For nearly a century, hemp has been at the mercy of prohibitionist policies that outlawed the cultivation and sale of industrial hemp in America. But after the 2018 Farm Bill legalized hemp and allowed states that were interested to create hemp programs, a robust industry quickly grew around the plant. By the end of 2020, the U.S. hemp industry had generated nearly $10 billion in sales, partly due to the rising popularity of cannabidiol (“CBD”), a hemp extract said to have potent medical properties.
However, the industry is barely regulated by the federal government. Each state has its own rules, leading to a patchwork of hemp regulations across the country, and the relevant authorities still haven’t created a comprehensive regulatory structure for hemp. Stakeholders and lawmakers have urged the U.S. Food and Drug Administration (“FDA”) to craft hemp regulations, but the federal agency has been dragging its feet. In the wake of the FDA’s rejection of a proposal to allow the sale of full-spectrum CBD as a dietary supplement, industry leaders say hemp would benefit a great deal from regulation.
Priyanka Sharma, cofounder of Kazmira, a Denver-based, industrial-scale producer of CBD isolate, says that regulation would raise the bar for high-quality production and manufacturing processes and ensure customers get products with safe ingredients. FDA approval would also provide sellers with the most-effective product format, Sharma says, allowing for much-needed toxicology and safety studies on hemp extracts such as CBD. According to Jeniffer Knaack, the senior director of compliance and science at Koi CBD in California, hemp products deserve just as much legitimacy as other botanical supplements. Federal prohibitionist policies against cannabis and hemp have created significant barriers to research, commerce, and investment, she says.
Federal regulation with a focus on science and research into hemp extracts would ensure the U.S. hemp industry is grounded in science and put the safety of the consumers first, says Knaack. Mark Montgomery, the cofounder and CEO of Tennessee-based NuSachi Holdings concurs, stating that the only reason there are bad actors in the CBD space is that hemp does not have any standards of operation or product quality. High production standards require investment in talented staff and suitable technology, and companies that hold themselves to high standards will be at a disadvantage compared to the bad actors that would rather make a quick buck at the expense of customers’ health.
Emily Leongini, a regulatory attorney with the FDA and a partner at Los-Angeles based Arent Fox, says the myriad of different hemp rules in different states provides a significant challenge for companies that want to expand. Not only is modifying products to meet contrasting standards in different states not commercially viable, but it also exposes them to consumer class litigation risks. Leading CBD industry actors such as The Alkaline Water Company Inc. (NASDAQ: WTER) (CSE: WTER) would prefer operating conditions in which such unnecessary risks are avoided, so federal regulations would be a welcome development.
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