Earlier this month (August 2019), the Washington State Department of Agriculture (WSDA) released a statement regarding the use of CBD as a food ingredient, which some reported as an act by the state to suddenly “ban all CBD-infused food and drinks.” However, the WSDA has never permitted the addition of CBD to food products, as such action would fly in the face of existing (and non-existent) federal regulations and create additional problems for both state regulators and cannabis food industry participants.

Nevertheless, despite these regulations, and in light of the incredible consumer market for CBD across the U.S., many Washington state cannabis businesses still add CBD to food and beverage products and market them broadly. Such food processors, warehousers, distributors, and resellers who add CBD to their products – as well as those thinking about entering the market – should be well aware of the state of the laws applicable to their business, the risks and liabilities involved in participating in the market both now and in the future, and should also contact an experienced attorney to mitigate those risks regardless of the size or scope of your cannabis food business.

I.   The WSDA & Federal Food Law

The WSDA’s Food Safety Program requires food businesses in Washington State, including those which produce, manufacture, distribute, or resell food, to obtain a license and comply with the food processing and handling rules applicable to their business. In Washington, the WSDA acts pursuant to both Title 21 of the Code of Federal Regulations and also state law, as set forth in the Revised Code of Washington (RCW) and Washington Administrative Code (WAC).

Uniformity with federal law provides many advantages to a state department of agriculture, as well as food businesses. Legal clarity provides an essential level of stability and predictability for businesses participating in any industry, especially one as highly regulated as cannabis. Uniformity with federal law also allows Washington state food businesses to participate seamlessly in interstate and international commerce. Additionally, uniformity allows Washington state to take advantage of partnerships and other funding opportunities with the federal government, such as, as relevant here, the FDA-manufactured food regulatory standards program and Washington state’s rapid response team program.

II.   Section 303 of the Food, Drug, & Cosmetic Act

Because the WSDA has adopted the rules set forth in Title 21 of the Code of Federal Regulations, businesses that operate under a Washington State Food Processor License may only utilize food ingredients approved by the U.S. Food and Drug Administration (FDA) and must comply with all applicable federal rules and requirements. CBD is not (yet) one of these products. Indeed, the FDA has been slow to regulate CBD, resulting in mass confusion and even some daring corporate acts – such as CVS, Walgreens, and Rite Aid announcing their intent to begin stocking CBD-containing products ahead of federal regulation.

Plainly speaking, under section 301(ll) of the Federal Food, Drug, and Cosmetic Act, it is currently illegal to introduce into interstate commerce a food to which CBD or THC has been added. The regulation applies to a) any food to which a substance, which substance is an active ingredient in a drug product (remember Epidolex?), has been added – including animal food and feed, and b) which is introduced into interstate commerce (which is a variably defined term, but generally refers to any commercial transaction that crosses state lines or otherwise affects the interests of multiple states). While exceptions exist, the FDA has expressly stated that neither THC nor CBD fall into any of the exceptionable categories.

III.   Hemp Exceptions to Section 303

Once a substance is prohibited under section 301, businesses may only add the substance to food if the FDA has issued a regulation approving the use of the substance in the food. To date, no such regulation has been issued with respect to CBD.

 However, the FDA has evaluated and concluded three specific hemp and hemp-derived ingredients are generally recognized as safe (GRAS) in human food only (not in animal food) and has issued the applicable notices exempting these products from section 301. They are hulled hemp seed, hemp seed protein powder, and hemp seed oil. Because these products are deemed GRAS, they can be legally added and marketed in human foods for the uses described in the notices submitted to the FDA during the evaluation. Some of the intended uses include utilizing them as sources of protein, carbohydrates, oil, and other nutrients to beverages (juices, smoothies, protein drinks, plant-based alternatives to dairy products), soups, dips, spreads, sauces, dressings, plant-based alternatives to meat products, desserts, baked goods, cereals, snacks, and nutrition bars. Businesses utilizing these ingredients must comply with all other rules and requirements, including declaring cannabis-derived ingredients by name on the ingredient list.

IV.   Risks, Liability, and Minimizing Risks & Liabilities

As explained above, the restrictions on adding CBD to a food product apply to food processors, warehousers, distributors, and resellers, which means that all such businesses and those contracting or otherwise dealing with such businesses should not only understand the federal and state laws which apply to them but also understand the assessment of liability among separately acting companies and individuals.

Still, rules are only effective if they are enforced, and the FDA has been slow to take enforcement action with respect to CBD businesses. In deciding whether or not to take legal action against a CBD business, the FDA considers several facts, including the agency’s own available resources and the threat to public health. As a result, the FDA has issued only four such warning letters in all of 2019:

  • Curaleaf, Inc. (July 22, 2019): Violations for 1) Improper health claims (which means “stating products may be used in the diagnosis, cure, mitigation, treatment, or prevention of disease and/or intended to affect the structure or any function of the body.”); 2) Claims of being a dietary supplement (note: the FDA has already expressly rejected CBD as a dietary supplement); 3) Unapproved new animal drugs (meaning, “intended for use in the mitigation, treatment, or prevention of diseases in animals”).
  • Advanced Spine and Pain, LLC (March 28, 2019): Violations for 1) Improper health claims (which means “stating products may be used in the diagnosis, cure, mitigation, treatment, or prevention of disease and/or intended to affect the structure or any function of the body.”); 2) Unapproved new animal drugs (meaning, “intended for use in the mitigation, treatment, or prevention of diseases in animals”); 3) Unsubstantiated advertising claims (which means the business failed to “possess competent and reliable scientific evidence, including, when appropriate, well-controlled human clinical studies, substantiating that the claims are true at the time they are made.”)
  • Nutra Pure LLC (March 28, 2019): Violations for 1) Improper health claims (which means “stating products may be used in the diagnosis, cure, mitigation, treatment, or prevention of disease and/or intended to affect the structure or any function of the body.”); 2) Unsubstantiated advertising claims (which means the business failed to “possess competent and reliable scientific evidence, including, when appropriate, well-controlled human clinical studies, substantiating that the claims are true at the time they are made.”)
  • PotNetwork Holdings, Inc. (March 28, 2019): Violations for 1) Improper health claims (which means “stating products may be used in the diagnosis, cure, mitigation, treatment, or prevention of disease and/or intended to affect the structure or any function of the body.”); 2) Unsubstantiated advertising claims (which means the business failed to “possess competent and reliable scientific evidence, including, when appropriate, well-controlled human clinical studies, substantiating that the claims are true at the time they are made.”)

Every one of these warning letters, including the letters issued in 2018, alleges that the business made improper health claims. It should be absolutely clear to all businesses that no business may, and the risk of adverse enforcement action increases significantly if a business does, make health claims with respect to CBD and/or its efficacy in treating, mitigating, or in any way addressing health issues – whether they be physical, emotional, or otherwise.

V.   Conclusion

In short, the WSDA’s statement does not change – or clarify – the state of the law applicable to CBD as a food additive. With the exception of the GRAS identified above, the federal government has been slow to regulate CBD. And because the WSDA has adopted Title 21, Washington state is waiting on its cue from the federal government to begin enforcing federal regulations, developing its own state regulations.

Despite these legally murky waters, the risks and liabilities applicable to all cannabis businesses should be well understood and intelligently weighed with the assistance of an experienced attorney, especially before entering the food or beverage market.

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In the third installment in our three-part series: “Exploring Issues in Cannabis and Bankruptcy,” we explore what the two recent decisions in Blumsack and Hacienda mean for creditors in the cannabis industry and also what rights are available to lenders and marijuana financiers in the bankruptcy context.