Congratulations. You have officially launched your Cannabidiol (CBD) eCommerce business. But just before you tap into a market that is projected to reach $24B by year 2024, you should proceed with caution. Notwithstanding shipping, banking and cultivation licensing issues (which are topics for another article), the last issue you may be worried about is marketing. After all, you are an advertising pro — this should be the easy part. Right? Not so fast my influential friend…
“ In this report I’ll explain CBD, how it is different than marijuana, and break down the steps toward advertising and complex compliance issues.”
An Introduction to CBD
A large part of the cannabis industry’s growth can be attributed to the increasing popularity of products that contain CBD. CBD, short for cannabidiol, is one of the hundreds of compounds found in the cannabis plant. The potential it has shown in helping with pain, seizures, and anxiety has made it a popular alternative for medical and recreational marijuana consumers.
The most commonly used form of CBD is CBD oil. Combining CBD extract with a carrier oil like coconut oil, it can be ingested or vaped. But because marijuana legalization is still in flux, both federal and state laws continue to wrestle with the legality of CBD oil. Note while similar, CBD derived from hemp and CBD derived from marijuana are distinct plants. Marijuana and hemp are both members of the cannabis family, so it is understandable that many mistake them for one another. There is, however, a crucial difference between the two – the amount of psychoactive Tetrahydrocannabinol (THC) each plant produces. While marijuana can contain up to 30 percent THC, hemp contains no more than 0.3 percent THC. In other words, marijuana can get you really high, while hemp has such a low amount of THC, that it would be impossible to get high from its consumption.
Thirty-three states and the District of Columbia currently have passed laws broadly legalizing marijuana in some form. The District of Columbia and 10 states — Alaska, California, Colorado, Maine, Massachusetts, Michigan, Nevada, Oregon, Vermont, and Washington — have adopted the most expansive laws legalizing marijuana for recreational use.
Despite the many states that have legalized some or all forms of marijuana, for decades, federal law did not differentiate hemp from other cannabis plants, all of which were effectively made illegal in 1937 under the Marihuana Tax Act and formally made illegal in 1970 under the Controlled Substances Act — the latter banned cannabis of any kind.
This changed in 2014 when Congress approved the Farm Bill, which allowed pilot programs to study hemp. The 2018 Farm Bill went further and allows hemp cultivation broadly, not simply pilot programs for studying market interest in hemp-derived products. It explicitly allows the transfer of hemp-derived products across state lines for commercial or other purposes. It also puts no restrictions on the sale, transport, or possession of hemp-derived products, so long as those items are produced in a manner consistent with the law.
What is CBD?
Running a CBD business is possible but there’s things you need to know to stay out of trouble.
However, the 2018 Farm Bill does not create a completely free system in which individuals or businesses can grow hemp whenever and wherever they want. There are numerous restrictions. First, as noted above, hemp cannot contain more than 0.3 percent THC. Any cannabis plant that contains more than 0.3 percent THC would not be considered hemp under federal law and would thus be legally protected under this new legislation.
Second, there will be significant, shared state-federal regulatory power over hemp cultivation and production. State departments of agriculture must consult with the state’s governor and chief law enforcement officer to devise a plan that must be submitted to the Secretary of the US Department of Agriculture (USDA). A state’s plan to license and regulate hemp can only commence once the Secretary of USDA approves that state’s plan. In states opting not to devise a hemp regulatory program, USDA will construct a regulatory program under which hemp cultivators in those states must apply for licenses and comply with a federally run program. This system of shared regulatory programming is similar to options states had in other policy areas such as health insurance marketplaces under the Affordable Care Act (ACA), or workplace safety plans under OSHA—both of which had federally-run systems for states opting not to set up their own systems.
Third, the law outlines actions that are considered violations of federal hemp law (including such activities as cultivating without a license or producing cannabis with more than 0.3 percent THC). The law details possible punishments for such violations, pathways for violators to become compliant, and even which activities qualify as felonies under the law, such as repeat offenses.
So, is it legal to advertise CBD products?
The 2018 Farm Bill essentially legalized industrial hemp and hemp-derived CBD oils, but the law requires the establishment of a regulatory framework that is not yet in place in all states. Once this happens in your state, the federal government should be fine with it being sold at the state level, if the states regulate those sales.
Currently, hemp-derived CBD is operating within a patchwork of regulations that vary by cities and states. For example in New York City, regulators are prohibiting outlets to sell CBD-infused food and beverages, threatening them with fines. Other states like Ohio and California are taking similar action. Maine’s governor, on the other hand, signed an emergency bill in late March allowing CBD in food products after state inspectors warned stores to pull them from shelves earlier in the year. Big players like CVS and Walgreens are selling skin creams and lotions with hemp-based CBD, and the FDA hasn’t specifically expressed concern. However, others are “rolling the dice” advertising and selling hemp-derived CBD-infused foods, drinks, and supplements as CBD isn’t allowed in foods.
In short — the law is far from settled here, so CBD business owners should proceed with caution. Or better, engage an experienced CBD attorney who can evaluate your options based on the state(s) in which you intend to sell and market your products.
Success needs hard work. Don’t listen to these ‘get rich quick’ schemes. You need to build your character and work hard on yourself and your business to achieve greatness. Work hard and work smart. Do the right things and do them in the right way. Don’t procrastinate. Take bold actions. Work long hours and craft your legacy.
Can I make health claims about my products?
CBD oil proponents often advocate the health benefits of their product, but health claims in advertising are closely scrutinized by the Federal Trade Commission (FTC) and, to some extent, the Food and Drug Administration (FDA). If your CBD business contains health or medical claims in its advertising, you need to have readily available evidence to support those claims, otherwise they should be omitted from your ad materials.
Another minor, but major issue.
Your CBD product ads are likely to be subject to takedown, fines and other penalties, depending on the state of the affected consumer, if those ads appear to be targeting minors, or are otherwise deemed to be deceptive or misleading. For instance in California, under the California Business & Professional Code Section 228580, internet, online and mobile application operators are prohibited from marketing or advertising drug paraphernalia, including marijuana paraphernalia. CBD for the purposes of this code section is included in the definition of drug paraphernalia, and as such, ads demonstrating consumption of CBD products is strictly prohibited.
While the opportunities for CBD business and eCommerce operators are impossible to deny, it is important for these entrepreneurs to consult an experienced CBD attorney to ensure your business is and remains in compliance, every step of the way.