California Greenlights Hemp-Derived CBD Commerce

California has taken a major step to resolve the ambiguities and inconsistencies in the regulation of hemp-derived CBD — a move that could see the state setting a de facto national standard for CBD consumables in light of continued inaction by the US Food & Drug Administration.

Legislation recently passed in Sacramento governing hemp-derived CBD products provides some long-overdue clarity for producers, purveyors, and consumers alike, who have all heretofore been operating in a legal gray zone.

Until now, the confused regulatory environment has led to what some have called a “Wild West” atmosphere in the Golden State’s CBD sector.

On Oct. 6, Gov. Gavin Newsom signed Assembly Bill 45, which authorizes the use of hemp and hemp-derived cannabinoids in foods, beverages, cosmetics and pet products in the state. It also holds manufacturers to strict testing and labeling guidelines, similar to those in place for THC-rich cannabis products sold in California’s state-licensed dispensaries.

California already has a thriving market for (hemp-derived) CBD products, accounting for $730 million in sales in 2019 — two and a half times more than any other state. But AB 45 doesn’t allow the sale of hemp-derived CBD products in cannabis dispensaries. For the time being, at least, the hemp-CBD and cannabis-CBD markets will remain segmented.

The California Cannabis Industry Association (CCIA) welcomed the new law — with some caveats. In a statement, CCIA director Lindsay Robinson praised the bill’s author, Assemblymember Aguiar-Curry, as “steadfast in her approach to create a level playing field between cannabis and hemp while protecting the health and safety of all Californians.”

Robinson implicitly acknowledged the new law’s limitations: “AB 45 establishes a long overdue, comprehensive framework for the manufacture and sale of hemp products in California, but our work is not over. We look forward to working with the author on future legislation to establish a pathway for the incorporation of hemp into the cannabis supply chain.”

Legacy of confusion

Will hemp growers and CBD producers be subjected to the same onerous taxes and regulations that are crippling the cannabis industry?

California policy on CBD has long been a muddle of confusion. In July 2018, the California Department of Public Health (CDPH) issued a memo asserting that hemp-derived CBD extract was not legal for use in “food products” in the state. Only CBD-derived from plants with more than 0.3 percent THC was explicitly permitted, and non-hemp-derived CBD-rich products, sold only in licensed dispensaries, were regulated by the CDPH’s Manufactured Cannabis Safety Branch.

The diktat only added to the confusion, which was even evident in the nomenclature used. The CDPH drew a distinction between CBD derived from “hemp” as opposed to “cannabis” — despite the fact that hemp is simply cannabis with 0.3% or less THC, by the federal government’s definition. (Even use of the term “psychoactive” for THC-rich-cannabis is contested by some, as CBD can also have a significant mood-altering effect even though it’s not an intoxicant.)

But the memo was not actually a regulation — it was only an “FAQ” (Frequently Asked Questions) intended to clarify existing policy. And it failed to make clear if the prohibition only applied to use in food products or to hemp-derived CBD generally.

Amy O’Gorman Jenkins, a lobbyist for the California Cannabis Industry Association (CCIA) and president of Sacramento-based Precision Advocacy, tells Project CBD: “That ambiguity continued, and we saw sporadic and inconsistent enforcement, largely on food and beverage products.”

Inconsistent enforcement

In December of 2018, the federal Farm Bill legalized hemp-derived CBD, while maintaining the prohibition on CBD derived from cannabis with more than 0.3 percent THC — but California’s regulations did not change. This placed California’s regs seemingly at odds with federal law on the question — barring CBD products derived from “hemp,” but not those derived from “cannabis.”

CBD derived from “cannabis” continued to be available in California’s licensed dispensaries (accounting for $217 million in sales in 2019, according to Headset) — while unregulated hemp-derived CBD was available, as elsewhere in the country, in convenience stores, grocery stores, and gas stations. But hemp-derived CBD products were generally manufactured out of state and were effectively being marketed with no oversight.

A 2019 study by Van Nuys-based cannabis-testing company CannaSafe Laboratories found that just 15% of the 20 products it tested contained the advertized amount of CBD, and that many were contaminated with adulterants — particularly solvents in vape products. Following threats from local authorities, many California retail outlets began to pull such items.

The confused regulatory environment was noted by Will Kleidon, chairman of California Hemp Council and CEO of CBD purveyor Ojai Energetics. Although based in Ojai, Southern California’s hub of New Age culture, the company’s manufacturing operation is actually located in Nevada and it has been sourcing much of its CBD from growers in Colorado.

Kleidon laments the erratic enforcement retailers have faced in the Golden State. “It came down to how local counties were interpreting the FAQ, because the CDPH didn’t even make a reg,” he relates. “It was different enforcement levels, from none to full tilt. Retailers were visited by agents from local jurisdictions. We had entire stores stop ordering from us, certain cafés stopped selling our products. You could still get them online anywhere in California, but they were pulled from some retailers.”

Following the passage of AB 45, Kleidon says his company plans to start cultivating specialty hemp strains in California’s Ventura County with the next planting season. Although he has some reservations about California’s new policy regarding CBD commerce, Kleidon feels there’s a lot to like about AB 45. “You can’t let perfection get in the way of progress,” he says. “The overall enabling of hemp products to be sold in the state is a big step forward.”

Contacted by Project CBD, the CDPH said that the department’s enforcement efforts on CBD products have “primarily focused on addressing consumer complaints.” It stated that since passage of AB 45, “CDPH has not taken any enforcement actions against hemp-derived CBD products.” In the statement, the department pledges to “work closely with stakeholders to help educate them” on the provisions of the new law so they can “successfully navigate the application and licensing process as it becomes available.”

Progress, not perfection

When AB 45 landed on Gov. Newsom’s desk in September, Assemblymember Aguiar-Curry told Cannabis Wire that she’d been pushing for such legislation for years because she’d “grown increasingly concerned about the risk to public health from the sale of illegal, unregulated CBD products in our state… My constituents have unwittingly been consuming these products for years and I wanted to provide regulated, tested alternatives and the jobs and economic activity that will come with this new law.”

AB 45 doesn’t allow the sale of hemp-derived CBD products in cannabis dispensaries. For the time being, the hemp-CBD and cannabis-CBD markets will remain segmented in California.

The new law – which allows CBD and other hemp-derived inputs or parts of the hemp plant to be included in food, beverages, and cosmetics – explicitly requires producers to register with the California Department of Public Health. “Hemp-derived products will be available in traditional retail stores,” says Amy O’Gorman Jenkins. “But now they will be tested and appropriately labeled, and subject to rigorous advertising standards, to help consumers be better informed about what they’re consuming.”

AB 45 gives the CDPH seizure, embargo, and recall powers over hemp-derived products, as well as inspection authority. It brings hemp ingestibles and topicals under the purview of the Sherman Food, Drug & Cosmetic Act, the primary California law governing this sector. AB 45 includes additional requirements that mirror the testing standards for contaminate levels in “cannabis,” referencing those codes in the 2017 Medicinal & Adult-Use Cannabis Regulatory Safety Act (MAUCRSA). The new law also requires that hemp imports meet California safety standards and that out-of-state facilities must submit to CDPH inspections.

Under the opt-out provisions of MAUCRSA, local jurisdictions in California are able to ban cannabis dispensaries, and currently a majority of cities and counties (particularly in the more rural and sparsely populated areas of the state) prohibit retail storefronts from engaging in cannabis commerce. AB 45 doesn’t include a similar opt-out provision, and local jurisdictions won’t be able to ban hemp-derived CBD products, which will be legally available statewide.

A rigid firewall

Hemp industry proponents and CBD producers did not get everything they wanted in AB 45, which maintains California’s rigid firewall between the hemp and “cannabis” markets — at least for now.

What the industry refers to as “co-mingling” will continue to be prohibited, meaning that hemp-derived inputs may not be used in THC-rich cannabis products. And hemp-derived CBD can’t be sold in cannabis dispensaries.

The law, however, does call for California’s Department of Cannabis Control to prepare a report on introduction of “hemp cannabinoids into the cannabis supply chain,” to be turned in to the governor and Legislature by July 2022. 

O’Gorman Jenkins notes that Aguiar-Curry has pledged to begin working on a bill by early next year to “authorize incorporation of hemp cannabinoids into cannabis products and allow sale of hemp-derived products in cannabis dispensaries.”

But the prospect of Integrating hemp-derived CBD into the licensed cannabis marketplace raises many difficult questions:

Will hemp growers and producers be subjected to the same onerous taxes and regulations that are stifling the cannabis industry?
How will regulators “level the playing field” between hemp and cannabis producers if cannabis sales are banned in many California cities and counties while no such restrictions apply to hemp-derived CBD?
Is a level playing field possible if California hemp producers can sell their wares out of state while cannabis producers can’t?
What regulations will apply to CBD that is chemically synthesized or biosynthesized in a lab rather than extracted from a plant?

AB 45 also prohibits the sale of smokable CBD products (meaning CBD-rich low-THC dried flower) until a separate law imposing a tax on such products is passed by the Legislature. And It bars the use of hemp-derived inputs in products that contain alcohol, tobacco or nicotine, notes a summary in the National Law Journal.

No Delta-8 loophole

In addition, AB 45 seeks to close the spurious “Delta-8 loophole,” under which some CBD retailers are marketing the psychoactive cannabinoid Delta-8 THC and asserting that it is legal because the 2018 Farm Bill, which legalized hemp cultivation, only references the better-known Delta-9 THC.

AB 45 creates a new category for any “THC or comparable cannabinoid,” which is defined thusly: “Any tetrahydrocannabinol, including, but not limited to, Delta-8-tetrahydrocannabinol, Delta-9-tetrahydrocannabinol, and Delta-10-tetrahydrocannabinol, however derived.”

Heading off any attempt to find and exploit new alleged loopholes, the CDPH is given the power to include within this definition “any other cannabinoid, except cannabidiol [CBD], that the department determines … to cause intoxication.”

This stipulation is in accord with numerous states, which have banned Delta-8 THC products, and with federal law that classifies Delta-8 and other synthetic THC analogues as illegal Schedule I drugs.

How will the ban on synthetic Delta-8 THC be enforced when unscrupulous businesses, which misinterpret the 2018 Farm Bill for financial gain, peddle Delta-8 and other synthetic THC products via mail order?

A de facto national standard?

As California finally emerges from the legal and regulatory gray zone around CBD, confusion and delay unfortunately persist at the federal level. Despite legalization of hemp-derived CBD in the 2018 Farm Bill, the US Food & Drug Administration refuses to promulgate regulations for CBD products — instead warning that cannabidiol may cause liver damage, among other dubious claims.

What happens in California often becomes policy in other states.

A 2020 FDA report for the House Appropriations Committee warned of mislabeled and tainted products and other dangers of unregulated CBD commerce. But the FDA perpetuates these problems by failing to regulate the hemp CBD market that it criticizes.

In August 2021, the FDA declined a request from the CBD company Charlotte’s Web to approve its products as dietary supplements. The FDA explained its decision by citing the 2018 approval of Epidiolex, a CBD pharmaceutical, as a prescription medication for treating pediatric epileptic seizures. The FDA argued that CBD’s prior status as an FDA-approved pharmaceutical meant the agency could not okay the sale of CBD as a health supplement.

Yet CBD products continue to be marketed nationwide — only regulated at the state level, and only in some states (now including California).

However, as we’ve seen with automobile emissions standards, California’s huge market means that its enacted policies have the potential to impose themselves nationally on a de facto basis. California’s assertion of its right to impose more stringent emissions standards than the federal government set off a state’s rights battle — with conservatives (including the Trump administration) hypocritically defending federal power.

Eric Steenstra, president of the national advocacy organization Vote Hemp, calls passage of AB 45 “a major moment for hemp in California, and what happens in California often becomes policy in other states.”

Looking back on the crafting of the bill, Steenstra observes: “It took us three years to get AB 45 negotiated and come up with a plan to move this forward, while the FDA is still sitting on its hands. California is the biggest marketplace in US, which is the biggest marketplace in world for these products. So, opening up this state in spite of the FDA is a huge win for the industry.”

Bill Weinberg, a Project CBD contributing writer, is a 30-year veteran journalist in the fields of drug policy, ecology and indigenous peoples. He is a former news editor at High Times magazine, and he produces the websites CounterVortex.org and Global Ganja Report.

Copyright, Project CBD. May not be reprinted without permission.