Absence of Federal Regulations Exposes CBD Industry to Class Action Lawsuits

The cannabidiol (CBD) industry is a novel one, having grown from nothing to a sector worth millions of dollars within just a year, and most of all, with barely any participation from regulatory authorities. The chemical, extracted from hemp, blew up after the Farm Bill legalized the farming and sale of industrial hemp and its extracts, including CBD, in 2018.

According to the legislation, cannabis with less than 0.3% THC is classified as legal industrial hemp, and farmers are allowed to grow it under state and tribal programs.

It’s worth noting that over the years, plenty of anecdotal evidence has surfaced painting CBD as a sort of cure-all. Users claim that the hemp extract is effective against a variety of ailments, including insomnia and chronic pain. However, there’s little scientific evidence to back these claims.

With the exception of Epidiolex, a CBD-based drug designed to treat seizures in rare pediatric epilepsies, the U.S. Food and Drug Administration (FDA) forbids sellers from advertising CBD products as therapeutic products. On top of that, the agency has banned the sale of CBD as a food supplement, going so far as to send warning letters to several companies accused of doing so.

Sadly, that’s the extent of the FDA’s involvement in the CBD industry. With barely any regulations on how to sell CBD products, the industry has filled up with companies selling thousands of unregulated products. Last year, hemp producers felt the brunt of the industry’s state as banks and insurance providers avoided working with them. Now CBD producers are feeling it too.

Two major CBD manufacturers were recently slapped with class-action lawsuits by disgruntled customers. Charlotte’s Web and CV Sciences are feeling the heat after some customers alleged that the companies engaged in “false, fraudulent, unfair, deceptive, and misleading” marketing of their CBD products by claiming that they were ordinary dietary supplements.

Two smaller companies, Infinite CBD and Green Roads, are facing similar lawsuits, and in all cases, the customers are demanding the companies hand over the profits they made from CBD sales, a move that could totally bankrupt them.

Daniel Fabricant, CEO of the Natural Products Association, says that the implications are huge, arguing that the lawsuits could lead to the collapse of the budding CBD sector.

“We’re just going to see a lot of this sort of mischief go on until the FDA does what it needs to be doing, which is establishing a formal regulatory framework for CBD,” says Jonathan Miller, general counsel of the U.S. Hemp Roundtable.

It would be justifiable to believe that the entire CBD industry, including players like Willow Biosciences Inc. (CSE: WLLW) (OTCQB: CANSF) and LiveWire Ergogenics Inc. (OTC: LVVV), is closely following those lawsuits since the entire industry will be affected by their outcome.

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