While President Donald Trump signed the Agriculture Improvement Act of 2018 legalizing hemp for the first time since 1970, the legislation doesn't legalize all forms of cannabidiol (CBD), a non-intoxicating component of both hemp and marijuana.
The law removes hemp from its earlier status as a controlled substance. Instead of oversight by the U.S. Justice Department and its Drug Enforcement Agency (DEA), the U.S. Food and Drug Administration (FDA) will regulate the plant.
For practical purposes, hemp will be treated like any other agricultural product. The law allows the transfer of hemp-derived products across state lines for commercial and other purposes and permits the sale, transport, manufacturing and possession of hemp-derived products — with some restrictions.
But the FDA continues to regulate products containing cannabis-derived compounds. Under the new law, the cannabis plant defined as hemp cannot contain more than 0.3 percent THC, which means it won't get consumers high.
FDA will Scrutinize Health Claims
Just after the bill was signed, FDA Commissioner Dr. Scott Gottlieb issued a statement confirming the agency's oversight of hemp and intent to seek pathways to legalize the sale of CBD in foods and other products. Gottlieb also vowed to closely scrutinize products that could pose health risks to consumers and promised to issue warnings and take enforcement actions if necessary.
Gottlieb said he is concerned about unsubstantiated health claims made about products including CBD and other cannabis compounds that have not been approved by the FDA, such as claiming therapeutic benefits. He said that products that claim to cure, treat, or prevent diseases, including cancer or Alzheimer's disease, must undergo extensive drug approval processes.
Gottlieb said it's still illegal to introduce CBD or THC into food products intended for interstate commerce or to market CBD or THC products in dietary supplements without FDA approval. But he pointed out that in June 2018, the FDA approved a drug, Epidiolex, containing CBD to treat seizures in two forms of rare epilepsy.
Hempseed Generally Recognized as Safe
He noted that some hemp-related products do not contain CBD or THC, and will not attract the same regulatory scrutiny. Gottlieb said the agency has evaluated three Generally Recognized as Safe (GRAS) notices identifying hulled hempseeds, hempseed protein and hempseed oil as safe. Those products can be legally marketed in human foods without further food additive approvals, as long as producers comply with normal FDA requirements and do not issue unsubstantiated health or treatment claims.
Canadian hemp and marijuana powerhouse Canopy Growth lauded the farm bill passage. In a statement, Chairman and Chief Executive Officer Bruce Linton called it “a transformative piece of legislation that will create jobs and meaningful economic impact across the United States” and vowed that Canopy Growth will quickly enter the American market “now that there is a clear federally-permissible path.”
High on Hemp's Business Opportunities
John Hudak, deputy director of the Center for Effective Public Management for the Washington, D.C.-based Brookings Institution, said hemp is poised to explode as the raw ingredient for a variety of commercial products: food, construction, textiles, and health and beauty products that include CBD. He cited an analysis from the Chicago-based firm the Brightfield Group estimating that the CBD market alone from hemp could exceed $22 billion within a few years. But he predicted some producers will test the margins and abuse the law.
Hudak, the author of “Marijuana: A Short History,” told Weedmaps News the law is clear.
“Many producers will create gray areas where there shouldn't be any. Many consumers already use CBD therapeutically and believe it has medical value. Others are using it for conditions in which it has not yet been demonstrated to work. The disconnect between what the medical community tells us is scientifically valid and what people believe is true is a pretty big gap. And that gap will power industry.”
Hudak acknowledged that while the U.S. is late to capitalize on legalized hemp, “no one should underestimate the entrepreneurship of American farmers. It is an agricultural sector second to none in the world. Our farmers are ready for it and better positioned than anyone anyplace else to exploit this market.”
Hudak foresees little crossover between the hemp and marijuana sectors. He pointed out that in marijuana, the product is primarily the flower known for its intoxicating properties and components such as CBD and THC that are used in edibles. The hemp plant, with little THC, is valued for its stalk and fibers, and it also produces CBD.
Hudak said that while the hemp provisions in the farm bill are far-reaching, he cautioned that “it is not a free-for-all for hemp or CBD. Nothing changes the FDA's authority to determine what is medicine and what has health or medical benefits. This celebration around the Farm Bill will encourage a level of misinformation about what is legal or not and will put some people into jeopardy. The most important message for people looking to purchase a product or produce them is do your homework.”
Erica McBride-Stark, executive director of Washington, D.C.-based National Hemp Association, told Weedmaps News, “It will finally legitimize our industry and allow us to bring hemp to its full potential.”
McBride-Stark said hemp can be used to produce more than 25,000 different products, noting that, “Many are unique products, but hemp can also make existing products stronger and more sustainable.”
She said the three major components of the plant are the fiber, grain, and CBD component. McBride-Stark predicted that hemp fiber processing will offer the greatest manufacturing potential, pointing out that European auto manufacturers have relied on hemp for years to make many different car parts.
“Before legalization, U.S. automakers were unwilling to create prototypes without an existing supply chain. They also faced the other major hurdle that hemp was classified as a controlled substance. It was illegal to use banks for purchases, sales, and loans,” McBride-Stark said. “Now under the Farm Bill, hemp farmers will qualify for crop insurance, which means they can afford to grow hemp on a large scale with far less financial risk and can write off their business expenses like other farmers.”
She said the manufacturing infrastructure has not existed to process hemp fiber on a large commercial scale.
“But now you'll start to see infrastructure coming into the U.S. with bankers and investors helping farmers and manufacturers and producers to create jobs and businesses,” she said, adding that hemp is a sustainable crop requiring no pesticides or chemical inputs, is drought-tolerant, and can be grown in many different climates.
Cannabis and hemp manufacturers were elated by the legalization of hemp, but recognized the legal barriers facing CBD products.
Nancy Whiteman, founder and chief executive officer for Boulder, Colorado-based marijuana producer Wana Edibles, told Weedmaps News that instead of confining sales to state-licensed dispensaries for its THC-based products, some CBD products could be sold online or retail at gas stations, supermarkets, and drugstores.
She said the privately held company, an 8-year-old firm that employs 80 and controls 21 percent of the country's cannabis edibles market, could exceed $18 million in 2018 sales revenues and expects “very healthy growth” in 2019.
Bomi Joseph, founder of the Los Gatos, California-based Peak Health Center and a CBD researcher, said hemp legalization marks “a cultural shift. CBD is going to explode. I think the market is going to triple in size,” predicted Joseph, co-creator of a non-cannabis CBD product.
Research and Development Possibilities
Legalization also opens up research.
“We will go from small-scale research to large stream R&D, with investors putting money in that will drive products to commercialization,” he told Weedmaps News. “We're going from Mickey Mouse to industrial-scale production.”
In 2017, the National Institutes of Health announced more than $140 million in funding to research cannabinoids, including CBD. Some of those research opportunities were included in a December 8, 2018, live-streamed workshop.
For years American entrepreneurs have gone to Canada to research and produce hemp products because the plant was effectively banned in the U.S.
“Now there will be more American institutional money supporting American companies,” Joseph said. “We're catching up to where everyone else has been.”
Jenelle Kim, a San Diego entrepreneur and a physician specializing in Chinese medicine and acupuncture, told Weedmaps News the Farm Bill opens the door to growing hemp-related businesses beyond state lines.
“It's been challenging for many companies to invest in research and infrastructure unless their businesses could expand regionally or nationally,” said Kim, the founder and lead formulator for JBK Wellness Labs and Cannabis Beauty Defined, a CBD skin-care line.
Her assessment: “It will touch almost every aspect of our economy.”