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Will Farm Bill mean windfall for hemp-derived CBD?

Posted on December 20th, 2018 by Global Ganja Report and tagged , , , , , , , , , .

cannabisThe newly enacted Farm Bill contains language implicitly removing hemp-derived CBD from the controlled substances list, along with industrial hemp. A CBD industry that has been growing fast in a legal grey zone stands to grow faster in the light of legal clarity. Conflicting state laws and even federal regulations, however, could prove an obstacle to unfettered expansion.

President Donald Trump signed the 2018 Farm Bill on Dec. 20, finally legalizing commercial cultivation of hemp—defined as cannabis with under 0.3% THC. Because the law explicitly removes any hemp-derived cannabinoids other than THC from the Controlled Substances Act, it implicitly includes CBD. This medically promising and extremely fashionable non-psychoactive cannabinoid appears to now have an unambiguous legal path to widespread production and mainstream commercialization.

Implicit CBD legalization
For the first time since passage of the Mariuhana Tax Act in 1937,  hemp can now be freely grown under federal law. And for the first time since passage of the Controlled Substances Act in 1970, its production is regulated not by the Drug Enforcement Administration but the Department of Agriculture. The bill had broad bipartisan support, and was actually championed by the Senate Majority Leader, Mitch McConnell of Kentucky.

McConnell, pillar of the country's conservative Republican establishment. comes from a state where farmers have long been at the forefront of pushing for legal hemp. He originally drafted the legislation as the Hemp Farming Act, but merged it into the Farm Bill—officially, the Agriculture Improvement Act of 2018—to speed passage.

"Last year alone, Kentucky hemp recorded more than $16 million in product sales through the state pilot program I previously secured, demonstrating that hemp holds great potential for the future of Kentucky agriculture," McConnell said in a statement pushing passage of the bill. "My Hemp Farming Act as included in the Farm Bill will not only legalize domestic hemp, but it will also allow state departments of agriculture to be responsible for its oversight."

He added, apparently alluding to CBD: "Kentucky's farmers can continue to lead the nation in the growing, processing and manufacturing of industrial hemp. I am confident the ingenuity of Kentucky’s farmers and producers will find new and creative uses for this exciting crop."

The pilot program was established by the 2014 Farm Bill, which also made the 0.3% THC maximum federal law. But it did not allow full commercial production, and it kept both hemp and all cannabinoids, including CBD, as a Schedule I controlled substances. The burgeoning CBD industry has to a large extent been based on a legal fiction—that CBD derived from industrial hemp, as defined by federal law, is legal. It now appears that this is actually the case.

The text of the Farm Bill does not actually mention CBD. But in amending the Agricultural Marketing Act of 1946 to allow hemp farming, it defines hemp thusly: "The term 'hemp' means the plant Cannabis sativa L. and any part of that plant, including the seeds thereof and all derivatives, extracts, cannabinoids, isomers, acids, salts, and salts of isomers, whether growing or not, with a delta-9 tetrahydrocannabinol concentration of not more than 0.3 percent on a dry weight basis." The reference to "any...cannabinoids" implicitly covers CBD.

CBD's legality is now a question of production: whether it is derived from federally defined hemp or from marijuana—that is, from psychoactive varieties of cannabis with THC content above the legal limit. CBD itself would now seem to be legal.

The industry has certainly been anticipating this. Joshua Camp, CEO of local firm LabCanna, which runs a line of CBD products, called Tennessee a "sleeping giant" of the hemp industry. He was speaking to the Tennessean on occasion of the state's first Hemp Expo, held at the Nashville fairgrounds in September. In contrast to hemp expos a decade ago, which featured clothes, fiber and hemp-seed foods, the most prominent products on display were various CBD preparations. 


Remaining federal wrinkles 
Passage of the Farm Bill was preceded by efforts to legalize hemp-derived CBD through the courts, exploiting apparent contradictions in federal law. On April 30, the Ninth Circuit US Court of Appeals in San Francisco turned down a bid by the Hemp Industries Association to overturn a DEA rule that explicitly added CBD to the list of controlled substances. 

The HIA argued that the DEA rule contravened provisions of the 2014 Farm Bill allowing research in substances derived from industrial hemp. As the legal blog Cultivalaw notes, the Ninth Circuit rejected the appeal on narrow procedural grounds. Although a technical defeat for the CBD industry, HIA v DEA loaned momentum to the push for consistent federal law on the matter.

And where the regulatory apparatus is concerned, the law is still not thoroughly consistent—for the moment. Immediately after Trump signed the Farm Bill, the Food and Drug Administration issued a statement saying it will take steps to identify "pathways for the lawful marketing" of hemp-derived cannabis products, but that for now it remains "unlawful…to introduce food containing added CBD or THC into interstate commerce." As Marijuana Moment blog notes, the FDA said it will "gather additional input relevant to the lawful pathways by which products containing cannabis or cannabis-derived compounds can be marketed." 

It was the FDA's June approval of the CBD-based pharmaceutical Epidiolex that forced the DEA to reconsider the cannabinoid's status as a Schedule I substance. The DEA's September ruling drew the line very finely—rescheduling Epidiolex but not CBD itself.  With the letter of the law now changed by Congress, it is the FDA's turn to bring its own regulations into conformity. If this doesn't happen soon, further litigation may be forthcoming.

Potential patchwork
Then there is the question of state law. While the Farm Bill removes federal roadblocks to CBD's commercialization, it is up to each state to set its own policy.

An optimistic report from the Brightfield Group, issued just before the Farm Bill passed, anticipates a $22 billion hemp-derived CBD market by 2022 as a fruit of the new legislation. But it warned that "even if the Farm Bill were to pass, states would not be required to create hemp programs or regulatory systems, leaving producers, retailers and consumers in those states in the same conditions they’re in today."

The report on MarketWatch following passage of the bill included a similar caveat: "The overall effect is not assured because...states will continue to be able to enact laws related to CBD and industrial hemp, allowing for a potential patchwork of legislation across the country."

One obvious dilemma is posed by California, where state health authorities in July actually banned preparations of CBD derived from industrial hemp rather than from psychoactive cannabis (marijuana). The California Department of Public Health found that CBD derived from industrial hemp did not fall under the purview of the state's cannabis regulations.

This will hopefully be reversed now that Congress has officially made CBD kosher. But it may take a while for the states to catch up with federal law—and even for federal regulations to catch up with the new law. Until then, elements of the erstwhile legal grey zone may persist.

Cross-post to Cannabis Now

Photo by WikiMedia

 
 

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