Author: wnnadmin

Take Your Hemp or CBD Company Public on the TSX

Banking, intellectual property, food and beverage (and cosmetics), international trade, domestic trade, state laws, ag production contracts, etc., etc. When it comes to industrial hemp, the 2018 Farm Bill upended all of these things. Our cannabis business lawyers have been busy advising a large number of new hemp and hemp-CBD businesses getting in on the fray, as well as some large and well-established companies exploring options in the space. All told, the amount of private capital flowing into hemp and hemp-CBD is extraordinary. And public money is on the way.

Prior to federal legalization of hemp last December, a few pioneering hemp companies had gone public. These companies acquired listings on secondary Canadian exchanges like the CSE, which is an alternative stock exchange with simplified reporting requirements and reduced barriers to listing. That exchange takes U.S. marijuana companies, too, and there are quite a few of them these days. The CSE caters to micro cap and emerging companies and it does not have the restrictive policies of the old-guard TSX (and TSXV) which is the primary Canadian exchange (and the eighth largest in the world, by market cap). Unlike the CSE, the TSX / TSXV does not allow for the listing of companies invested in activities which violate U.S. law with respect to cannabis.

Still, a lot of companies would like to be listed on the TSX / TSXV. While the listing requirements are intensive by comparison, issuer opportunities are more expansive on everything from international institutional investment to specialized indices to overall visibility. Given all of that, it was interesting last month when we got word from a multi-national Canadian law firm we work with that TMX Group had advised its lawyers that the TSX / TSXV is open to the listing of US hemp and CBD Issuers that operate in states where such operations are legal.

The TSX / TSXV is apparently taking the position that this is not a change in policy, as an issuer must still satisfy the exchange that the issuer complies with all applicable laws in the jurisdictions in which it operates. However, the exchange is now generally satisfied that Hemp / CBD activities are now legal in the US at the federal level in light of the 2018 Farm Bill. It seems unlikely that the TSX / TSXV will issue a formal notice on this development (given its position that it has not changed its policy), but we think the exchange got it right this time.

So what does this mean for U.S. hemp companies? More possibilities. More reach. More access to institutional capital. More legitimacy. More visibility. We may also start seeing certain companies divest themselves from marijuana entirely in favor of hemp, and we may see a rash of uplisting in the near future. As far as major U.S. exchanges, like the NYSE and Nasdaq, we may see some northern influence with respect to those exchanges’ policies on the acceptance of hemp-only and CBD-only listings. To date, those exchanges have only agreed to list Canadian cannabis producers, but with native companies like Walgreens moving into the CBD space, it’s only a matter of time until we see a U.S. hemp-co listing.

The U.S. exchanges should be put to a decision very soon, but for now the TSX / TSXV joins the CSE as wide open for U.S. hemp and CBD companies operating as per the 2018 Farm Bill.

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The TTB Clarifies Its Position on Adding CBD to Alcoholic Beverages

Last week, the U.S. Alcohol and Tobacco and Trade Bureau (“TTB”), which regulates the alcohol industry, released new information regarding the use of hemp-derived ingredients in the formulation of alcoholic beverages. The industry circular came as a response to numerous inquiries from the alcohol industry about whether alcoholic beverages containing cannabidiol (“CBD”) derived from hemp (“Hemp-CBD”)—which was legalized under the 2018 Farm Bill—may be produced.

The overall message of the circular confirms the conclusion we reached a few months ago, that the TTB will not currently approve the use of Hemp-CBD in the formulation of wine, beer and liquor.

Although the TTB oversees the formulation of alcoholic drinks, the agency works closely with the Food and Drug Administration (“FDA”) in determining whether the ingredients added to those beverages are safe for consumption and whether their use is lawful under the Food, Drug & Cosmetic Act (“FDCA”). Indeed, the FDA is tasked with protecting public health by ensuring that foods and drinks introduced into interstate commerce are safe.

As we previously discussed, any substance that is intentionally added to food (including drinks) is subject to FDA premarket review and approval, unless the substance is generally recognized as safe (“GRAS”). Because the FDA has yet to approve CBD (including Hemp-CBD) as a food additive, CBD-infused drinks are deemed unsafe under the FDCA. Moreover, the FDA deems the use of hemp-CBD-infused foods and drinks as unlawful because CBD has been approved in the treatment of epilepsy (Epidiolex); and therefore, cannot be concurrently marketed as a food. Consequently, the FDA treats Hemp-CBD infused alcoholic beverages as unsafe and unlawful under the FDCA.

Given its deference to FDA guidelines, the TTB has determined that, at this time, it will not approve formulas of alcoholic beverages infused with Hemp-CBD. In addition, the agency has decided that it will return for correction any applications for formulas containing “hemp” ingredients.

However, the TTB will continue to accept and review applications for alcoholic beverages derived from parts of the hemp plant that do not contain CBD, such as hulled hemp seeds and hemp seed oil—both of which have been deemed GRAS. Such formulas will be approved if the applicants successfully demonstrate, through laboratory analyses of hemp ingredients, that the ingredients are not controlled substances.

In the circular, the TTB left open the possibility that formulas containing hemp-derived CBD could be approved down the line if the FDA determines that Hemp-CBD could be lawfully marketed in food products. Nevertheless, alcohol companies would still have to submit formula applications to the TTB before selling the products.

The agency further declared that it will closely monitor FDA actions and guidance on CBD as it continues to review its existing policies. This statement most certainly refers to what will come out of the public hearing the FDA will be holding on May 31, during which stakeholders will share their thoughts on potential pathways by which CBD products may be legally sold and marketed.

So for now, members of the alcohol industry who want to lawfully enter the booming CBD market will need to stick to hemp seed ingredients which, as we just explained, are the safest path through this booming market. For more information on this issue, feel free to reach out to our team of cannabis and CBD attorneys.

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Hemp Seed Ingredients: A Safe Path through the CBD Market?

As we previously explained, under the Food, Drug, and Cosmetic Act (“FDCA”), any substance that is intentionally added to food (including drinks) is a food additive. A food additive is subject to premarket review and approval by the Food and Drug Administration (“FDA”), unless the substance is generally recognized as safe (“GRAS”) by qualified experts under the conditions of its intended use.

Because the FDA has yet to approve CBD (including CBD derived from hemp) as a food additive, CBD-infused foods are deemed unsafe under the FDCA. But what about other hemp-derived ingredients free of CBD?

On December 20, 2018, the FDA completed its evaluation of three GRAS notices issued by Fresh Hemp Foods, Ltd. for hemp seed ingredients and concluded that (1) hulled hemp seed, (2) hemp seed protein powder, and (3) hemp seed oil can be lawfully marketed in human food.

According to Fresh Hemp Foods, Ltd.’s notices, hemp seeds do not naturally contain tetrahydrocannabinol (“THC”) or CBD. However, the hemp seed ingredients subject to these GRAS notices contained trace amounts of THC and CBD, which was likely caused by the seed’s contact with other parts of the plant during harvesting and processing. The FDA’s response to the GRAS notices (“Response”) suggests the agency does not take issue with very small quantities of CBD and THC in food ingredients. In fact, in its cannabis and cannabis-derived product Q&A, the agency explained that the three GRAS hemp seed ingredients could be legally marketed in human food, and thus, lawfully sold in interstate commerce.

However, in its Response, the FDA stated that all hemp seed ingredients are not inherently GRAS under 21 CFR 170.35. The agency clarified this point in its Q&A by stating that the GRAS conclusions could apply to hemp seed ingredients marketed by other companies, so long as (1) the ingredients are manufactured in a way that is consistent with the notices; and (2) they meet the listed specifications, including but not limited to the same specific use of the ingredients in food.

Some of the intended uses for these hemp seed ingredients include adding them as source of protein, carbohydrates, oil, and other nutrients to beverages, soups, dips, spreads, sauces, dressings, plant-based alternatives to meat products, desserts, baked goods, cereals, snacks and nutrition bars.

Therefore, these GRAS notices suggest that companies may lawfully add any of the three hemp seed ingredients to food products so long as their products are:

  1. intended for human consumption;
  2. manufactured in a manner that is consistent with the GRAS notices;
  3. contain no more trace amounts of THC and CBD than those found in the GRAS hemp seed ingredients;
  4. meet other specifications found in the notices; and
  5. comply with all relevant laws and regulations regarding food under the FDCA, including but not limited to good manufacturing practices and labeling requirements.

More and more CBD companies are jumping on the hemp-seed-bandwagon as it can afford a safer path to entering the booming “CBD” market. If you would like to learn more about this alternative track, do not hesitate to contact our team.

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