In 2018, President Donald Trump took steps to legalize the sale of hemp-derived products via the Farm Bill; a set of measures designed to make it easier for entrepreneurs to sell products containing CBD. But while it is legal to sell marijuana in some states, the Food and Drug Administration recently warned that is not yet legal to sell CBD-containing foods, cosmetics or dietary supplements.
The agency has indicated that it will likely be legal to do so in the future, but right now there is still no regulatory framework in place to regulate the sale of products that contain cannabidiol.
The Market Incentives
Despite legal warnings for companies selling CBD-related products over the internet, there’s no sign as yet that the industry is slowing down. Sales of US hemp products are likely to top more than $1 billion in 2019 and continue to grow to $4.8 billion by 2022.
The Risks To Sellers
The risks to sellers, according to Denver lawyer Henry Baskerville, are profound. First, there’s the issue of intellectual property. With no regulation of CBD products yet in place, entrepreneurs are at high risk of having their ideas stolen. There are simply no safeguards in place to protect people in the marketplace from IP theft.
Then there’s the problem of shipping to states in the Union that have not yet legalized marijuana or related products. There’s a risk that CBD and hemp could be confiscated at the state border, leading to disgruntled customers and lost profits.
The most significant business risk, however, is prosecution. Entrepreneurs could be tried under existing illegal substance laws and face a criminal indictment, even if the state in which they operate has legalized marijuana. Though there have been no cases so far, it’s not impossible to imagine that there might be in the future.
The current advice from legal experts is to include disclaimers denying company responsibility of shipped products so that the customer, not the producer, is responsible for loss, should the state confiscate items. This legal sleight of hand should help to protect businesses from claims by consumers, though it will not protect them if a felony case is brought against them.
How Can CBD Businesses Mitigate Risks?
- Pay Sales Taxes. If states are making money from the cannabis trade, then there are much less likely to introduce regulation to prevent it or charge sellers with a criminal offense.
- Avoid Making Medical Claims. Until regulations from LARA and the FDA are in place, entrepreneurs should avoid making health claims about their products, as these may fall foul of current advertising laws.
- Prove Product Safety. Those in the CBD industry know that cannabidiol is safe. However, policymakers and regulators may not be up to date on the latest science. Company marketing should, therefore, focus on the safety of the substance.
- Combat Misinformation. CBD companies need to point out that CBD is not the same as marijuana. It does not contain psychotropic THC and does not have the same mind-altering effects.
- Do Not Ship To States That Prohibit CBD. Finally, don’t ship to states that have explicitly banned sales of CBD products while staying up to date with the law.