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Banking Exchange | What Your Financial Institution Needs to Know About Banking CBD Retailers

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Banking Exchange

By Terri Luttrell, Abrigo
October 30, 2019

The Federal Trade Commission’s latest round of warning letters to companies selling products containing cannabidiol (CBD) is a reminder to financial institutions to tread carefully as they look into the possibility of providing banking services to cannabis-related retailers and other cannabis-related businesses (CRBs).

The FTC  warned three unidentified companies that it is illegal to advertise that a product can “prevent, treat, or cure human disease without competent and reliable scientific evidence to support such claims.” The companies were selling oils, tinctures, capsules, “gummies,” and creams containing CBD, and each firm had advertised the products treat or cure diseases or health conditions, such as cancer, chronic pain, diabetes, and epilepsy.

In recent years, hemp and hemp-derived cannabidiol (CBD) products have been introduced into the market, sometimes as stand-alone oil products or in cosmetics, animal food, and infused food and beverages meant for human consumption. CBD is especially popular with some health enthusiasts, who buy anything from wellness products such as beauty creams and shampoos to flavored water. 

Many believe that CBD holds therapeutic value for many diagnoses, including pain and anxiety. Some bars and restaurants are serving CBD-infused cocktails, sauces, and even hamburgers. There are even CBD-infused dog treats to assist if your pet has anxiety issues.  

With the passing of the  Agriculture Improvement Act of 2018  (2018 Farm Bill) many manufacturers, retailers, and financial institutions believe CBD products are now fully legal at the federal level.  That assumption is not quite accurate. The 2018 Farm Bill addresses the declassification of hemp as a Schedule 1 narcotic under the  Controlled Substances Act  (CSA), but not marijuana. CBD can be derived from marijuana or hemp, which are both subspecies of the cannabis plant. Marijuana-derived CBD has not been declassified and has not been federally legalized.

While the terms cannabis, marijuana, and hemp are often mistakenly used interchangeably, they are considerably different.  Marijuana, which remains classified by the CSA as a Schedule 1 narcotic along with heroin and LSD, is used for both recreational and medical uses and generally has a 10% or more content of tetrahydrocannabinol (THC), the component that is psychoactive and gets the user high.

Hemp-derived CBD oils and tinctures are legal under the Farm Bill if they do not make claims of unproven health benefits. Keep in mind, however, that hemp must have 0.3% or less THC to not be considered marijuana.  If the chemical composition of a CBD product tests about 0.3% it is considered marijuana and remains a Schedule 1 narcotic.  

CBD regulated by FDA

When the industry opened the door into CBD-infused food and cosmetic products, it immediately became partners with the Food and Drug Administration (FDA) whether it wanted to or not. In immediate response to the passing of the 2018 Farm Bill, then  FDA Commissioner Scott Gottlieb, M.D. reminded the public that the agency has been given authority to regulate hemp and CBD under the  U.S. Food, Drug, and Cosmetic Act (FD&C Act). He also noted that the FDA does not distinguish between hemp-derived CBD and marijuana-derived CBD.  Gottlieb stated that “it’s unlawful under the FD&C Act to introduce food containing added CBD or THC into interstate commerce, or to market CBD or THC products as, or in, dietary supplements, regardless of whether the substances are hemp-derived. Under the FD&C Act, it’s illegal to introduce drug ingredients like these into the food supply, or to market them as dietary supplements.” He made it clear that the agency will take enforcement action when necessary to protect the public but acknowledged that there are potential opportunities that cannabis and cannabis-derived compounds could offer.

The FDA further states that there has been no FDA evaluation regarding whether CBD is safe and effective to treat disease, what the proper dosage is, how it could interact with other drugs or foods, or whether CBD has dangerous side effects or other safety concerns. As far as the FDA is concerned, CBD should be evaluated and go through the same standards and approvals as any other drug.

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For the full article featuring Abrigo, visit Banking Exchange, “What Your Financial Institution Needs to Know About Banking CBD Retailers.”