard Scientific, mentioned several companies using third-party testers or notified bodies, and its certification to verify products.
The issue, Anderson explained, was several of these testing organizations not being unapproved bodies. “Companies are being told that if they complete these 12 steps, or go through this certification process, then all of a sudden, they get [their certificate].” Due to these unapproved bodies, Anderson says companies, whether they intend to or not, misrepresent their product. “They’re following standard operating procedures, and they’ve now misrepresented a certification in this marketplace.”
Labeling has become that much more of an issue due to recent regulatory rulings. In March 2020, the FDA determined that cannabis products, CBD and THC, were not included under the definition as a dietary supplement. Per the ruling, marketers cannot list these products as a supplement. Moreso, it is illegal to sell food with THC or CBD added to the product. However, hemp seed oil, a useful product commonly misrepresented as CBD, is allowed.
“This has hampered the industry from growth and expansion, confused buyers and led large chain retailers to shy away from offering CBD products on their shelves,” said Dr. Stuart Titus, CEO of Medical Marijuana, Inc.
Kat Merryfield, the founder of CBD brand Kat’s Naturals, agrees. Merryfield also agrees the rules are simple to navigate compliance-wise. However, the CBD executive believes the rules leave labeling up for interpretation. “Currently, there is no FDA inspection process, and companies claiming this are not being truthful,” said Merryfield. The brand head also highlighted ongoing banking and credit issues that stem from the U.S. tax code Section 280E, which prohibits banks from working with Schedule 1 and other illicit operations.
Though, in regards to labeling, Merryfield said her Tennessee-based company is in frequent contact with regulators from the FDA to stay up to date and compliant. Merryfield also mentions being the first in the state to receive its GMP/SQF certification from the TDA. The accreditation came despite difficulties finding a regulatory agency to inspect the company without a federal definition on the hemp plant. “Working with the TDA, we were able to define hemp as produce and, therefore, our facility as a food manufacturing facility.”
With support from state and federal agencies, is the industry on its way towards resolving some of its most pressing concerns? Kat Natural’s Merryfield said that after five years in the CBD space, you learn things can happen quickly. “Things change daily, monthly, yearly, and until there is a clearly defined path of regulation, things are likely to continue to change erratically,” the founder said.
She forecasted a current trajectory that mirrors the dot-com era of the early 2000s. “After the crash, there was a reconstruction process where companies came together to form stronger, larger entities that could survive with their collective strength, and there were regulations put into place that created a standard of operation.”
Merryfield sees the hemp and cannabis sector at the end of the wave’s swell, with some major industry names going under as collaboration takes rise. That said, the founder believes the industry growing pains should bring progress in the end.
“This next year or so, I see our industry being further solidified with regulatory standards that will allow legitimate companies to compete in a fair marketplace,” said Merryfield. “Change is imminent for us all, but I believe this change will be good.”