President Donald Trump finally signed the 2018 farm bill on Thursday afternoon, legalizing industrial hemp and making the popular cannabidiol (CBD) more accessible.
The bill’s marijuana-related reforms have generated plenty of interest among investors, particularly in the growing number of companies that specialize in extracting CBD, a relaxing component of cannabis, from hemp, to make beverages, health products and pet snacks.
CBD oil is being billed as a solution to treat everything from anxiety, epilepsy, acne and pain to schizophrenia. Those prospects help to explain why the share prices of cannabis firms Tilray Inc. (TLRY) and Canopy Growth Corp. (CGC) rocketed when they announced partnerships with some of the world’s biggest beverage manufacturers.
Analysts have been quick to talk up the value of the CBD market, as well as the fortunes of the industrial hemp-derived CBD producers, such as Aurora Cannabis Inc. (ACB) and Canopy and lesser known names Charlotte's Web Holdings (CWEB), CV Sciences Inc. (CVSI), Medical Marijuana Inc. (MJNA), Elixinol LLC (ELLXF) and Isodiol International (ISOL).
Canopy Growth and Charlotte's Web released statements celebrating the signing of the bill. Canopy will now enter the U.S. market, and Charlotte's Web reported "material improvements in its business outlook."
While arguably a positive step forward for those advocating cannabis reform, it is worth noting that the bill didn’t legalize the use of CBD in food, drinks or dietary supplements and contains a number of restrictions. Companies are also still prohibited from making therapeutic claims about CBD products without FDA approval.
Think Tank Brookings pointed out that the farm bill legalized hemp, but did not give permission for anyone to grow the Cannabis sativa plant as they please. Restrictions include shared state-federal regulatory power over cultivation and production and the banning of any hemp that contains more than 0.3% THC, the compound in the plant that creates a high.
CBD products also haven’t suddenly been made completely legal. The bill removed hemp-derived products from under the Controlled Substances Act, although CBD remains a Schedule I substance under federal law.
“The Farm Bill ensures that any cannabinoid—a set of chemical compounds found in the cannabis plant—that is derived from hemp will be legal, if and only if that hemp is produced in a manner consistent with the Farm Bill, associated federal regulations, association state regulations, and by a licensed grower,” wrote John Hudak, deputy director of the Center for effective public management at Brookings. “All other cannabinoids, produced in any other setting, remain a Schedule I substance under federal law and are thus illegal. The one exception is pharmaceutical-grade CBD products that have been approved by FDA, which currently includes one drug: GW Pharmaceutical’s Epidiolex."
The FDA showed signs it may soften its stance in a statement released Thursday. It said, "Pathways remain available for the FDA to consider whether there are circumstances in which certain cannabis-derived compounds might be permitted in a food or dietary supplement. Although such products are generally prohibited to be introduced in interstate commerce, the FDA has authority to issue a regulation allowing the use of a pharmaceutical ingredient in a food or dietary supplement. We are taking new steps to evaluate whether we should pursue such a process."