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INSIDER Law

CBD industry governed under ‘problematic patchwork’

New York City 2020
Draft regulations in New York highlight a challenge facing marketers of hemp-based CBD products: adhering to an increasingly diverse collage of state-by-state requirements.

The New York State Department of Health in October announced a proposal to regulate hemp-based cannabinoid products, including establishing a maximum limit on cannabinoids (25 milligrams) in food and beverage products.

"These regulations are the next step toward regulating the growing hemp industry in New York in a way that protects consumers and helps ensure the industry's long-term viability," New York Governor Andrew Cuomo said in a statement when the draft rules were released. "Establishing the state's Cannabinoid Hemp Program to regulate production and sale of hemp and hemp extract will help protect both consumers and farmers."

The draft regulations highlight a challenge facing marketers of hemp-based products: adhering to an increasingly diverse collage of state-by-state rules—from labeling disclosures to testing and registration requirements.

“In going this route, we have created this problematic patchwork, and it becomes particularly challenging when it comes to labeling because one state will say, ‘This needs to be on the label,’ and another state will say, ‘This needs to be on the label,’” said Jonathan Miller, general counsel to the U.S. Hemp Roundtable, whose members include prominent CBD brands, in an interview. “And oftentimes, they’re all reasonable, but we’re given the direction of needing a dozen different labels to meet the different standards of these states, and that’s quite burdensome for a company that wants to sell in all 50 states or sell in many of them.”

Rend Al-Mondhiry, a partner in Washington, D.C. with the law firm Amin Talati Wasserman LLP, echoed Miller’s observations.

“Companies are having to create state-specific labels,” she said in an interview in November. “You have Utah requiring certain information on a label. You have Florida requiring certain information. California’s thinking about doing the same. New York is looking at proposed regulations, which I’ve been reviewing for the past few days. What they [New York officials] want is very different than what these other states want.”

Al-Mondhiry has a daunting task of keeping track of an ever-increasing patchwork of state laws. The following, she observed in a Dec. 10 interview, are among the states that have authorized the sale of hemp-based CBD products, most but not all of which permit CBD to be sold in both conventional food and supplements: Alaska, Colorado, Connecticut, Florida, Hawaii, Indiana, Iowa, Kansas, Kentucky, Louisiana, Maine, Nevada, New Jersey, New Mexico, New York, Ohio, Oklahoma, Oregon, Rhode Island, Tennessee, Texas, Utah, Virginia and West Virginia.

Some states have not yet implemented laws through rulemaking, which can add to confusion about the legality of hemp-based CBD products in certain jurisdictions. For instance, while Hawaii Gov. David Ige signed HB 1819 into law in August, which appears to authorize hemp CBD in supplements but not food, the Hawaii Department of Health states on its website (last updated in April 2019) that CBD may not be “marketed as a dietary supplement.” A spokesperson for the state health department did not immediately respond to a request for comment.

Specific nuances in state law 

From one jurisdiction to the next, there are nuances in state law for hemp-based products. For instance, Louisiana and Rhode Island have imposed age restrictions, while Maine restricts the sale of products to those sourced and produced in the state, Al-Mondhiry commented. 

Kasey Irwin, quality assurance manager with CBD brand Bluebird Botanicals, said the largest challenge facing manufacturers is meeting product labeling requirements. "Each state has different requirements for verbiage and warnings," Irwin explained via email. "For companies that sell their products nationwide, they must figure out how to include various warning and language requirements on each label and work around constraints on space."

Myriad licensing requirements and registration fees also may pose challenges. 

"Some states, including West Virginia, Alaska, Utah, Michigan and Texas, require licensing for all out-of-state CBD manufacturers and processors, while other states only require licensing for in-state companies," Irwin stated. "State registration fees can also present a major roadblock here. Several states require registration fees per product, which can ultimately cost up to thousands of dollars for CBD manufacturers simply in order to sell their products. This cost can be particularly overwhelming for small companies."

Finally, Irwin suggested some companies may find it "tricky" to meet required specifications in testing that may differ from one state to another, though she added firms like Bluebird Botanicals that follow rigorous protocols are less likely face difficulties in this area.

Other states are either silent on hemp CBD products or have interpreted laws to prohibit their sale, Miller of the U.S. Hemp Roundtable observed. In the 2018 Farm Bill, which legalized hemp, including cannabinoids, Congress did not preempt the states from restricting the production or sale of hemp.

"Some states, like Florida, have worked hard to put together a regulatory framework that benefits farmers, distributors and consumers,” said Kelly Shea, senior vice president of government affairs and communications with Charlotte’s Web, a public company marketing CBD, in an email. “Then, there are states somewhere in between. We are fans of a clear, consistent federal regulatory program, which recognizes CBD as a dietary supplement and doesn’t prohibit interstate commerce.”

Shawn Hauser, a partner in Denver with the law firm Vicente Sederberg, agreed in an interview the patchwork of state regulations is problematic.

“It’s incredibly difficult and incredibly impractical for businesses to comply with different and often conflicting state laws,” said Hauser, who chairs her firm's Hemp and Cannabinoids Department.

Federal oversight

Based on its interpretation of the Federal Food, Drug & Cosmetic Act (FDCA), FDA maintains CBD is an unlawful ingredient in conventional food and dietary supplements because, essentially, the cannabis-derived compound was first studied as a drug. Through a document sent to the White House in July for its review, FDA could eventually publish a policy of enforcement discretion regarding CBD products. Hauser is among those hoping FDA will eventually release the draft guidance.

“I would expect that many states would model their laws after that guidance or defer to that guidance,” Hauser said. “That would give the market … some uniformity and stability.”

In a Nov. 23 email, an FDA spokesperson, Shannon Hatch, said the agency is not commenting further on the CBD guidance until it is published.

"We recognize that there is substantial public interest in marketing and accessing CBD for a variety of products," Hatch said. "We are working toward a goal of providing additional guidance, and have made substantial progress. There are many questions to explore regarding the science, safety, effectiveness and quality of products containing CBD, and we need to do our due diligence. Our first priority needs to be to protect the health and safety of Americans."

FDA’s failure to regulate the CBD market is “hurting consumers,” according to Eric Steenstra, president of Vote Hemp, a grassroots advocacy group.

“If they want to work toward more data to ensure that the products are safe, that’s great, but why aren’t they applying existing requirements [of the law]?” Steenstra asked in an interview. “Why aren’t they telling the industry that all the existing requirements for foods, drugs and dietary supplements apply to hemp and that if you’re selling these products in the market, you better meet those requirements, or your product is not legal? They haven’t done that, so what do we see?”

‘Regulatory nightmare’

Steenstra suggested the market contains a hodgepodge of products of varying quality—ranging from "great" to "substandard."

More states, including California, are expected to consider or reconsider legislation in 2021 to explicitly permit the sale of hemp-based CBD. That is likely to result in additional testing, labeling and registration requirements for CBD brands.

Dan Fabricant, Ph.D., president and CEO of the Natural Products Association (NPA), expressed concern that FDA “inaction is creating the regulatory nightmare and patchwork approach that is the worst of all worlds.”

“This is a federal regulatory issue, FDA needs to do its job, and they [FDA officials] need to do it now,” he said in a Nov. 24 press release, commenting on proposed regulations in Iowa for consumable hemp products by the Iowa Department of Inspections and Appeals. “Further delay by FDA is not good for public health or for the CBD industry, because the best approach is one uniform national standard based on sound science that is enforceable.”

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