Though FDA made its position onCBD clearer at the end of 2019, technically all of FDA'senforcement actions so far have qualified as unofficial agencyactions.

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With a market estimated to grow more than 260% to a dizzying$1.25 billion over the next four years, itappears that the demand for cannabidiol, more commonly known asCBD, is expected to continue to grow. All of this growth is stillexpected despite the actions by the Food and Drug Administration(FDA).

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In November 2019, FDA issued Warning Letters to more than adozen companies saying they had violated the Federal Food, Drug,and Cosmetic Act for selling consumer products with CBD. FDA statedthat these products could not be marketed because they madeunlawful drug claims for their products and that the use of CBD inthese products was inappropriate. FDA's currently stated policy isthat CBD cannot be used as ingredients in food and dietarysupplements without new FDA regulations allowing its use.Furthermore, FDA stated that it had safety concerns regarding theuse of CBD due to potential side effects associated with theingredient.

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Related: Wading through the cannabis haze

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The industry responded by saying they believe the use of CBD issafe and effective at appropriate levels and that FDA should enactregulations to allow for the safe use of CBD in consumerproducts.

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Despite this dispute, it currently looks like the CBD marketwill continue to grow in 2020. While recent FDA actions havecreated a speedbump for industry, they haven't been enough to stopthe CBD train. Without FDA regulations to clearly allow for themarketing of CBD consumer products and without consistent FDAenforcement of this issue, the industry continues to look like theWild West, i.e., a place where there is a lot of risk but potentialfor growth.

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2020 looks to be a pivotal year for CBD and related hempmarkets, and anyone involved in the cannabis industry should bepaying close attention to evolving actions. Here are four points toconsider as the new decade begins.

1. Class action lawsuits against CBD companies could threatenthe industry's growth.

While the November Warning Letters from FDA were a surprise, themore worrying risk may come from the recently filed class actionlawsuits. Last year, a handful of CBD companies were hit with classaction lawsuits alleging they misled consumers by marketing theirproducts as dietary supplements. This lawsuits came shortly afterFDA's Warning Letters and were based in part on FDA's reasoningthat CBD products are excluded from the dietary supplementdefinition.

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This distinction was made based on the fact that CBD was firstinvestigated as a drug before being marketed as a supplement orfood. Without final agency action from the FDA on the regulatorystatus of CBD, it's unclear whether the courts will want to resolvethis issue or wait for further guidance from FDA. Nevertheless, theoutcome of these suits will have wide-ranging impact on theindustry moving forward.

2. Political support could have significant implications on theCBD and cannabis industry.

While November saw FDA take its most aggressive position againstCBD in dietary supplements and foods, it remains to be seen whetherCBD's political allies in Congress will be able to push back onFDA. Having already passed the 2018 Farm Bill the year before thathelped spur on the enormous growth of CBD, the political power ofthose in favor of CBD should not be underestimated. Additionally,the outcomes of the upcoming presidential and congressionalelections could impact both the status of CBD and cannabis industryat large. Those that want to influence the legal status of CBD andcannabis should be working to support the election of politicalrepresentatives that will push their preferred outcome.

3. Without an official action on CBD by FDA, expect continuedconfusion on enforcement at the federal, state, and locallevels.

Though FDA made its position on CBD clearer at the end of 2019,technically all of FDA's enforcement actions so far have qualifiedas unofficial agency actions that can't be reviewed by federalcourts. As a result, there is some remaining confusion whether ornot FDA's position on CBD will stand up to scrutiny. FDA maycontinue to regulate this area through unofficial means such asWarning Letters in 2020. If it does, then this will give someflexibility to those in industry that want to continue the risk ofselling CBD products. However, if this issue is reviewed by thecourts in 2020, we may get a final determination regarding thestatus of CBD in consumer products.

4. States and the USDA are expected to finalize rules andanswer outstanding questions regarding hemp farming in 2020.

In October 2019, the United States Department of Agriculture(USDA) released the text of its interim final rule that specifies rules andregulations to produce hemp. Currently, a farmer must be licensedor authorized under a state or tribal hemp program or through theUSDA hemp program to produce the crop. However, there aresignificant differences between states (and even within states andthrough Indian tribes) that can cause confusion for producersinterested in hemp farming. Additionally, new license applicationswere only eligible for possible approval beginning after November30.

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With these rules still new to many, there are stilluncertainties regarding how each state will respond and how theUSDA will approach Tetrahydrocannabinol (THC) testing and more. Thenew year will hopefully provide more guidance on questionspertaining to all aspects of hemp production both federally and atthe state level.

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William A. Garvin is shareholder andco-chair of Buchanan Ingersoll & Rooney's CannabisGroup.


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