Month: September 2019

The Agriculture Improvement Act of 2018 (“2018 Farm Bill”) legalized hemp by removing the crop and its derivatives from the definition of marijuana under the Controlled Substances Act (“CSA”) and by providing a detailed framework for the cultivation of hemp. The 2018 Farm Bill gives the US Department of Agriculture (“USDA”) regulatory authority over hemp cultivation at the federal level. In turn, states have the option to maintain primary regulatory authority over the crop cultivated within their borders by submitting a plan to the USDA.

This federal and state interplay has resulted in many legislative and regulatory changes at the state level. Indeed, most states have introduced (and adopted) bills that would authorize the commercial production of hemp within their borders. A smaller but growing number of states also regulate the sale of products derived from hemp.

In light of these legislative changes, we are presenting a 50-state series analyzing how each jurisdiction treats hemp-derived cannabidiol (“Hemp CBD”). Each Sunday, we summarize a new state in alphabetical order. Today, we turn to Kansas.

In 2018, Kansas legislators enacted the Alternative Crop Research Act (“Act”), which authorizes the cultivation of industrial hemp for research purposes only and is overseen by the Kansas Department of Agriculture (“KDA”). To implement the Act, the KDA issued regulations that went into effect on February 8, 2019.

In May 2019, Governor Jeff Colyer signed into law Senate Substitute for House Bill (“HB”) 2167, which authorizes the commercial sale of hemp and hemp products containing less than 0.3% THC, pursuant to the 2018 Farm Bill, and ensures that hemp and hemp products are no longer treated as controlled substances.

Consequently, the Act was officially renamed the “Commercial Industrial Hemp Act” but will remain in effect until the KDA establishes the commercial production of industrial hemp in the state or a federal plan by the USDA allowing for the cultivation and production of commercial industrial hemp is adopted, whichever occurs first.

With this in mind, the following sections address the current rules under the Act and the future regulations under HB 2167.

State License or Permit Status

• Act: Currently, the KDA requires each individual who is growing, processing, selling and distributing hemp to obtain a license. Note that the rules do not provide whether a license is required to manufacture, sell and distribute Hemp-CBD products. However, in May 2018, Governor Jeff Colyer signed legislation amending the state’s criminal code to exclude CBD from the state’s definition of marijuana, which means that the sale of Hemp-CBD products is authorized if the oil contains no THC.
• HB 2167: Although HB 2167 gives the KDA the authority to monitor and regulate the commercial production of hemp within the state, the new law does not provide whether a license will be required to sell and distribute Hemp-CBD products. The new law is also unclear about whether certain categories of Hemp-CBD products that may be lawfully manufactured, marketed, distributed, or sold in the state. HB 2167 expressly bans Hemp-CBD smokable products as well as teas, liquids, solids, and other hemp products intended for human consumption containing any ingredient derived from hemp and prohibited by the Kansas Food, Drug, and Cosmetic Act. However, the new law also states that it does not explicitly prohibit the use of Hemp-CBD ingredients, such as CBD oil, in such hemp products.

Possession
Kansas does not have Hemp-CBD laws or medical marijuana laws. However, as previously stated, Kansas law removed CBD products free of THC from the state’s definition of marijuana. Unlike CBD-exemption laws enacted in other states, Kansas law permits all adults, not just those with qualified medical conditions, to possess and purchase CBD products containing no THC.

Transportation

• Act: The KDA requires individuals who transport hemp to obtain a research distributor license. However, the rules do not provide whether a license is required to transport Hemp-CBD products that contain THC.
• HB 2167: Neither HB 2167 nor the proposed rules from KDA address this issue.

Marketing/Advertising Regulations

• Act: The Act does not impose restrictions on marketing or advertising of hemp or hemp products under the research program.
• HB 2167: The new law bans the marketing of all Hemp-CBD products prohibited in the statute and listed above.

In enacting HB 2167, Kansas showed a desire to provide the Kansas hemp community with an opportunity to fulfill its economic potential. However, to reach this objective, the state will need to clarify its policies regarding the manufacture, distribution, marketing and sale of Hemp-CBD products.

Stay tuned to the Canna Law Blog for developments on hemp and Hemp CBD in Kansas and other states across the country. For previous coverage in this series, check out the links below:

• Alabama
• Alaska
• Arizona
• Arkansas
• California
• Colorado
• Connecticut
• Delaware
• Florida
• Georgia
• Hawaii
• Idaho
• Illinois
• Indiana
• Iowa

A first(!): Charlotte’s Web Holdings, Inc. (“CWB Holdings”), operated by the famed Stanley brothers, has secured the first-ever patent for a hemp cultivar in the United States. CWB Holdings is now the proud owner of a plant patent for “a new and distinct hemp cultivar designated as ‘CW2A.’” Patent documents describe CW2A as a hardy plant, resistant to cold, and capable of producing up to 6.24% CBD and only 0.27% THC (which is below the 0.3% threshold that separates hemp (legal) from marijuana (illegal) under the current federal scheme created by the Controlled Substances Act). The patent was granted on July 2, 2019 to the patent’s listed inventor, Co-Founder and Chairman of CWB Holdings, Joel Stanley.

It appears that CWB Holdings filed for the CW2A patent in May 2018, about half a year before the 2018 Farm Bill was signed into law by President Trump this past December. Because the patent is for a hemp cultivar within the threshold, CW2A will be legal to grow under the 2018 Farm Bill.

A plant patent is an intellectual property right that protects the key characteristics of a new and unique plant from being copied, sold, or used by others. A plant patent, as opposed to the broader utility patent, is only good for legal protection against a competitor growing the same cultivar from a clone. Despite its pretty narrow teeth, this is still groundbreaking news as it’s the very first plant patent for a cultivar of hemp issued in the United States. And, if the patent’s description of CW2A is correct, the plant would be ideal to curb the challenge that hemp farmers face of ensuring that the hemp crop doesn’t rise above that 0.3% THC threshold (or as industry-insiders say, “get hot”). To explain: typically, plants originally bred for other hemp products (seed, oil, fiber) is usually what is sourced for CBD products. These plants already yield about 0.3% THC, but you have to use a lot of plants, and cannabis is also great at sucking toxins from the soil. Therefore, a hemp cultivar like CW2A that is supposed to produce twice as much CBD by dry weight is a lot more beneficial to use. That’s why industry insiders seem to agree that CWB Holdings’ newest patent could be the start of its capturing a commanding share of the growing CBD market.

CEO of SIVA Enterprises and member of the California Bureau of Cannabis Control’s Cannabis Advisory Committee, Avis Bulbulyan, stated, “A lot of brands out there have catchy logos and catchy names, but the product inside is generic. There’s nothing proprietary about it.” In contrast, what CWB Holdings has secured is “huge” and “something tangible.”

It’s also entirely possible that we will learn of other patent filings soon. Utility patents, which cover seeds as well as complex chemical compositions, do not become publicly available under about eighteen months after their filing date. If CWB Holdings had filed for a utility patent around the same timeframe, that information won’t be public for a little while longer. We’ll be sure to check in and report back if it CWB Holdings is able to secure another win for its intellectual property portfolio.

Back in March, former Food and Drug Administration (“FDA”) Commission, Scott Gottlieb, explained it would take several years for the agency to come up with rules that would legalize the use of hemp-derived cannabidiol (Hemp-CBD) in food products, unless Congress stepped in.

Last week, both chambers showed they are not interested in waiting around for the FDA to go through the traditional rulemaking process and pressured the agency to proceed with the federal legalization of these products.

House of Representatives

Last Thursday, a collation of twenty-six House members sent a letter to the FDA, urging the agency to develop a path for the lawful marketing of Hemp-CBD products.

The letter provides that while lawmakers appreciate the FDA’s “proactive approach” towards pursuing a legal pathway for the production and sale of Hemp-CBD products, the agency’s current regulatory posture on the matter has created significant regulatory and legal uncertainty for stakeholders.

Specifically, the signatories explained that:

Given the widespread availability of unregulated CBD products, growing consumer demand, and the expected surge in hemp farming in the near future, we believe that FDA must quickly act to provide legal clarity and to establish a regulatory framework that supports this exciting new opportunity.”

Moreover, the lawmakers are hoping that regulatory certainty will provide stakeholders access to banking services and open up new economic opportunities for the industry while at the same time protect consumers.

Lastly, the House members pressed the FDA to consider issuing an interim final rule to establish clear regulatory framework for Hemp-CBD as a dietary supplement and food additive and asked the agency to clarify that while it is developing its rules it is limiting its enforcement discretion towards CBD companies that are making egregious medical claims about their products.

Senate

On the same day the coalition’s letter went out to the agency, Senate Majority Leader Mitch McConnell convinced the Senate Appropriations Committee to incorporate provisions into an agriculture spending bill that directs the FDA to issue enforcement guidelines for Hemp-CBD products.

The spending reports mandates the FDA to clear a path for the lawful marketing of these products within 120 days. This “policy of enforcement discretion” towards CBD products is believed to clarify rules so banks will provide banking services to CBD companies.

According to the language of the provisions, the FDA would be required to submit a report to the Senate Appropriations Committee within 90 days, detailing its “progress toward obtaining and analyzing data to help determine a policy of enforcement discretion, and the process in which CBD meeting the definition of hemp will be evaluated for use in products.”

Once approved, these provisional guidelines would remain in effect until the agency finalizes the regulatory process to enable Hemp-CBD manufacturers to share safety data through existing FDA notification procedures to be fully compliant with federal law and policy.

Overall, both of these effort by U.S. lawmakers show promise in soon forging a path for the lawful sale and marketing of Hemp-CBD products. In pressuring the FDA, both houses acknowledge that the limitations on the marketability of Hemp-CBD has been an ongoing source of frustration that must come to an end to enable the crop and its derived products to meet their economic potential.

Last week, the Federal Trade Commission (“FTC”) issued warning letters to three unnamed companies that advertised their CBD-infused products as treatments or cure for serious medical conditions.

These warning letters are nothing new. As we have explained before, making medical claims about CBD-infused products is the perfect way of falling under the scrutiny of federal authorities.

What may be surprising to some, however, is that the FTC sent out these letters, not the Food and Drug Administration (“FDA”). The regulatory authority of the FDA and of the FTC overlaps greatly.

Pursuant to the Food, Drug & Cosmetic Act (“FDCA”), the FDA has regulatory authority over labels and labeling and is to ensure that consumer products (foods, dietary supplements, cosmetics, tobacco products and drugs) are not misbranded. Generally, misbranding consists of false and misleading labeling. On the other hand, the FTC is tasked under the Federal Trade Commission Act (“FTC Act”) with regulating “advertising” to protect the public from unfair and deceptive claims in any medium.

The distinction between labeling (including packaging) and advertising is not always clear. Over the years, some courts have expanded the authority of both agencies by interpreting “labeling” to include products sold on the Internet, especially if purchased directly from a website. This expansion of power has blurred the lines between the FDA and FTC’s jurisdiction. In addition, the agencies have increased collaboration in regulating the advertising of food and dietary supplement products, making those jurisdictional lines foggier.

A perfect example of this interagency collaboration is reflected in the March 28 warning letters that the FDA and the FTC sent jointly to three CBD companies: Advanced Spine and Pain, LLC; Nutra Pure LLC; and PotNetwork Holdings, Inc..

The growing symbiotic relationship of these agencies has resulted in heightened regulatory scrutiny of consumer products, including that of CBD-infused products. Of course, with increased scrutiny comes increased financial risks in defending against those enforcement actions. In addition, the public nature of these warning letters naturally opens the door to potential consumer class action claims and securities violations – take the example of Curaleaf, here and here.

Since the beginning of the year, the FDA and the FTC have issued a total of four warning letters to CBD companies, which suggests that the agencies are acknowledging the growth of the CBD industry and that more enforcement actions are sure to come.

Consequently, and given the lack of distinction between labeling and advertising and the overlap of regulatory authority between the FDA and the FTC, CBD stakeholders, particularly manufacturers, distributors and marketers, should:

1. not make health claims about the therapeutic value of their products;
2. closely monitor both agencies’ enforcement actions (i.e., warning letters) and regulations; and
3. develop compliance programs to (i) ensure that their marketing efforts align with federal guidelines and (ii) ensure that their compliance team is familiar with the FDA and the FTC’s regulations to successfully implement these guidelines.

For more information on FDA and FTC’s guidelines and how to mitigate your risk of enforcement action, please contact our team of regulatory attorneys.

The Agriculture Improvement Act of 2018 (“2018 Farm Bill”) legalized hemp by removing the crop and its derivatives from the definition of marijuana under the Controlled Substances Act (“CSA”) and by providing a detailed framework for the cultivation of hemp. The 2018 Farm Bill gives the US Department of Agriculture (“USDA”) regulatory authority over hemp cultivation at the federal level. In turn, states have the option to maintain primary regulatory authority over the crop cultivated within their borders by submitting a plan to the USDA.

This federal and state interplay has resulted in many legislative and regulatory changes at the state level. Indeed, most states have introduced (and adopted) bills that would authorize the commercial production of hemp within their borders. A smaller but growing number of states also regulate the sale of products derived from hemp.

In light of these legislative changes, we are presenting a 50-state series analyzing how each jurisdiction treats hemp-derived cannabidiol (“Hemp CBD”). Each Sunday, we summarize a new state in alphabetical order. Today, we turn to Iowa.

On May 13, 2019, Iowa Governor Kim Reynolds signed into law Senate File 599, aka the Iowa Hemp Act (the “Act”). The Act requires Iowa’s Department of Agriculture and Land Stewardship (“DALS”) to prepare and submit a plan for hemp cultivation to the USDA. DALS will assume primary authority over the “production of hemp” after the USDA approves Iowa’s state plan. Under the Act, “produce” means “to provide for the planting, raising, cultivating, managing, harvesting, and storing a crop.” DALS will issue hemp licenses and the Act outlines the application process and licensee qualifications.

A hemp licensee is exempt from criminal offenses for “producing, possessing, using, harvesting, handling, manufacturing, marketing, transporting, delivering, or distributing hemp” so long as the licensee is in compliance with the Act and DALS subsequent regulations. DALS will likely issue regulations elaborating on what is required to produce, process, manufacture, market, transport and deliver hemp and hemp products.

The Act defines hemp products as “an item derived from or made by processing hemp or parts of hemp, including but not limited to any item manufactured from hemp , including but not limited to cloth, cordage, fiber, food, fuel, paint, paper, particleboard, plastic, hemp seed, seed meal, or seed oil. Hemp product does not include any of the following: (1) An item or part of an item with a maximum delta-9 tetrahydrocannabinol concentration that exceeds three-tenths of one percent on a dry weight basis. (2) Hemp seed that is capable of germination.”

The Act allows for the retail sale of a hemp product if the hemp was “produced in this state or another state in compliance with the federal hemp law or other applicable federal law.” In addition, “[t]o the extent consistent with applicable federal law, a derivative of hemp, including hemp-derived cannabidiol, may be added to cosmetics, personal care products, and products intended for human or animal consumption. The addition of such a derivative shall not be considered an adulteration of the product, unless otherwise provided in applicable federal law.” Reading between the lines, it sounds like the Act mandates that Iowa follow the FDA’s guidance in determining what hemp products will be permitted for sale within the state’s borders.

Though the Act seems to allow for the sale of at least some Hemp-CBD products, the sale of Hemp-CBD remains risky in Iowa until the USDA approves of DALS’s state plan. Don’t believe me? Then take Iowa Attorney General Thomas Miller’s word for it. AG Miller issued a Statement on Hemp and CBD Products after Governor Reynolds signed the Act into law. Miller’s position on the matter is summed up nicely in this particular passage of that Statement:

The only provision of the Iowa Hemp Act that can be currently implemented is Section 3, which requires the [DALS] to prepare a state plan to be submitted to the USDA. Per Section 18 of the Act, the other provisions of the [Act] cannot be implemented until after the USDA approves Iowa’s state plan. Therefore, at present time, no one can grow, manufacturer, or process hemp in Iowa, outside of the two mCBD manufacturers licensed by the Iowa Department of Public Health.

I need to briefly interrupt AG Miller to note that “mCBD manufacturers” refers to Iowa’s limited Medical Cannabidiol Act, which allows patients to legally possess “medical cannabidiol” if they have a qualifying condition and obtain a registration card based on a recommendation from a healthcare professional. See Iowa Code Ann. § 124E et seq. OK, now back to the statement:

In addition, the coordinating amendments, many of which remove hemp and hemp products from the Uniform Controlled Substances Act, do not become effective until after the USDA approves Iowa’s state plan. Until the coordinating amendments of the Iowa Hemp Act are effective, any product sold over-the-counter containing CBD or THC technically falls within the definition of marijuana and is considered a Schedule I controlled substance.