Over the last 25 years, cannabis laws and attitudes throughout the U.S. have undergone a remarkable transformation. As recently as 1995, cannabis was illegal in every U.S. jurisdiction, and its use was still widely taboo. The transformation began in 1996, when California voters passed Proposition 215, making California the first U.S. state to enact medicinal marijuana legislation. Since then, 32 additional states, the District of Columbia, Guam, and Puerto Rico have enacted medical marijuana/cannabis programs. More than a dozen other states permit use of cannabis derivatives, most notably cannabidiol (CBD), and numerous states have legalized recreational marijuana.
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Explore this issueApril/May 2019
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As legalization initiatives have swept across the nation, the legal cannabis industry has enjoyed explosive and nearly unprecedented growth despite the challenges stakeholders continue to face. Those challenges include conflicting state and federal laws, lack of regulation, burdensome tax schemes, and transportation hurdles.
Despite (or perhaps because of) the rapid legal and cultural shift, confusion regarding cannabis abounds. For purposes of this article, the term “cannabis” refers to both marijuana and hemp. Both are members of the family Cannabis sativa and share many properties, but there are meaningful distinctions between the two. Whereas marijuana typically produces significant levels of tetrahydrocannabinol (THC)—the psychoactive compound that produces a “high” when ingested—hemp does not. Hemp produces only a trivial amount of THC, generally less than 0.3 percent, which is insufficient to cause impairment.
Hemp has long been an important agricultural commodity. Archaeological evidence of hemp cultivation dates back 10,000 years to ancient Mesopotamia. More recently, George Washington cultivated hemp at his Mount Vernon estate. Hemp has many industrial applications. It is used to manufacture textiles, biofuels, paint, varnish, soap, lotions, rope, lubricating oil, and many other products. Unbeknownst to many, hemp was widely cultivated in the U.S. until the 1960s. Thereafter, it was swept up in the “War on Drugs” and, pursuant to the Controlled Substances Act, was prohibited under federal law.
With the enactment of the 2018 Farm Bill, hemp prohibition has effectively ended, though it will continue to be stringently regulated. The Farm Bill defines hemp as an agricultural commodity and removes its status as an illegal drug, provided the THC levels are below 0.3 percent. Hemp may now be introduced into interstate commerce, provided it is otherwise compliant with the law. Likewise, many of the onerous restrictions on the sale, transport, or possession of hemp-derived products have been eliminated.
Hemp will now be regulated pursuant to a cooperative framework under which state and federal authorities will work together to oversee hemp cultivation and production. The Bill directs departments of agriculture to consult with executive and law enforcement officials to devise and submit plans to the head of USDA. These plans will establish quality control standards for hemp production. Each state’s plan must be approved by USDA prior to the state commencing licensure and regulation. To the extent a state opts out, USDA will implement its own regulatory regime pursuant to which cultivators may seek licenses and will be subject to oversight.
FDA Regulation and Classification
Today, hemp is most well-known for CBD, a promising compound widely credited with offering therapeutic benefit for a variety of ailments, including stress, pain, and seizure disorders, among others. Though CBD is now legal under federal law when derived from hemp—as opposed to marijuana—hemp-derived CBD remains subject to FDA rules when used as an additive to foods, beverages, or supplements. Put differently, CBD as a compound is no longer illegal. However, CBD is still considered a drug ingredient, meaning it requires FDA food additive approval. FDA will treat CBD as it does any other FDA-regulated product—meaning it’s subject to the same authorities and requirements as FDA-regulated products containing other drug ingredients.
Shortly after the Farm Bill became law, FDA Commissioner Scott Gottlieb (who is scheduled to resign in April) released a statement affirming that “While products containing cannabis and cannabis-derived compounds remain subject to the FDA’s authorities and requirements, there are pathways available for those who seek to lawfully introduce these products into interstate commerce. The FDA will continue to take steps to make the pathways for the lawful marketing of these products more efficient.”
Other parts of the hemp plant, including hulled hemp seeds, hemp seed protein, and hemp seed oil, have been deemed safe by FDA. Therefore, these products may be legally marketed in human foods without food additive approval, provided they comply with all other rules and regulations.
Marijuana, on the other hand, remains classified as a Schedule I substance under the Controlled Substances Act. Schedule I substances are deemed to have a high potential for dependency and no accepted medical use. The effect of that designation, from both a legal and economic standpoint, is profound. Among other things, Schedule I substances may not be transported through interstate commerce, banks are barred from transacting business with legitimate marijuana businesses, medical providers are not allowed to prescribe marijuana, and federally funded institutions cannot conduct marijuana research, etc. (Medical providers sometimes circumvent prescription prohibitions by giving “recommendations” in states that allow medical marijuana use.)
It appears increasingly likely that many of the federal hurdles will soon clear, giving rise to yet another boom for the cannabis industry. Among the proposed legislation being circulated by Congress are bills that de-schedule marijuana, address tax fairness for cannabis businesses, and remove barriers to banking and scientific research. These would ostensibly lay the groundwork for a broader bill to end federal cannabis prohibition outright, which some analysts expect by the end of the year. Whether any such bills will pass is unclear, but the momentum is indisputably trending toward legalization.
Irrespective of marijuana’s Schedule I status, states are charging ahead with legalization initiatives, and legal cannabis sales have surged into the billions of dollars annually. As the legality and social acceptance of cannabis use have grown, so too have the opportunities available to businesses willing to enter the cannabis market. Meanwhile, many other businesses have adopted a wait-and-see approach, reluctant to enter the market because of the legal ambiguity, lack of regulation, cost-prohibitive taxation, banking obstacles, and longstanding misconceptions about cannabis itself.
Food for Thought
One of the fastest growing cannabis sectors, projected to exceed $4 billion in annual sales by 2021, is cannabis-infused edibles. Many cannabis consumers prefer to attain the therapeutic or intoxicating effects of cannabis through the consumption of edibles, as opposed to inhalation through smoking or other means. The diversity of edible cannabis products is striking, and includes butter, honey, chocolates, olive oil, lemon cakes, and even pizza sauce. Chefs across the country are incorporating cannabis into elaborate culinary presentations.
The remarkable growth and success of the cannabis edibles industry is attributable to many factors, including sophisticated marketing and product development strategies. But perhaps more importantly, the edible industry has done a remarkable job of innovating and self-regulating to ensure the safety and quality of their products. Despite the lack of regulation, edible producers have demonstrated ingenuity and discipline in adopting responsible policies and procedures to ensure and enhance product safety.
Cannabis edibles present both common and unique safety and quality challenges for businesses, regulators, and policy makers. The safety of cannabis products, like any food, is dependent on many things, including traceability, supply chain integrity, proper lab testing for potency, pathogens, pesticides, heavy metals, etc. But there are additional safety considerations unique to cannabis and do not necessarily apply to other types of foods. These include secure childproof packaging, proper dosing (tolerance levels vary significantly between users), and consumer education. Edible producers, state regulators, and manufacturers are innovating and successfully developing the policies and procedures to address these risks.
Nevertheless, as the industry continues to grow, it will be important for cannabis industry entities to deal with the unique civil legal issues that are certain to arise. For instance, determining liability in product liability cases involving cannabis edibles will bring issues before the courts that have never been previously adjudicated. For food companies that choose to pursue the potentially lucrative opportunities, it will be vitally important to understand and mitigate the full range of potential risks—a feat that will necessarily entail the use of complex contractual agreements.
Regulation Challenges for Edibles
Regulation of THC-infused edibles presents the most significant challenges. Consider that in some cases marijuana is a medicine, while in others it is a recreational intoxicant, and at other times it is both. Unlike most medicinal products, cannabis is a naturally occurring plant. It can be grown in a garden and does not require the strict manufacturing parameters required for the manufacture of most other medications. At the same time, THC is a powerful intoxicant, and due to its Schedule I status and its long-term effects, many express concerns that the effects of marijuana have not been adequately studied. Whatever policies one may support regarding the way marijuana should be regulated, there are compelling arguments to support them.
Colorado, which has some of the nation’s most comprehensive cannabis regulations, observes numerous differences between the medical and recreational marketplaces. For example, Colorado residents with a Colorado medical cannabis card are not subject to minimum age restrictions, but any adult over the age of 21 can purchase retail cannabis products in person from cannabis stores, regardless of whether they are residents of Colorado. While ostensibly straightforward at the consumer level, these vagaries will likely create problems in terms of developing clear, consistent, policy-based federal regulations that apply nationally.
Traditional principles of federalism may offer the best course in developing and implementing effective cannabis regulations. The phrase “laboratories of democracy,” coined by U.S. Supreme Court Justice Louis Brandeis, describes a legal process by which states serve as de facto “laboratories.” They test novel social, legal, and economic experiments without subjecting the entire nation to the corollary risks of failed policy. Moreover, permitting states to adopt their own legal and regulatory policies encourages policy experimentation and provides valuable insight into what is (and is not) effective from a social, economic, and public health standpoint. Indeed, given the many social, economic, and legal consideration involved, we believe (as do many others) that the “states-rights” approach is the wisest course of action. In turn, we believe it is also the most likely approach the federal government will adopt. This approach would entail ending federal marijuana prohibition and allowing the states to regulate within certain broad parameters.
It is a fascinating time. Undoubtedly, cannabis issues are extraordinarily complex. They transcend our legal, social, geographical, and economic barriers. The many idiosyncrasies and ambiguities associated with cannabis will eventually have to be worked out. Indeed, we are only at the beginning of what is certain to be a long and policy-intensive process of enacting sensible federal cannabis laws.
At this point however, it does not appear likely that we will turn back. Rather, it appears cannabis is here to stay. The dramatic shift in cannabis law presents an exciting and potentially lucrative opportunity for food companies willing to enter the edibles market. If or when it is appropriate to do so, however, is a determination for each company to make. But when that time comes, ensuring the safety and quality of your products will be paramount.
Stevens, a food industry attorney, is a founding member of Food Industry Counsel, LLC. Reach him at email@example.com. Chappelle is also a food industry lawyer and consultant at the same organization. Reach him at firstname.lastname@example.org.