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.

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.

New York State Releases Report on Recreational Cannabis

Posted by Margolin & Lawrence on July 13, 2018

With a recent study, the state of New York signaled receptiveness to the possibility of legalizing cannabis for recreational use. Specifically, the report, commissioned by Governor Cuomo, recommends that adults be allowed to legally consume marijuana. While the study has yet to be finalized by the New York State Department of Health, its announcement indicates that New York is planning to embrace the marijuana industry to the same extent that states like California and Colorado have, switching from a relatively restrictive medical-only marijuana program to a system which legalizes the recreational use of cannabis. Given the size and influence of New York State’s population and economy, this shift would have major implications for the status of cannabis in the nation at large.

Currently, New York State’s regulations only allow marijuana to be legally used for medical purposes. Additionally, only 10 companies are licensed to operate as medical marijuana suppliers, a restriction with the potential to greatly limit patients’ access to marijuana and drive prices up. Further, patients aren’t even allowed to smoke marijuana – as of December 2017, the drug can only be legally taken in the form of cannabis extracts like oils, tinctures, and chewable tablets. According to the New York Times, these restrictions were initially put in place by Cuomo, out of concern that marijuana would become a “gateway” drug leading to use of other illicit substances. Therefore, this study, with its conclusion that marijuana (even when smoked) is not harmful for adult recreational use, indicates a major pivot on the governor’s part when it comes to legalization.

This shift may be due to the upcoming election for the governorship, where Cuomo’s most prominent challenger, Cynthia Nixon, has made marijuana legalization a central campaign issue. Nixon has positioned herself as even more pro-legalization than Cuomo, calling for a fully regulated and taxed recreational marijuana industry in New York as well as a statewide program to expunge past marijuana convictions. Therefore, whichever candidate wins the governorship, it seems likely that New York State will continue to liberalize its cannabis regulations. Together with New York City moving to limit marijuana arrests, this indicates that, while New York may not have a full recreational cannabis industry for some time, the region’s political climate has shifted significantly against the restrictive laws which are currently in place.

News: Ninth Circuit Hears Medical Cannabis Case

Posted by Margolin & Lawrence on April 17, 2018

Just last week, on March 29th, a three-judge panel for the Ninth Circuit Court of Appeals held a special setting at the University of Idaho College of Law. Judges Richard Tallman, N. Randy Smith, and Morgan Christen considered the case of Michael Assenberg v. Whitman County (Case No. 15-35757). Assenberg was appealing the district court’s summary judgment in an action against Whitman County, the Sheriff’s Office, Sheriff Brett Myers, and the Quad Cities Drug Task Force. Assenberg alleged that the search of his Colfax home for marijuana and his subsequent arrest violated his rights under the Fourth Amendment of the U.S. Constitution.

In 2011, law enforcement conducted a raid on his home, where Assenberg was running a medical marijuana dispensary. According to Assenberg, the raid came about after a confidential informant posing as a medical marijuana patient visited his dispensary. The Whitman County sheriff and Quad Cities Task Force seized approximately one hundred marijuana plants and Assenberg was charged with four felonies. However, the charges were later dropped in Whitman County Superior Court after it became clear the marijuana was stored incorrectly by the county.

Federal Cannabis Update: 2018 Spending Bill Keeps Rohrabacher-Blumenauer Amendment

Posted by Margolin & Lawrence on March 27, 2018

Last week, despite controversy, criticism from both sides of the aisle, and talk of a veto, President Trump agreed to sign the federal government’s omnibus spending bill for 2018. To the relief of many in the legal cannabis industry, the spending bill retains a provision known as the Rohrabacher-Blumenauer (or Rohrabacher-Farr) amendment, which provides limited protection from federal prosecution for state-level legal cannabis activity.

Given both Trump’s and Attorney General Jeff Sessions’ tough talk on drugs and threats to crack down on the cannabis industry, the continued presence of this amendment is a silver lining for those anxious about the future of legal cannabis. While this won’t mean a change in the federal treatment of marijuana – the amendment has been included in every spending bill since 2014 – it does indicate that the government intends to keep on its current course with regard to cannabis, as the provision has to be renewed every year to remain in effect.

Likewise, though the actual protections afforded by the Rohrabacher-Blumenauer amendment are limited, its being signed into law was, and remains, an important indication of the federal government’s shift in attitude regarding cannabis: as the LA Times reported following the provision’s first inclusion in the spending bill, “Congress for years had resisted calls to allow states to chart their own path on pot. The marijuana measure, which forbids the federal government from using any of its resources to impede state medical marijuana laws, was previously rejected half a dozen times.” In this light, the amendment was a notable pivot from a top-down to a state-level approach to cannabis regulation.

California cannabis consumers and business owners shouldn’t get too comfortable, though: not only does the amendment not change anything about the federal government’s cannabis policy in and of itself, its terms only apply to medical marijuana, not recreational cannabis. So far, the government has rejected proposed amendments that would grant recreational cannabis operations the same protection from federal intervention. For the time being, California cannabis business owners’ best bet is to stay in full compliance with state and local law as the federal situation develops.

Ask A Cannabis Trademark Lawyer: How Do I Apply For A State Trademark?

Posted by Margolin & Lawrence on January 9, 2018

 As of January 1st, 2018, the long wait is over: cannabis business owners can apply for California state trademarks. The application form can be obtained here: http://bpd.cdn.sos.ca.gov/ts/forms/tm-100.pdf. Because cannabis is still federally illegal and cannabis products themselves cannot be trademarked, this is a viable avenue for many California cannabis brands that will protect your business marks within the state. You can read our prior post about USPTO Trademarks here.

According to the website for the Office of the California Secretary of State:

“Beginning January 1, 2018, customers may register their cannabis-related Trademark or Service Mark with the California Secretary of State's office so long as:

1.The mark is lawfully in use in commerce within California; and 

2.Matches the classification of goods and services adopted by the United States Patent and Trademark Office.  

If the application submitted to register a Trademark or Service Mark is found deficient, the application will be returned to the registrant for correction.

Note: Not all cannabis-related products can be registered under current law due to the inability to meet federal classifications.”

This means that in order to obtain your state marks, you must be lawfully using the marks in commerce at the time of the application. Therefore, you will need to be licensed in compliance with SB 94,  both at the local and state level, before you’re eligible for trademark approval. Otherwise, if you claim an unlicensed use, you may run into issues with the Secretary of State. Further, once your license is obtained, you must also show that you’re making actual, bona fide use of the trademarks on your products in the stream of commerce. That means that customers are identifying you by your brand when they purchase your goods or services in the marketplace.

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.