Is CBD legal? FDA readies to regulate industry now that hemp legalized

The legal haze surrounding a $1 billion market of lotions and cookies made with CBD, a highly-touted wellness compound found in marijuana and hemp, could begin to clear.

On Wednesday during a Congressional hearing, Scott Gottlieb, the head of the US Food and Drug Administration, said he planned to discuss his agency’s approach to regulating foods and supplements made with the ingredient in April. CBD is increasingly turning up in everything from creams to coffee to cakes.

Although it doesn’t get you high, CBD has been linked with potentially therapeutic properties and is the main ingredient in the first federally-approved cannabis-based medication. Wall Street sees high potential for the CBD industry overall, with some analysts recently projecting that it could blossom into a $16 billion market by 2025.

So long as CBD products are derived from hemp, a freshly-legalized cannabis strain that’s nearly identical to marijuana, the items could be legal — but that remains to be decided by the FDA. Foods and supplements sold across state lines and products that make health claims fall under its regulatory purview.

Here’s what analysts think could happen during the meeting in April.

From a ‘warning shot’ to a ‘flexible regulatory approach’

By Chloe/Leslie Kirchoff

In a note circulated on the heels of the hearing, analysts with investment firm Cowen said they believed the FDA would take a somewhat “flexible” approach to policing CBD products, cracking down only in two main instances: first, when the products make health claims, and second, when food products are sold across state lines or marketed as dietary supplements.

They said that plan could eventually allow the industry to thrive. But they predicted there would be uncertainty across the CBD market for at least the next 6 months.

Gottlieb first outlined that approach in December, shortly after President Donald Trump legalized hemp farming.

“We treat products containing cannabis or cannabis-derived compounds as we do any other FDA-regulated products — meaning they’re subject to the same authorities and requirements as FDA-regulated products containing any other substance,” Gottlieb wrote in a statement released last December.

Read more: On the heels of hemp legalization, regulators have fired a ‘warning shot’ to the $1 billion CBD industry

Gottlieb is expected to expand on precisely what that means during the meeting in April. Meanwhile, the analysts predict his plans will prioritize ensuring that some forms of hemp-derived CBD could be sold legally as foods or supplements, while also protecting pharmaceutical CBD applications.

“In our view, Gottlieb’s statement and testimony indicate that he is willing to take a flexible regulatory approach to foster the development of hemp products such as CBD,” they wrote on Thursday.

However, new laws may be required to do this, the analysts noted, meaning that the CBD legal haze will likely continue for several months.

“We continue to believe there will be a period of regulatory uncertainty over CBD products at the state and federal level for at least the next six months to a year,” they wrote.