Unpacking CBD’s Unregulated Status and Legal Pitfalls

Is Hemp Legal?

is hemp a legal product?

The most recent iteration of the Farm Bill changed the game for CBD by decriminalizing hemp on a federal level. While it’s still up to each individual state to set its own laws regarding hemp and CBD, the vast majority of them have elected to legalize hemp. So, for the most part, hemp is now legal to sell and cultivate. 

There’s been unprecedented growth in the CBD and legal hemp farming industries in the last five years. Even though CBD is legal for the most part, it’s still largely an unregulated product. So while it may seem like there’s CBD everywhere you turn these days (even on Amazon), the FDA hasn’t actually approved over the counter CBD as medicinal products or as dietary supplements. This means that companies selling CBD products have to be very careful about how they market their products and what kind of claims they make regarding CBD. 

Warnings from the FDA

fda and hemp regulation

Even in states where smokable hemp is legal, operating a CBD business can get you in trouble with the Food and Drug Administration if you’re not careful about marketing. 

The FDA has sent warning letters to numerous companies for either falsely claiming their products can cure certain ailments such as Covid-19, misrepresenting their ingredients, or claiming they’ve been approved by the FDA when in fact, they haven’t. Aside from the anti-seizure medication Epidiolex, which utilizes CBD as an active ingredient, no cannabis derivatives have yet been approved by the FDA.

Because of CBD’s unregulated status, plenty of unscrupulous snake oil salesmen have tried to market CBD as a miracle cure-all drug or exploited the lack of testing by selling products that don’t contain any of the listed ingredients.    

However, the intense scrutiny from the regulatory agency may also affect legitimate CBD businesses. Michael Harinen of Bluebird Botanicals recently told Forbes.

"It's affected our business because whenever the FDA comes out with an announcement, including this one, customers call us up. They are very wary and scrutinizing us. And they are concerned about the legal status of CBD."

So far the FDA has not taken any action beyond sending the warning letters, though it does maintain the right to take further action to remove products it deems dangerous to public health.

Despite the FDA’s watchdog attitude regarding cannabis-derived products, the agency claims to be committed to “exploring potential pathways for CBD products to be lawfully marketed while also educating the public about these outstanding questions of CBD’s safety.

Similar warnings have also been sent from FTC to companies the Federal Trade Commission believes are making bogus health claims about cannabidiol.

Cannabis and the Telephone Consumer Protection Act

Cannabis and the Telephone Consumer Protection Act

Health claims aren’t the only marketing strategy that can land a cannabis business in hot water.

The Telephone Consumer Protection Act is designed to limit the number of annoying spam calls we all hate receiving. However, the law is ripe for exploitation by litigious plaintiffs hoping to make some quick cash, and cannabis businesses are the newest targets.  

It’s incredibly important for companies to be honest and transparent regarding what they do with their customers’ private data regardless of what industry they’re in. However, What’s troubling is that the basis of many of these cases are seemingly benign actions such as collecting a cell phone number during the process of signing up for an app. 

Companies can be targeted regardless of if they’ve actually acquired the proper consent from their customers to send text messages or collect their information. Plaintiffs bank on the fact that the amount of money in legal fees it can take to successfully argue a case often ends up being more than the original lawsuit and convinces the business to try and settle in arbitration.  

One of the best ways companies can protect themselves is by making sure not only that they require proper consent from customers, but also any marketing firms they may employ. Things like adding a STOP TEXT or OPT-OUT option at the end of every SMS can go a long way in demonstrating consumer consent.

It’s always best practice to treat customers with respect and not try to get one over them. Pittsburg based attorney Michael Sampson told mjbiz “It’s a much better approach to do it in a clear and delineated way,” Sampson said, “because you don’t want to be sending text messages to someone who doesn’t want to receive them. You shouldn’t be tricking someone into receiving your text messages.”
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