CBD Confusion

Posted by Raza Lawrence on November 14, 2018

Cannabidiol (CBD for short) is a naturally-occurring element of the cannabis plant that has recently exploded in popularity and availability.  Like tetrahydrocannabinol (THC), CBD is believed to have therapeutic and medical benefits, but unlike THC, CBD has no intoxicating effects.  Across the country, people can now find CBD products everywhere.  But are they safe and legal?

Many products advertised as CBD are imported from other countries or produced in unregulated, unlicensed operations, with no verification that they are free from toxic compounds or that they even contain CBD.  Even if the products contain “pure” CBD, knowledgeable experts contend that CBDs have little or no benefits when they are stripped from THC and other cannabinoids and compounds naturally occurring in the marijuana plant. CBDs appear to exhibit their medical and healing properties only when they are left combined with the other cannabinoids like THC, as they are found in nature.

CBD Production and Sales Remain a Federal Crime Without FDA Approval and a Doctor's Prescription

The law on CBD products is confusing, due to conflicts among local, state, federal, and international laws.  Under the Supremacy Clause to the US Constitution, federal law controls to the extent it conflicts with state or local law.  State law also controls to the extent it conflicts with city or county laws.  Federal law in this area is moving, but it is not clear in what direction.  Some predict the federal government will relinquish all regulation of CBDs and cannabis generally to the states, and keep a hands-off approach.  Others expect the federal government to strictly regulate CBDs and cannabis as they do with prescription drugs through the FDA, leaving the states with little control.  This approach was foreshadowed by the DEA’s recent memo announcing that drugs including CBD with THC content below 0.1% will be taken off of Schedule 1 of the controlled substances schedules, and moved to Schedule 5, which allows CBD products to be sold through traditional pharmacies with a doctor’s prescription so long as the particular product is first approved by the FDA. The order also disallows any importing or exporting of CBD products without a permit.

Under federal law, CBD with THC content above 0.1% remains classified as a Schedule 1 controlled substance, subject to severe criminal sanctions. The Rohrbacher-Farr amendment creates a limited exception, preventing the DOJ from prosecuting anyone in strict compliance with state medical marijuana laws (adult-use or recreational uses of CBD products may still be prosecuted).

Without Commercial Cannabis License, CBDs Are Banned in California Food Products

In California, the Department of Public Health recently issued a memo confirming that CBD products are not allowed in any food products in the state (unless the products are regulated as commercial cannabis edibles, which by definition contain THC levels of at least 0.3%). Thus, under state law, CBDs are allowed to be sold and ingested as long as they include THC, and are banned in food if they come from industrial hemp with little or no THC. The reason CBD products with no THC are banned by state law is that California incorporates federal law regarding food additives, dietary use products, food labeling, and good manufacturing practices for food.  Currently, the United States Food and Drug Administration (FDA) has concluded that it is a prohibited act to introduce or deliver for introduction into interstate commerce any food (including any animal food or feed) to which THC or CBD has been added.

This is regardless of the source of the CBD – i.e., whether the CBD is derived from cannabis or industrial hemp. CBD used as a topical or smokeable product could arguably be allowed under either federal or state law as it may not be considered to be a food that is ingested.

Los Angeles Allows CBD Businesses Without a Cannabis License to Register for Business Tax Certificate to Engage in Commercial Activities

The City of Los Angeles recently issued a form for businesses seeking a Business Tax Registration Certificate to engage in commercial activities related to industrial hemp and/or CBD derived from industrial hemp in the City of Los Angeles. This form allows your business to pay local taxes, but it does not protect you from criminal prosecution under state or federal law.  It likely also signals that enforcement of state CBD laws is not a high priority of the Los Angeles Police Department.

International Treaties Ban All Cannabis Extracts Including CBDs

In addition to local, state, and federal law, international treaties place obstacles to the sale of CBD products. The United Nations has had a series of International Drug Control Conventions (treaties of which the US and Canada are part), and while CBD is not specifically listed in the schedules of the Conventions, "extracts" of cannabis are apparently included within Schedule 1, meaning they are prohibited.

Given the controls required by the UN Conventions, the US would be unable to keep its obligations under the treaties if CBD products were de-controlled under federal law. The Federal Controlled Substances Act, moreover, indicates that scheduling decisions will be made in accordance with treaty obligations.  For example, under section201(d)(I) of the CSA, if control of a substance is required under an international treaty or convention in effect on October 27, 1970, the Attorney General is required to impose controls on the substance by placing it under the schedule he deems most appropriate to carry out such obligations. 

The World Health Organization Expert Committee on Drug Dependence is scheduled to review the UN’s classification of CBD, THC, and cannabis in general at its November 2018 meeting, which could lead to a change in the international treaty.

The result of all these different layers of law leave many confused. We expect that the laws will adapt over time to allow for open sales of CBD products, whether or not they also contain THC.  For now, however, the law is full of problems for CBD products and cannabis in general, and we applaud those working to reform the laws for these products that are all around us.

New Cannabis Legislation in Riverside County

Posted by Margolin & Lawrence on October 30, 2018

Last Tuesday, the Board of Supervisors in Riverside County approved an ordinance allowing the following commercial activities starting on 26th December: Testing, Manufacturing, Distribution and Wholesale Nurseries. There is now a 60-day deliberative period regarding the cannabis businesses in Riverside based on the newly approved ordinance. The Board also voted to allow a limited number of dispensaries and cultivators to operate in 2019. Up to nineteen dispensaries and fifty grows will be permitted in unincorporated Riverside County as decided by a 3-2 vote following a public hearing that last nearly four hours. The Board also approved an “Implementation Plan for Retail and Cultivation” uses that is scheduled for process in early January 2019. The proposal process will include pre-registration by interested applicants, and the issuance of a Request for Proposals by the Planning Department. However, there are certain conditions that will be enforced regarding additional taxation and fees associated with each of these activities as determined by the Planning Commission.

DEA Reschedules CBD to Schedule 5

Posted by Margolin & Lawrence on September 28, 2018

By Raza Lawrence and Allison Margolin

On September 28, 2018, the DEA issued a rule announcing that drugs including CBD with THC content below 0.1%  will be taken off of Schedule 1 of the controlled substances schedules, and moved to Schedule 5, which allows CBD products to be sold through traditional pharmacies with a doctor’s prescription, so long as the particular product is first approved by the FDA.  The order also disallows any importing or exporting of CBD products without a permit. 

It is important to note that the ruling is narrow in that it only applies to CBD products with less than 0.1% THC.  However, products with higher THC content could continue to be sold under state law and without federal FDA or DOJ regulation under the Rohrabacher–Farr amendment.  Ironically, the new federal policy is to tolerate sales of CBD products with high levels of THC, but to restrict sales of CBD products with low levels of THC by requiring FDA approval, a huge task in itself. Some sources indicate that it can cost more than $1 billion to bring one FDA-approved product to the market, including approximately $50-840 million to bring treatments through the stages of Basic Research/Drug Development and Pre-Clinical/Translational Research, and approximately $50-970 million to complete the Clinical Trials (Phases 1, 2, and 3).

The new ruling is bad news for anyone hoping to sell CBD with no or low levels of THC and without FDA approval.  Already, in July 2018, the California Department of Public Health ruled that hemp-derived CBD would not be allowed in food or drinks for humans or pets in California. 

CBD products could potentially be sold as edible cannabis products under California state law if the producers obtain commercial cannabis manufacturing licenses from the state and local government, and the products are distributed and sold through outlets with state and local commercial cannabis licenses.  Even if everyone involved complied with California state cannabis laws, they would still be subject to enforcement, punishment and being shut down by the FDA, unless they contain over 0.1% THC, in which case they could be sold under state law with no federal interference.

The Rohrabacher–Farr Amendment would not protect any low- or no-THC CBD distributors, even those who strictly complied with state law, from enforcement actions from the FDA, as Rohrabacher–Farr only restricts the DOJ from interfering with state regulation of medical marijuana.  The FDA is part of the Department of Health and Human Services, not the DOJ, and thus retains the ability to regulate CBD – its regulations trump any state laws relating to CBD under the supremacy clause of the US Constitution. 

It is possible that today’s DEA ruling could later lead to reclassification of all cannabis from a Schedule 1 to Schedule 5 substance, which would mean that all cannabis could fall under the jurisdiction of the FDA and could only be sold through pharmacies with doctor’s prescriptions and must be produced by companies with FDA approval (i.e., large drug companies). 

Since 2009, the FDA has had the authority to regulate tobacco products, which are now controlled by only a few large corporations, as are many other drugs regulated by the FDA.  The same could happen to cannabis.  Individuals and organizations in the cannabis community should lobby the government to prevent this monopolization by ensuring that cannabis is descheduled as a controlled substance.

Earlier this year, the FDA's parent agency stated that CBD has little potential for abuse – hopefully the government's future approach to CBD will follow this lead and remove CBD's schedule 1 classification.

Approval of Cannabis Epilepsy Medicine is Sign of Growing Acceptance

Posted by Margolin & Lawrence on August 17, 2018

This editorial, by Allison Margolin and Raza Lawrence, also appears in the July 25th, 2018 edition of The Daily Journal.

On June 25, the Food and Drug Administration announced that it was approving Epidiolex, a cannabidiol (CBD) oral solution for the treatment of seizures associated with two rare and severe forms of epilepsy. This is the first drug approved by the FDA comprised of an active ingredient derived from marijuana.

The approval is a sign of the growing acceptance of CBD, and cannabis generally, to treat various medical ailments. THC, not CBD, is the primary psychoactive (intoxicating) component of marijuana. But CBD is believed to have its own distinct health benefits for conditions ranging from anxiety to cancer, and has recently exploded in  popularity. CBD-based products seem to be everywhere, including Walmart, although the 9th U.S. Circuit Court of Appeals ruled this year that CBD is properly banned as a controlled substance under federal law, and the FDA warned in its recent press release that it will continue to crack down on “illegal marketing of CBD-containing products with serious, unproven medical claims.”

California’s health department also recently made clear that state law forbids adding CBD products (whether from cannabis or industrial hemp) to any food. Regardless, the FDA’s ruling could open up CBD and cannabis generally to broader acceptance in government and society.

The FDA’s approval contradicts the federal classification of cannabis as a Schedule 1 substance, the same as heroin, which is defined as one with a high potential for abuse and no medical value. The FDA specifically found, as part of its approval of Epidiolex, that CBD has medical benefits that have been supported by rigorous scientific research and clinical studies. Litigants could use the FDA approval to challenge marijuana’s Schedule 1 status in court. Or, reading the tea leaves, the government could re-classify or de-classify marijuana on its own. Under the law, Congress, the president, and the heads of the
Drug Enforcement Administration and FDA would each have the power to remove marijuana from Schedule 1.

What happens next if cannabis is removed from Schedule 1? There are different possible paths. Under one scenario, feared by many in the cannabis industry, cannabis would become regulated by the FDA as a Schedule 2 (or 3 or 4 or 5) controlled substance. Complying with FDA regulations can be extremely expensive and time-consuming, which is why drug companies are all large corporations rather than “mom and pop” operations. The estimated cost of bringing a new prescription drug to market is $2.6 billion.

In California, the cannabis industry has operated for years under an informal system of non-profit “collectives,” with only vague legal guidelines and no regulation. This year, the state is transitioning to a new system of state and local licensing and regulations. California cannabis cultivators, manufacturers, distributors, and retailers are already struggling to comply with the new high taxes and complicated regulations imposed by California. If the FDA were to take over the regulation and licensing, the costs of compliance would likely be much higher, and only those with the deepest pockets would have the resources required to produce and sell cannabis. The costs of compliance would inevitably be passed on to consumers, who would face sky-high cannabis prices similar to those of prescription drugs.

Federal control and regulation of cannabis, however, is not inevitable. Many would prefer the approach taken by proposed federal legislation that removes federal penalties and allows each state to sets its own marijuana policy within its borders, similar to how alcohol is now treated. Under this approach, the FDA would not regulate cannabis like a prescription drug, but could still prevent misleading health claims or misrepresentations on labels, and enforce basic quality standards, as it does for dietary supplements.

Unlike synthetic drugs derived for billions of dollars in corporate labs, cannabis is just a plant. It is not toxic or physically addictive. People who use it for medical purposes can safely and effectively determine and adjust their own doses. States could set reasonable restrictions and regulations on commercial
cannabis as they do with alcohol, but would not need to subject it to the intense scrutiny of prescription drugs.

The approval of Epidiolex is promising to the extent it increases awareness and legitimacy of cannabis as medicine. But it also raises the concerning possibility that all cannabis may soon be regulated like prescription drugs, and controlled by large corporations, rather than by the people and small businesses who grew the industry up from the ground.

[UPDATE] WHERE CAN I GET A DISTRIBUTION LICENSE IN CA?

Posted by Margolin & Lawrence on May 18, 2018

Back in September, we published a blog post titled “Where Can I Get a Distribution License in California.” Now that the ordinances for the majority of jurisdictions in California have been reviewed and somewhat solidified, Margolin and Lawrence presents an updated list on the viable locations for distribution licenses in California.

Meet Us In NYC

Posted by Margolin & Lawrence on May 17, 2018

Cannabis CBD v. THC

Posted by Margolin & Lawrence on March 22, 2018

The cannabis plant contains over 480 elements. Two of them being THC and CBD. Both are ubiquitous in modern day cannabis products, with different benefits and side-effects to each.

California Redefines Volatile Manufacturing

Posted by Margolin & Lawrence on December 1, 2017

Our Los Angeles cannabis attorneys are often faced with questions about which substances count as "volatile solvents" when it comes to cannabis manufacturing. The state has added clarity in the new regulations released on November 17th, which define the solvents for volatile and nonvolatile manufacturing of cannabis extract. You can read the full set of regulations here: regulations on Manufactured Cannabis Safety.

The distinction between “volatile” and “nonvolatile” is relevant to the process of cannabis manufacturing because there are different license types for each type, and some jurisdictions allow one but not the other. Additionally, the zoning and sensitive-use requirements can be different for the two types of cannabis manufacturing.

Cannabis-infused products like marijuana edibles, tinctures, and oils comprise a large part of the legal cannabis industry’s sales, and are only increasing in popularity. A key ingredient of these products is cannabis extract – the pure, often high-THC-content cannabis distillate that can be combined with other products to create goods ranging from weed brownies to CBD bath soaps. To create this distillate, it’s necessary to use chemical solvents to extract the active ingredients from whole marijuana flowers. However, these solvents are often flammable, pressurized chemicals like butane, which, if used improperly during the extraction process, can be dangerous.

To limit potential dangers, California split the activity of cannabis manufacturing into two different categories, distinguished by whether or not they used “volatile solvents,” and placed differing restrictions on the two categories, with additional precautions required for manufacturing operations that used volatile solvents.  In June 2017’s Medicinal and Adult-Use Cannabis Regulation and Safety Act, a “volatile solvent” was defined as a solvent that “is or produces a flammable gas or vapor that, when present in the air in sufficient quantities, will create explosive or ignitable mixtures.”

Cannabis manufacturers who use non-volatile solvents or no solvents at all (e.g. operations that only packaged or labeled goods, or that created cannabis-infused products using distillate purchased from a third party) are treated as “Level 1 Manufacturers,” while manufacturers who dealt with volatile solvents are “Level 2 Manufacturers.” To qualify for a Level 2 Manufacturer operating license, businesses would have to meet a much more strict set of criteria than the Level 1 Manufacturers would.

Since two of the most popular solvents used in the cannabis extraction process – butane and ethanol – counted as volatile solvents by this standard, and relatively few municipalities in California allow for Level 2 cannabis extraction, many were concerned that these regulations would make it too difficult for new small-scale extraction operations to get their businesses up and running. Additionally, some cannabis manufacturers argued that ethanol, a substance that’s food-safe, safe to handle, and is only ignitable as vapor in extremely high concentrations, shouldn’t be treated as “volatile” for the sake of cannabis manufacturing. By responding to these concerns and downgrading ethanol from “volatile” to “nonvolatile,” the Department of Public Health has taken an important step toward making cannabis extraction more accessible to California marijuana businesses.

Locally, the City of Los Angeles will be issuing cannabis licenses for both volatile and non-volatile cannabis manufacturing. Stay tuned for updates for updates, and contact us at info@margolinlawrence.com to speak with one of our LA Cannabis attorneys about the latest on Measure M.

Ask a Cannabis Lawyer: What Is The Legal Status of CBD? (Part 1 of our CBD Series)

Posted by Margolin & Lawrence on September 6, 2017

Our marijuana lawyers are frequently being asked about one particular cannabis derivative: cannabidiol, also known as CBD. The popularity of cannabidiol as used in CBD-only products, which do not contain THC and are non-intoxicating by design, has surged in recent years in the wellness community. In Los Angeles, CBD products aren't just found at dispensaries, but can be bought over the counter at health shops and even a few high-end grocery stores. Given this wide acceptance, our clients often ask: “Do I need a license to sell CBD?” The answer may surprise you.

CBD can be derived from hemp as well as cannabis plants. It is a common misconception that because hemp is non-psychoactive, its derivatives are therefore non-regulated, or that because CBD isn't an intoxicant, its sale isn't subject to existing marijuana laws. In fact, both of these assumptions are wrong: Hemp and CBD are regulated by federal, state, and local law (though few local jurisdictions are currently regulating hemp). In California, the SB-94 bill does not cover hemp; instead, it's regulated by the Food and Agriculture Code, which defers to federal law under the 2014 Farm Bill. For now, the Farm Bill only allows for the cultivation of hemp for research, and also requires registration with the state.

Under federal law, the DEA has issued multiple statements to clarify that, as a cannabis derivative, CBD qualifies as a Schedule I controlled substance, the same as cannabis itself. However, this doesn't mean that CBD is without advocates beyond the state level: the FDA has determined that CBD has beneficial effects, and the World Health Organization is also evaluating the potential health benefits of CBD. You can play a role in shaping CBD policy by participating in the FDA and World Health Organization’s request for comment on CBD by September 13, 2017.

This request was made in the hopes of gaining information on the “abuse liability and diversion” of a number of drugs – in other words, how easy it is for the use of these substances to become dangerous. The official notice listed 17 drugs, with a breakdown of their specific effects and uses. Of those substances, only CBD was deemed by the FDA to have positive qualities. The WHO’s judgment about the potential benefits of this marijuana derivative, informed by the FDA's text and submitted comments, will inform the organization’s recommendations about whether CBD should have international restrictions placed on its use.

In its own way, though, the FDA’s statement may inform drug policy and cannabis law here in America. Stay tuned for part 2 of our Regulating CBD series next week.

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This blog is not intended as legal advice and should not be taken as such. The possession, use, and/or sale of marijuana is illegal under federal law.