Numerous CBD Business Opportunities where Sales are Legal

The business opportunities for developers of legal CBD products are almost too numerous to mention. Forbes estimates that the CBD market could jump 700% in 2020.  The financial magazine cites The Hemp Business Journal which asserts that sales of CBD based products will be more than $2 billion in 2020. About $450 million of those sales will come from newly legalized “hemp based-sources.” CBD products derived from hemp became legal (with exceptions an experienced CBD lawyer can explain) when the Farm Bill of 2018 was passed.

In 2015, the CBD products sold for $90 million due to hemp. Marijuana based CBD product sales for 2016 were $112 million. Other analysts are even more optimistic. Matt Karnes of Greenwave Advisors estimates CBD product sales will reach $3 billion in 2021.

At least 23 states and Washington DC have legalized medical marijuana. Another 10 states have legalized both medical marijuana and the recreational use of marijuana. CBD based on industrial hemp were legalized by the Farm Bill at the federal level. The states are working to determine whether they will also legalize the product and sale of industrial hemp.

Investors, developers, and businesses need to understand, on a federal and state level, whether the production, development, and sale of their products are:

• Legal
• Legal for medicinal use
• Legal for recreational use
• Legal if manufactured according to specific laws. Generally, the dividing line is whether the product has a concentration of THC that is more than .3% plant or end-product based.
• Illegal

Generally, hemp has little THC while marijuana has a lot of THC. THC is psychoactive.

Forms of CBD Products

CBD products are created in one of two ways – either through a CBD extract or through an isolate. It is from these two different forms, that many marketable products such as beauty products, drinks, edibles, suppositories, vapes, and other products are made.

CBD extract can be sold as a standalone product or as an ingredient in other products. When sold as a standalone, a syringe or similar product is usually included. The syringe is used to measure the dosage. Extracts are oily substances that contain cannabinoids, terpenoids, and fatty acids. Packaging of extracts and syringes must comply with FDA labeling requirements.

When a CBD extract is used as a standalone product it is often placed under the tongue “via sublingual application” or it is swallowed. In standalone form, the main use is medicinal.

Different methods (which should be part of the GPMC process) are used to purify the extract – increase the CBD concentration in the extract.

The extraction method generally uses a solvent, such as a low-grade alcohol the separates the chemicals/cannabinoids from the rest of the plant. The solvent is then burned off, leaving the cannabinoids.

CBD Isolate

“Isolate” means the CBD is isolated. The crystalline substance comes in either slab form or white powder form and contains 99%+ potency of the single cannabinoid compound. Many people find comfort in isolates because they contain no THC which prevents any potential drug testing issues. The Farm Bill doesn’t legalize all CBD products. The Farm Bill generally legalizes CBD products with less than .3 percent THC. As with all laws, there are exceptions.

The CBD isolate, like the extract, can be used in its standalone form or as an ingredient in other products.

The general benefits of the isolate form, in addition to having no THC, are that it has many uses and is generally less expensive to make than the extract form.

Some of the common ways CBD isolate are used:

• In edibles
• Added to capsules
• Smoked
• Dabbed
• Mixed with a carrier oil to create an isolate-CBD oil tincture.
• Added to Marijuana Products for Increased CBD Concentration

The many different forms of CBD products

Each form of a CBD product opens new business opportunities. It is critical for companies who make and sell these forms (and investors) to understand how the produce is classified (as a food, drug, dietary supplement, cosmetic, or some other way), and what laws such as the federal (and often state version of the) Food and Drug Cosmetic Act apply.

Businesses also need to understand what actions can result in FDA warning letters. Warning letters can escalate into fines and penalties and into injunctions to stop operations.

Skilled CBD lawyers understand what factors determine a product’s classification – as drug, food, etc. These attorneys also understand what compliance steps are required depending on the classification.

Common compliance issues include:

• Current good manufacturing practices (CGMP)
• Misbranding
• Adulteration
• Improper labeling
• Dishonest marketing

Some common forms and common federal compliance issues

Each product form must comply with all federal and state laws and the corresponding regulations. The FDA regulates the production and sale of CBD oil products. The DEA regulates the sale of illegal drugs. The FTC regulates how products are marketed (the FDA also has its own marketing rules).

A few of the common CBD oil forms that businesses are developing include:

• CBD oils. CBD oils come in edible form, tinctures, and capsules. The oil can also be added to balms and lotions. Companies that sell balms and lotions do need to comply with FDA and FTC regulations regarding the promises that are made. Additionally, promises – such as “this balm can help relax sore muscles” – may result in the FDA claiming the balm is a drug. Drugs are subject to specific regulations such as the requirement to be scientifically tested and approved.
• CBD wax.  Wax is also called resin, budder, or crumble. CBD was is highly concentrated. Uses normally ingest it or dab it for pain relief. Again, if the product is promoted as pain relief, it will likely be branded as a drug where it will be subject to FDA drug regulations.
• CBD crystals and sheets. Crystals can be used to make edibles, capsules, and creams. Crystals can be added to food and drinks or even sprinkled on a cigarette. Some users inhale them to get a quick response. Products that are categorized as foods need to comply with the Food, Drug, and Cosmetic Act.
• E-liquids. This form is used for vaping. It is sometimes combined with nicotine and/or THC.
• CBD supplements. Supplements must be properly classified. They must be made and marketed according to the relevant federal regulations. The labels identifying their ingredients must be accurate and must conform with the applicable laws on labeling.

Some additional common CBD product forms include:

• Disposable CBD vape pens. “comes with pre-filled with a CBD vape oil. The all-in-one unit features a battery directly attached to an atomizer or clearomizer. Simply vape until the tank is empty and dispose of the pen.”
• Vape Cartridges. “Vape cartridges are pre-filled with CBD extract/thinning agent combos, or distillate.” Users screw the cartridge on the battery end and then begin vaping.
• Vape Oil. This produce, also called vape juice or e-juice, is used as a CBD vape oil where the liquid content is heated, turned to vapor, and inhaled when vaping. The liquid is sold by itself, usually in a squeeze bottle or tincture dropper. The liquid is then loaded into refillable cartridges and then use in a vape pen.
• Water Soluble / Emulsified CBD. CBD oil and other cannabis molecules separate from water just like any other oil. New advances in technology have enabled companies to produce water-friendly CBD products. These CBD products are then used for various types of emulsions and other products.
• Water Soluble Hemp Powder. This produce can be mixed by the user into many other products. It can be combined with foods and liquids because the power dissolves into water. It’s a very versatile produce.
• Water Soluble Tinctures.

The amount of CBD that the body absorbs differs depending on the way the CBD product is consumed. If CBD is ingested, it can take a while to feel any affects because the CBD has to go through the digestive system and the liver. On the plus side, ingesting CBD tends to have a longer-lasting effect. CBD products that are inhaled or placed under the tongue have a much more immediate effect.

CBD Marketing Legal Issues

Marketing of CBD products shouldn’t confuse the buyer or user. Labels should clearly identify the ingredients. Natural Stacks suggests that marketing and labels should answer the following questions:

• What form is the CBD product – extract, isolate, or wax?
• Is the product pure CBD oil?
• What’s the quality of the product?
• What is the CBD product best used for?
• Which company produced the product?

Many additional questions should be answered in the marketing depending on how the CBD product is classified – drug, food, cosmetic, dietary supplement, or some other form. A skilled CBD compliance lawyer will review your company’s marketing and labeling requirements.

Federal and state CBD related laws and regulations

We’ve written several articles which cover some of the following legal issues pertaining to CBD oil:

Many articles on how products are classified – drugs, foods, cosmetics, dietary supplements.

Some additional many considerations the developers, sellers, and investors of CBD products need to review with experienced FDA lawyers are:

• What permits and licenses are required to run a CBD oil business?
• What is the source of the CBD oil product – is it from a licensed facility?
• Is the product being sold in-state or across state lines? Where are the products being sold? Any products being sold in other states must comply with the laws and regulations of its respective state.
• Has the developer of an industrial hemp product complied with the Farm Bill?
• What warranties are your supplies making so you know the supply is legal and that manufacturing new products and/or selling any CBD products are legal?
• What tests have been run on any supplies and on the products your company is making. Lab and scientific tests are usually, depending on the nature of the product, required by the FDA for drugs. Lab tests are especially important for CBD products because of their potential for physical and emotional harm.
• What is the exact amount of THC in any products or any derivatives?
• What steps are being taken to comply with both federal and state laws?
• What representations are being made about the product? Claims that it can cure a disease or even reduce the severity of a disease present red flags for the FDA that the product is a drug. Claims that the product can change “structure or function” are also highly suspect.
• Is the company keeping current with new federal and state laws and regulations since the CBD legal field for CBD products is changing rapidly?

The CBD oil business is booming. The demand for CBD products of all types and forms is high. Before developers and others launch new businesses to meet these demands, they need to understand the full range of criminal and civil laws and regulations. The legal issues only multiply as products are sold across state lines. Each new form of a CBD oil product raises numerous concerns about the product’s classification, testing, manufacturing procedures, labeling, and marketing.

Contact the CBD attorneys at Cohen Healthcare Law Group, PC before investing in or starting any CBD oil product business. Failure to comply with FDA, FTC, federal, and state regulations can result in criminal prosecution, civil fines and penalties, FDA warning letters, and enforcement action that can close your CBD business.