With Plans to Sell CBD Nationwide, Lucky’s Market Charts Legal Gray AreaChase ScheinbaumOctober 11, 2017
“This is just about the grayest of gray areas as far as federal law and policy. I think the DEA's even confused about it.”Vince Sliwoski
The Colorado-based grocer, which is backed by retail giant Kroger, announced this week that it will add a dozen CBD products to its apothecary shelves nationwide, where they’ll be sold alongside herbs and natural cosmetics made from ingredients like echinacea and calendula.
Lucky’s Market isn’t the first large retailer to test the waters of the CBD market, forecast to be worth $3 billion by 2021. Last month, in a short-lived move, Target added four CBD-enriched products to its online inventory. The big box yanked them from its virtual stores in less than a week without explanation, though.
Yet as consumer demand for CBD products grows, authorities at the DEA have reiterated their stance that anything derived from the cannabis plant—including hemp-derived CBD extract—is a Schedule I drug.
“This is just about the grayest of gray areas as far as federal law and policy,” said Vincent Sliwoski, a cannabis law attorney and professor in Oregon, of CBD products. “I think the DEA’s even confused about it.” (The agency may get some clarification by way of a federal lawsuit filed by hemp farmers challenging the way the agency codifies “marihuana extract”.)
Conversations of legality surrounding cannabis usually focus on the Drug Enforcement Administration, and the agency may well take issue with grocery store-sales of CBD extract. But would-be sellers may have to tussle with the Food and Drug Administration, too. Earlier this month, the FDA made a vague announcement about its intent to crack down on unproven health claims on cannabis products.
“The FDA is the bigger issue around hemp oil and CBD oil. That’s why Target backed out,” says Mark Slaugh, former executive director of the Cannabis Business Alliance.
In a recent statement to the press, the DEA opined that sales of Charlotte’s Web were illegal because the CBD oil has not been FDA approved. (Even if CBD is “beneficial” in treating neurological disorders, as the FDA has declared, products containing it would still need to pass the approval process.)
In the past couple of years, the FDA has sent to CBD producers cautioning them against making unfounded health claims or claiming products contained CBD when in fact they contained less than advertised or none at all, said Rod Kight, an attorney in North Carolina who represents numerous companies that deal with hemp.
Lucky’s Market did not immediately respond to requests for comment.
Under federal law, hemp can only be grown only in states with federal hemp research programs. “If the CBD were imported it could arguably be legal,” Sliwoski noted, adding it would be unlikely that a retailer could track the provenance of CBD in numerous products. “Maybe they could prove all their source material was from China or somewhere else. That would have to be their affirmative defense and it would end up being litigated.”
Kight isn’t so sure federal law will be the problem (he says the DEA is slowly “retreating” from earlier positions) but state law might be. “The 9th Circuit has ruled that nonpsychoactive imported hemp is legal. If you connect the dots, the DEA says CBD is not a controlled substance,” he said. “But a lot of states haven’t carved out an official position.” Lucky’s Market could force them to, he adds.
“They see a demand for the products and feel comfortable enough with the muddled state of the policy.”Sliwoski
Food and supplement companies that sell hemp seed or oil get away with it because they don’t claim the products contain CBD, Slaugh said. “Once you start claiming CBD is an active ingredient, are you getting into the realm of a regulated drug? I think that’s the great debate. These folks aren’t held to food, nutraceutical, or drug manufacturing standards.”
While the FDA does regulate nutraceuticals, the industry has developed many self-imposed standards in an effort to put regulators at ease, Slaugh said. CBD producers may want to consider going the same route, he suggested. “The hemp industry has to step up and create those internal, self-policing standards if they want to avoid regulation.”
That’s already taking place, noted Kight. “Hemp and CBD are moving right in line with that. We’re probably going to see a split between cannabinoid prescription medications and nutraceutical-type producers who will co-exist,” he said.
Whatever potential response Lucky’s Market might see from regulators or law enforcement could be worth the opportunity of getting into the CBD space early. “It says the potential upside of doing this is worth the risk of any law enforcement action,” Sliwoski said. “They see a demand for the products and feel comfortable enough with the muddled state of the policy. They might be thinking the DEA will probably write us a letter rather than hauling us into court and we’re going to differentiate ourselves here.”