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HIGHLIGHTS
  1. U.S. FDA updating regulations related to cannabidiol
  2. Many producers are staying away from health claims around CBD in an effort to stay within regulations
  3. Maine recently ordered all CBD products to be removed from stores

U.S. companies looking to cash in on the CBD craze are racing to find new markets despite looming fears of a federal crackdown on products containing cannabidiol.

Twice over the past two months, the Food and Drug Administration (FDA) in the United States has expressed concern and moved to update regulations related to CBD, the increasingly popular non-psychoactive component of cannabis. Following those FDA warnings, regulators in Ohio, Maine, North Carolina and New York City moved to pull food and drink products containing CBD from store shelves - but Quan Nguyen is not concerned.

“We started this business four and a half years ago and that was probably among the most vague time from a regulatory perspective,” the co-founder of Folium Biosciences, a Colorado-based wholesaler of CBD products, told Cannabis Professional on the sidelines of an industry conference in Boston. “Every time there was a statement made by the FDA or the DEA [Drug Enforcement Administration] and we had stopped every time, we would not be where we are today.”

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The issue the FDA is trying to address, Mr. Nguyen says, is more related to the false health claims made by some CBD-based products than to the use of CBD itself. Earlier this week, the agency sent warning letters to 17 companies for “illegally selling” products that claim to treat Alzheimer’s disease, but has stopped short of a broader product ban.

“The FDA made it very vague, there is a lot of grey area and they are letting individual states interpret the rules however they want to interpret them right now,” he said. “That is hard because our customers, who are out in places like New York and Maine, are asking for clarity.”

In December, the 2018 Farm Bill descheduled hemp-derived CBD, moving CBD under the auspices of the FDA, which now treats it as an active ingredient in food and pharmaceuticals. The FDA almost immediately put out a statement saying it’s “unlawful ... to introduce food containing added CBD or THC into interstate commerce, or to market CBD or THC products as, or in, dietary supplements, regardless of whether the substances are hemp-derived.”

Maine, for example, recently deemed that all edible products containing CBD be removed from store shelves because cannabidiol is not a federally approved additive to foods. The Portland Press Herald said the “action has shocked hemp farmers and CBD retailers who have sunk millions into their business ventures.”

In Vermont, that lack of clarity has led to fear at Champlain Valley Organics, makers of the Vermont Pure CBD line of hemp-derived products.

“It does scare me that the FDA is getting more and more Big Brother, watching over us where something could potentially happen there that could affect our business,” Olin Schumacher, the company’s co-owner and master cultivator, said on the sidelines of the conference in Boston. “The Farm Bill helped us in a couple of ways in terms of being able to put our money in more legitimate places but really it is just nice being off the scheduled drug list.”

Not selling food products or making specific health claims has helped companies like Folium and Champlain avoid any regulatory wrath for now, but the broader concern among those focused on the CBD-side of the legal cannabis business is the stigma such regulatory warnings perpetuate among potential investors. Private equity firm Cresco Capital, for example, has invested in 29 cannabis-focused businesses but none have a CBD focus and according to managing principal Matt Hawkins, none ever will.

“We probably will not do a straight CBD play. In my opinion it is a placebo,” Mr. Hawkins told investors gathered in Boston on Tuesday for the CannaVest Northeast conference. “You can get mad at me if you want but I just think it is not really something that is sustainable. I think some of the health claims [CBD products] make are bogus, it gives the rest of the cannabis industry a bad name and I don’t want any part of it.”

Clarity from the FDA in terms of what is, and more importantly is not, a legitimate CBD product will undoubtedly address some of that stigma. However, given the agency is just now launching a “Botanical Safety Consortium” to begin looking into the issue, no clarity is expected soon and according to Folium’s Mr. Nguyen, may never come.

“I think the FDA is always going to be vague on this, there is no doubt and I don’t foresee any clarity for a while,” Mr. Nguyen said. “And for now there is a ton of confusion.”

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