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Is CBD Legal?

At least twice a week our firm gets an inquiry from clients who are interested in starting a CBD business and want to know whether or not CBD is legal to sell. Resoundingly, the answer is “it depends”. Unfortunately, it will probably be a while before there is a simple yes or no answer about the legality of CBD oils and CBD product.

Federal law currently classifies anything that contains greater than 0.3% THC as “marihuana”. Under the Controlled Substances Act (CSA), marijuana is a Schedule 1 drug due to the Federal Government’s current stance that there is a high risk of addiction and no recognized medicinal benefits associated with marijuana consumption (21 U.S.C. 801 et seq.). While hemp derived CBD has questionable legality at the federal level, the source of CBD or percentage of THC contained in a CBD product can both result in CBD products being classified as marijuana.

Source Considerations The majority of consumers and producers are under the assumption that as long as a CBD product contains less than 0.3% THC, it is classified as hemp under federal law. While it is true that any product containing over 0.3% THC is federally illegal, it is not true that any CBD product containing less than 0.3% THC is legal. CBD oils can be sourced through hemp seed, industrial hemp, or cannabis extraction. CBD products derived from hemp seed are legal. CBD derived from cannabis is federally illegal, but Cannabis-CBD products are legal within states where the production and sale of cannabis products is legal and heavily regulated. Hemp-derived CBD continues to have questionable federal legality, but may be authorized by state law under a very limited set of conditions.

Hemp Law and The Farm Act  Hemp CBD law at the federal level stems from The Agricultural Act of 2014 (The Farm Act), which defines Industrial Hemp as any part of the cannabis sativa plant with less than 0.3% THC (H.R.2642 §7606). Under the Farm Act, hemp must be cultivated in accordance with a state agricultural pilot program, which entails that Hemp can only be grown in states that explicitly regulate hemp cultivation.

While cultivation of Hemp can be legal under a regulated state program, the Farm Act does not clearly indicate whether the manufacturing or production of CBD products is legal. The Farm Act does allow State Departments of Agriculture to “promulgate regulations” to “study the growth, cultivation, or marketing of industrial hemp” (H.R.2642 §7606(b)(1)). Accordingly, State Departments of Agriculture have the authority to regulate the manufacturing and production of hemp-derived CBD products as an effort to study the marketing of industrial hemp. This suggests hemp-derived CBD oil and products can be manufactured and sold legally within states where such activity is regulated and permitted by the State Department of Agriculture.

Epidiolex & Federally Rescheduling of CBD Drugs There are, essentially, very limited carve outs for hemp derived CBD at the Federal level. The legality conundrum has been exacerbated by the Drug Enforcement Administration’s (DEA) rescheduling of “approved cannabidiol drugs” to Schedule V of the CSA. The DEA’s rescheduling only approves CBD drugs that are: (a) FDA approved; (b) derived from cannabis; and (c) contain no more than 0.1% THC. This limited rescheduling has resulted in the misconception that CBD has been approved outright.

In actuality, the narrowness of the DEA’s definition excludes all CBD products that are not FDA approved. The only “CBD drug” that currently falls under this definition is Epidiolex, which was approved by the FDA in June 2018.  Put simply– the federal status of Epidiolex has been established; the legal status of other CBD products is unaffected. However, this narrow rescheduling represents a step towards widespread recognition and acceptance of CBD as a federally recognized substance with medicinal applications.

Epidiolex FDA Description

Legal Production and Distribution of CBD The DEA’s approval of Epidiolex has granted a British company, GW Pharmaceuticals, a de facto monopoly over the United States medical CBD market until other companies can attain FDA approvals for similar products. Everyone else at this point will need to look to state law for a legal path to production and distribution of CBD.

At the state level, CBD must be legal under the laws of the state and any CBD sold within the state needs to be derived from a legal source. This allows for cannabis-derived CBD to be legally produced and sold in states that have regulations controlling the production and sale of cannabis. This also entails that hemp-derived CBD can be sold and produced legally as long as: (1) CBD is not illegal in the state, and (2) the state has authorized producers to grow hemp and produce CBD products under the Farm Act or some other state law.

Regardless of the state in which you operating, whether your CBD is legal under state law, or if your CBD is hemp or cannabis-derived, distributing or transporting CBD product across state lines brings further legal considerations into the analysis. Put simply, you would be exposing yourself legally by engaging in interstate commerce because of the federal government’s authority to regulate interstate commerce. The next hope for national legalization is the 2018 omnibus Farm Bill, which includes the Hemp Farming Act of 2018, and would amongst other things, remove hemp from the controlled substance list.

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Green Consulting Partners
Phone: (949) 291-0587
Address: 23 Corporate Plaza Drive #150
Newport Beach, CA 92660
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