against CBD products (e.g., South Dakota, Nebraska), while others require
their registration (e.g., Utah). As the
state regulation landscape is changing
quickly, routine analysis of the applicable laws should be conducted. Federal
courts are also beginning to review state
laws regarding CBD in light of the new
Commercial Considerations for
Marketing CBD Products
Notwithstanding the legal un-
certainty of the status of CBD, the
marketplace is filled with CBD-based
products in consumables and consumer
products such as supplements, foods
(human and animal), cosmetics, and
beverages. In the absence of a regulatory
framework for these products, and lack-
ing industry-standard testing method-
ologies, traditional market forces have
emerged to attempt to control the risk
within the supply chain. Further, as with
any consumer product, especially with
regard to one for which there is no legal
framework, there is always the threat of
product liability and National Adver-
tising Division (NAD) and consumer
class-action challenges based on asserted
injuries and/or false-advertising claims.
Below are considerations for mitigation
• Ingredient specifications – Most im-
portantly, CBD suppliers/purchasers
must be able to document the THC
content is not more than 0.3 percent
to avoid being considered a con-
trolled substance. Documentation
of testing results should be available
from a qualified laboratory using
accepted methodologies for each
batch of CBD. Acceptance of only a
Certificate of Analysis would not be
• Ingredient contaminants/adultera-tion – Ensure that the product can
be documented to be free of heavy
metals and other contaminants.
Ensure adequate testing of potential
bacterial and other adulterants typical of produce/herbs.
• Labels – For finished products,
ensure the label is appropriate for
the intended uses. Lack of labeling
with regard to content, serving size,
warnings, net weight, etc. can lead to
substantial exposure to class-action
claims and potential liability from
• Claims – Avoid disease/drug claims.
To the extent that any claims are
made, ensure that there is proper
substantiation for them. Note that
the Federal Trade Commission
and NAD require health claims be
substantiated with “competent and
reliable scientific evidence, which
includes, tests, analyses, research, or
studies” that have been conducted
by qualified experts using validated
test methods. 9
• Warnings – Ensure appropriate warnings for the intended uses, such as
keep away from children, warnings
against use by subpopulations such
as pregnant or lactating women, and
interactions with other substances.
• Guarantees – Many companies in
the FDA-regulated supply chain will
often include in standard terms and
conditions guarantees of compliance
with the FD&C Act. The uncertain
legal status of CBD should be considered before any agreement to such
• Indemnification – Many contracts
for CBD products will include indemnification provisions to cover
the cost of injuries or false-advertising challenges. Further, to the extent
that a CBD product requires recall
or market withdrawal, contractual
provisions may be triggered to cover
the costs of market recovery.
• Insurance – Retailers may request
evidence of insurance to cover the
cost of injury claims or recall costs.
Before agreeing to provide such assurances, it is important to carefully
check whether existing insurance
policies will even cover CBD products in view of their legal status.
• State licenses – Companies whose
functions may be regulated under
certain state licenses, such as pharma-
cies, should be aware of the possible
effect of improper CBD sales on
the status of those licenses in states
where the sales are still prohibited.
The marketplace for CBD products
is exploding and expected to grow to
$16 billion by 2025.10 Because FDA ordinarily does not move quickly to regulate new products, especially in times
of transition, it is likely that the marketplace will develop its own form of
regulation through the use of the NAD,
product liability claims, and competitor
challenges. In this type of fluid environment, it is critical to ensure that the risk
around the legal uncertainty of the ingredient is properly allocated among the
Kathleen Sanzo, Esq., is head of Morgan, Lewis &
Bockius LLP’s FDA practice.
doc/062519 Wyden Letter to FDA HHS on Hemp
4. See, for example, letter from Michael A.
Chappell, acting associate commissioner of regulatory affairs, FDA, to Kathleen M. Sanzo, Morgan, Lewis & Bockius LLP, responding to Citizen
Petition 2005P-0259 from Biostratum Inc. (Jan.
12, 2009) Docket No. FDA-2005-P-0259, and
Pharmanex v. Shalala, 2001 WL 741419.
9. See POM Wonderful LLC, 155 F TC 56, 193
(2013), aff’d in part, 777 F.3d 478, 504-505 (D.C.
Cir. 2015), cert. denied, No. 15-525, 2016 LEXIS
2991 (May 2, 2016).