In December 2019, the Trump administration legalized hemp at the federal level. Hemp is a type of cannabis that contains more CBD (cannabidiol) and less of psychoactive THC (tetrahydrocannabinol). THC can be dangerous when consumed in large quantities. Meanwhile, CBD is used to treat various health issues. It’s also used as a raw material in food and other products. Despite hemp legalization, the FDA hasn’t approved any CBD products except Epidiolex, which treats seizures. As a result, selling and distributing CBD products isn’t legal.
In November 2019, the FDA sent warnings letters to 15 cannabis companies for wrongfully marketing their CBD products on product webpages, online store pages, and social media. Some companies claimed that their products could treat various illnesses, which violated the Federal Food, Drug, and Cosmetic Act. In March 2019, a report from The GrowthOp stated that Scott Gottlieb, the former FDA commissioner, said that unless Congress intervenes, the regulation of CBD products would take years. However, the situation could change with the introduction of Collin Peterson’s new bill.
New bill could boost CBD business
On January 14, Nutritional Outlook reported that the House Agriculture Committee chairman, Collin Peterson, introduced the new legislation. The bill will modify the Federal Food, Drug and, Cosmetic Act. The bill will include hemp-derived CBD products to be marketed under dietary supplements. Also, the bill has asked the Department of Agriculture to submit a report on the problems that hemp farmers face on the regulatory and marketing front. Thomas Massie and James Comer, members of the House of Representatives from Kentucky, and Chellie Pingree, a member of the House of Representatives from Maine, co-sponsored the bill.
Speaking on the bill, Peterson said, “This bill will allow FDA to regulate CBD that comes from hemp as a dietary supplement, providing a pathway forward for hemp-derived products. It would also identify barriers to success for hemp farmers, informing growers and policymakers of the challenges facing this new industry,” as reported by Nutritional Outlook.
Bill drives cannabis stocks
The cannabis sector rose due to investors’ optimism about the introduction of the new bill. On Wednesday, the ETFMG Alternative Harvest ETF (NYSE:MJ) rose by 5.4%, while the Horizons Marijuana Life Sciences Index ETF increased by 6.5%. Charlotte’s Web Holdings (NYSEARCA:CWEB), which has a significant market share in hemp-based CBD products, rose by 17.3%. Despite the rise, the company has lost 30.4% of its stock value. In November, the company reported weak third-quarter earnings. To learn more, read Charlotte’s Web: Q3 Earnings Missed Analysts’ Estimates.
Canopy Growth (NYSE:CGC), which recently entered the US CDB market with its First & Free Brand, rose by 4.2%. Cronos Group (NASDAQ:CRON) rose by 5.7%. The company acquired four subsidiaries of Redwood Holding in September 2019, which gave it entry to hemp-derived CBD consumer products. Aurora Cannabis (NYSE:ACB) rose 15.5% on Wednesday. In July 2019, Aurora Cannabis entered the US CBD market through a clinical research program with UFC (Ultimate Fighting Championship). To learn more, read Aurora Cannabis Focuses on the US CBD Market.