Reed Smith Client Alerts

Following last year’s removal of hemp – and, therefore, also hemp-derived cannabidiol (CBD) – from the list of Schedule I controlled substances effectively banned in the United States, products containing CBD – from creams to gummies – can be found everywhere, it seems. With the rise of the new lucrative and still largely unregulated CBD industry come new headaches, however – in particular, consumer litigation. A bevy of federal class action lawsuits recently filed against CBD manufacturers for false and misleading claims regarding the CBD and tetrahydrocannabinol (THC) content in their products is probably just the first wave in what will likely be a flood of CBD-related litigation. In the face of this mounting and anticipated litigation, CBD companies should take prudent action now to reduce the risk of becoming a target of false advertising litigation and to increase the odds of successfully defending against any lawsuit that is filed.

Authors: Cori Annapolen Goldberg Kathyleen A. O'Brien Michael H. Sampson Adam D. Brownrout

The regulatory landscape

According to the Agriculture Improvement Act of 2018 (available at govtrack.us), which is often referred to as the “2018 Farm Bill,” “[t]he term ‘hemp’ means the plant Cannabis sativa L. and any part of that plant, including the seeds thereof and all derivatives, extracts, cannabinoids, isomers, acids, salts, and salts of isomers, whether growing or not, with a delta-9 tetrahydrocannabinol concentration of not more than 0.3 percent on a dry weight basis.” Pursuant to that legislation, which became U.S. law in December 2018 (read more at reedsmith.com), “hemp” was expressly removed from the definition of “marihuana” in the U.S. Controlled Substances Act and its regulations.

At the same time, the U.S. Food and Drug Administration (FDA) (1) reiterated that before a product containing CBD is marketed as a drug (read more at reedsmith.com), it must go through new drug approval and (2) stated that it remains currently illegal to put into interstate commerce a food containing CBD or to market CBD as, or in, a dietary supplement. The U.S. Department of Agriculture (USDA) recently issued an interim final rule (read more at reedsmith.com) for domestic hemp production, including requirements for testing hemp, licensing growers, disposing of noncompliant hemp, and collecting and storing information related to hemp production. However, the FDA still has not issued any regulations concerning the sale of CBD in food, dietary supplements, drugs, or cosmetics.

In the absence of federal guidance, some states have developed their own requirements for the sale and marketing of CBD products, including rules for testing and labeling CBD products. However, only a handful of states have developed such rules, while other states are either working to develop rules or have merely accepted the realities of an unregulated CBD market while awaiting further FDA guidance.