Joseph Kelley III; Offit Kurman.

Bartenders are mixing it into cocktails. Professional athletes are using it to treat injuries. Mondelez International—the owner of Oreo, Ritz Crackers and other billion-dollar food and beverage brands—is considering adding it to snacks.

CBD is everywhere. From upscale coffee shops to the shelves of major retailers such as CVS and Walgreens, products containing the compound can be purchased across the United States.

But despite its proliferation in the marketplace, CBD continues to generate confusion among consumers—and debate among state and federal lawmakers. Moreover, its cultivation, distribution and use raise complex legal questions and uncertainties.

What Is CBD?

CBD is short for cannabidiol, one of over myriad chemical compounds (called cannabinoids) found in cannabis plants. Cannabis is commonly referred to as “marijuana” or, outside of drug-related contexts, “hemp.” Alongside tetrahydrocannabinol (THC), cannabidiol is one of the primary extracts of cannabis.

THC, CBD and other cannabinoids induce certain physical and psychoactive responses in the human body. These chemicals work by interacting with receptors in the body's endocannabinoid system, which is partially responsible for appetite, memory, pain tolerance and other physiological processes.

When people discuss the effects or supposed health benefits of cannabis, they are almost always referring to the effects of THC or CBD. However, while the two compounds share some medical and recreational applications, and possess an almost identical chemical structure, they affect the body in different ways. THC is psychoactive; it alters brain functions. CBD, on the other hand, does not seem to impact users' perception. In other words, THC will get you “high”—CBD will not. In fact, there is an ongoing scientific debate as to whether CBD may actually block THC from binding with the brain's CB1 receptor, thus mitigating some of THC's psychoactive effects.

It is believed that CBD reduces pain and inflamation and is effective in treating treat conditions as disparate as epilepsy, multiple sclerosis, arthritis and even depression.

The Legal Status of CBD

Is CBD legal? In 2019, the answer is more than a simple “yes” or “no.”

As of this writing, legislatures in more than half of all states in the United States have legalized cannabis for medical use. In 10 states, as well as the District of Columbia, people 21 years or older can consume cannabis recreationally. Other jurisdictions have decriminalized cannabis possession. Nonetheless, the substance remains illegal under federal law, which classifies cannabis as a Schedule I drug under the Controlled Substances Act (CSA).

That said, the U.S. government does not consider all cannabis the same. The aforementioned distinctions—between CBD and THC, between marijuana and hemp—carry significant legal meaning. To understand why, one must understand the impact of a recent change in federal policy.

The 2014 Farm Bill established a legal avenue for cannabis cultivation by creating a new category: industrial hemp. The legislation defined industrial hemp as cannabis “grown or cultivated for purposes of research conducted under an agricultural pilot program or other agricultural or academic research.” The law further provided that hemp cultivation was “allowed [only] under the laws of the state in which such institution of higher education or state department of agriculture is located and such research occurs.”

Four years later, the 2018 Farm Bill, transformed federal cannabis policy in two crucial ways. First, the law allowed anyone, not just researchers in the 2014 pilot program, to cultivate industrial hemp (under certain restrictions—see below). Second, it clarified the definition of industrial hemp to encompass any cannabis plant with a THC concentration of 0.3% or less. Notably, Section 12619 of the law explicitly removed industrial hemp from Schedule 1 of the CSA.

Broadly speaking, federal law no longer prohibits businesses and individuals throughout the United States from producing or distributing CBD and CBD-containing products. That is, cannabidiol is now federally legal. so long as the compound is derived from hemp (i.e., cannabis with less than 0.3% THC content) and not marijuana (cannabis with a THC content exceeding the federal maximum). Marijuana-derived CBD is still proscribed by the CSA, and may only be produced, sold and possessed pursuant to state-regulated marijuana programs.

While the 2018 Farm Bill generally legalized hemp—and by extension, hemp-derived CBD—restrictions still apply. In addition to the rules surrounding THC content, hemp cultivators are subject to state regulations and, ultimately, federal approval.

The Brookings Institution notes: “Under Section 10113 of the Farm Bill, state departments of agriculture must consult with the state's governor and chief law enforcement officer to devise a plan that must be submitted to the Secretary of the U.S. Department of Agriculture. A state's plan to license and regulate hemp can only commence once the Secretary of USDA approves that state's plan. In states opting not to devise a hemp regulatory program, USDA will construct a regulatory program under which hemp cultivators in those states must apply for licenses and comply with a federally-run program. This system of shared regulatory programming is similar to options states had in other policy areas such as health insurance marketplaces under ACA, or workplace safety plans under OSHA—both of which had federally-run systems for states opting not to set up their own systems.”

A December 2018, statement from U.S. Food and Drug Administration Commissioner Scott Gottlieb provided additional caveats. The FDA cautioned against marketing CBD products with claims regarding therapeutic benefits or efficacy in the “diagnosis, cure, mitigation, treatment or prevention of diseases (such as cancer, Alzheimer's disease, psychiatric disorders and diabetes),” as any such product would be subject to FDA approval first. The administration also warned that the Federal Food, Drug, and Cosmetic Act (FD&C Act) makes it unlawful to “introduce food containing added CBD or THC into interstate commerce, or to market CBD or THC products as, or in, dietary supplements, regardless of whether the substances are hemp-derived.”

Members of the pharmaceutical industry should not interpret the Gottlieb letter as an outright repudiation of CBD products. Last year, in fact, the FDA approved Epidiolex, a CBD-based oral solution for the treatment of epileptic seizures. It is the first cannabis-derived drug to earn FDA approval.

Questions Remain

Under the 2018 Farm Bill, multiple states have already begun establishing industrial hemp production programs. Pennsylvania, for example, recently concluded its application period for the 2019 growing season, and is submitting a plan to the USDA. In New Jersey, Gov. Phil Murphy signed A1330, the state's industrial hemp bill, into law, spurring the regulation and licensing process.

But while states appear eager to cash in on the newly legalized crop, uncertainties about CBD remain. For instance, can hemp-derived CBD produced legally in one state travel through interstate commerce to another state if it wasn't produced pursuant to the second state's licensing process?

What about those CBD “shots” at bars and coffee shops? Are they permissible under FDA regulations? When does marketing encroach on the category of “dietary supplements?”

Given the constantly changing laws and attitudes around cannabis—two-thirds of all Americans support full legalization, according to a recent Gallup study—expect further developments soon. In the meantime, any business or individual interested in the cultivation, sale or use of CBD can rely on their trusted legal counsel for guidance.

Joseph Kelley III, of Offit Kurman, is principal and chair of the privacy and data protection practice group at the firm. He focuses his practice on health care and privacy and helped to found the firm's health care practice group. He counsels clients on all health, privacy and security, technology, and cannabis industries and serves as general counsel to businesses in the health care, cybersecurity and medical cannabis sectors.