Wisconsin’s Industrial Hemp and CBD: After Decriminalization Comes Regulation

By: Attorney William E. Wallo– Weld Riley, S.C.

The cannabis industry is often been equated to the “Wild West” because of its heady combination of economic possibilities and uncertain legalities. On a state level, the trend toward legalization of marijuana has picked up steam in recent years, with nearly half the country passing some sort of legislation. Wisconsin has not yet moved to join those states which have legalized its use (medically or otherwise), but there has been activity on another cannibas front: namely, the use of cannabidiol, or CBD.

Wisconsin legalized the possession of CBD – albeit with a doctor’s prescription – in 2015. In 2017, Wisconsin passed a law creating an Industrial Help Research Pilot program allowing farmers to grow industrial hemp (used to produce CBD). While the Wisconsin attorney general initially raised concerns that CBD was still illegal because the state statute permitting its possession continued to require a prescription, subsequent guidance indicated that farmers who remained in compliance with applicable rules could grow, sell, and process their crops without fear of prosecution.

Perhaps the biggest development was the 2018 federal farm bill signed by the President in November. Under that legislation, industrial hemp (or CBD) was legalized, or “descheduled,” and removed from the federal Controlled Substances list. Many regarded this as freeing the market to produce CBD edibles and dietary supplements. Hemp production seemed poised to explode – not only in Wisconsin but elsewhere.  

Almost immediately after the farm legislation was signed, however, the Food and Drug Administration (FDA) put everyone on notice: CBD may be legal in some forms, but putting it into food or dietary supplements remains subject to FDA guidelines and restrictions. Notably, in 2018 the FDA approved a CBD-infused product as a drug; federal law dictates that if something is a drug, it cannot be added to food.

Edibles are one of the mainstays of cannabis culture (countless movie gags are based on “those” kind of brownies, after all), and the CBD industry is no different. Growers and processors of CBD have added it to a whole host of products marketed to consumers. But in the wake of the FDA’s announcement and the subsequent uncertainty, questions abound: what can be sold, and to whom?

The FDA recently began sessions that will eventually lead to the issuance of some sort of guidance or regulation relating to food and other products that fall under the FDA purview. Those guidelines may not impact CBD products that are truly local in nature (at least if they are not shipped across state lines). But state and local governments remain free to step into that void.

Reports on the FDA’s comment sessions highlight how the industry hopes to avoid stringent regulation of what could soon be a $16 billion market. But they also reflect some of the challenges. Notwithstanding the perceived health benefits associated with CBD, researchers claim some products have been found to contain problematic levels of pesticides or lead, and a lack of standards frequently means inconsistency in terms of CBD levels in the products themselves. All of this threatens to put consumers at risk.

Congress may well have anticipated that descheduling hemp in the farm bill meant legal CBD products on grocery store shelves. But moving out of the shadows inevitably means facing greater scrutiny as to health and food safety concerns. In Wisconsin, there also remains uncertainty about the legal status of retailers. The state’s former attorney general indicated that only physicians and pharmacists may sell CBD products and distribution remains limited to CBD that has no psychoactive effect (i.e., with a concentration of tetrahydrocannabinols (THC) of not more than 0.3 percent on a dry weight basis).

Final FDA rules on CBD products are unlikely to be produced quickly. Even interim rules will be subject to additional comment. However, in April the FDA leveled charges against several CBD companies and asserted they had violated federal law by placing unapproved drugs and adulterants into interstate commerce and making false or unsubstantiated health claims. Given the current lack of standards for compliance, the FDA’s aggressive step on this front raises substantial concerns for CBD producers. Without knowing the rules, it is hard to avoid becoming a target.

It is clear the FDA regards the industry with skepticism – much as one might have doubted the claims of snake oil salesmen in the Old West. From a legal perspective, the 2018 Farm Bill also clearly preserved the FDA’s regulatory oversight of products – including not just foods and drugs, but supplements, cosmetics, and tobacco products – as provided by existing law. Until recently, CBD products were illegal on a per se basis, so there was little reason to consider how to produce them safely for consumption.

As the landscape on legality has shifted, regulation becomes inevitable. What seems like an open and exciting new market will feature many pitfalls. Even as to products the FDA does not regulate (e.g., those which are not produced or shipped across state lines), individual states will ultimately adopt health and safety regulations as well. Producers need to anticipate these prospects and consider the risks as they develop business plans.