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United States: FDA Announces A Path Forward For CBD Consumer Products: A New Regulatory Framework Is Needed



Cannabis industry stakeholders waiting for the US Food and Drug Administration (FDA) to forge a regulatory path forward for cannabidiol (CBD) in consumer products such as conventional foods and dietary supplements will now be waiting on Congress to act. FDA announced, on January 26, 2023, that its existing food and dietary supplements regulatory pathways are not appropriate for CBD products and that the agency does not intend to initiate rulemaking for CBD. Rather, FDA called for a new regulatory pathway for CBD products that “balances individuals’ desire for access to CBD products with the regulatory oversight needed to manage risks.”1Concurrent with this policy announcement, FDA denied three citizen petitions from trade associations that asked, among other things, for FDA to issue a regulation allowing CBD products to be marketed as dietary supplements. Companies waiting for certainty on the future of CBD product regulation will have to wait until Congress acts, perhaps, to amend the Federal Food, Drug, and Cosmetic Act to establish a unique regulatory pathway for CBD.

This Advisory contextualizes FDA’s policy announcement in the recent history of its actions with respect to CBD, summarizes the key points of FDA’s announcement, and covers the implications for stakeholders.


Growth in the CBD industry followed significant changes in the legal status of hemp and its derivatives, most notably, the Agriculture Improvement Act of 2018, Public Law 115-334 (known as the 2018 Farm Bill). The 2018 Farm Bill legalized the cultivation and sale of hemp, defined as “[T]he plant Cannabis sativa L. and any part of that plant . . . with a delta-9 tetrahydrocannabinol concentration of not more than 0.3 percent on a dry weight basis.”2The law also amended the definition of marijuana in the Controlled Substances Act (CSA) to exclude hemp and its derivatives from the CSA’s definition of controlled substances.3Congress expressly preserved, however, FDA’s authority to regulate products containing CBD (derived from hemp) and other products containing hemp or hemp-derived compounds.4Thus, while hemp is no longer a controlled substance, FDA retained authority to regulate products such as CBD.

Indeed, FDA issued a statement on the day the 2018 Farm Bill passed, touting its awareness of the growing public interest in cannabis and cannabis-derived products, including CBD, and announcing the importance of clarifying FDA’s regulatory authority over those products.5FDA explained that it was unlawful to market CBD in food or dietary supplements, but also indicated that—

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. However, the FDA would only consider doing so if the agency were able to determine that all other requirements in the FD&C Act are met, including those required for food additives or new dietary ingredients.6

Subsequently, FDA formed a “high-level internal agency working group” to explore potential pathways for dietary supplements and/or conventional foods containing CBD to be lawfully marketed, including consideration of the necessary statutory or regulatory changes and the public health impact of marketing such products.7FDA also convened a widely attended public hearing to obtain scientific data and information about the safety, manufacturing, product quality, marketing, labeling, and sale of products containing cannabis or cannabis-derived compounds. While FDA sorted out its approach to CBD, industry waited, and some companies sought to lawfully market CBD as a dietary supplement within the existing regulatory framework. For example, one company submitted a new dietary ingredient notification (NDIN) to FDA on March 3, 2021 for full-spectrum hemp extract (FSHE) which contains CBD.8FDA rejected the NDIN, however, having found that the FSHE, which contains CBD, was a CBD product precluded from marketing as a dietary supplement by the exclusion provision of the FD&C Act.9Following this rejection, it became clear to many that FDA’s position was settled and that FDA believed that lawful marketing of CBD as a dietary supplement was impossible absent FDA proceeding through notice and comment rulemaking to issue a regulation finding that CBD would be lawful in such products. Three citizen petitions, submitted in 2019, 2020, and 2022, requested that FDA take such action, though each would be denied alongside the January 2023 policy announcement, as we note below.

FDA’s January 2023 CBD Policy Announcement

FDA’s work and progress on regulating CBD took a turn on January 26, 2023, when FDA took coordinated action to issue the CBD policy announcement and deny the three citizen petitions that sought rulemaking on CBD. Principal Deputy Commissioner Janet Woodcock’s announcement stated that after careful review by an internal FDA working group, FDA concluded that a new regulatory pathway for CBD was necessary; FDA’s current conventional food and dietary supplement regulatory pathways would not be appropriate for CBD. Such a pathway, would balance consumers’ desire for access to CBD products with the regulatory oversight needed to manage risks. According to FDA, safety concerns and limited ability to manage risks associated with CBD products under the existing food and dietary supplement authorities drove FDA’s policy determination. FDA noted that the agency reviewed studies pertaining to Epidiolex, published scientific literature, information submitted to the CBD public docket, and studies conducted and commissioned by FDA. It concluded that the use of CBD raises various safety concerns, especially for long-term use, including potential risks to the liver and male reproductive system and the risk for medication interactions. FDA also expressed concern about CBD exposures by certain vulnerable populations, such as children, and those who are pregnant. Ultimately, the agency could not see how CBD products could meet safety standards applicable to dietary supplements or food additives—for example, FDA lacked adequate evidence to determine the level of CBD that can be consumed, and the duration of consumption, before causing harm.

The agency all but explicitly asked Congress to act, stating that “FDA is prepared to work with Congress on this matter” and “FDA looks forward to working with Congress to develop a cross-agency strategy for the regulation of these products to protect the public’s health and safety.” It provided a light roadmap, including recommendations for including safeguards and oversight to manage and minimize risks associated with use of CBD products, such as clear labels, prevention of contaminants, CBD content limits, and minimum purchase age.

Finally, FDA turned to the topic of compliance actions and essentially preserved the status quo. Per Dr. Woodcock, “FDA will continue to take action against CBD and cannabis-derived products to protect the public, in coordination with state regulatory partners, when appropriate. FDA will remain diligent in monitoring the marketplace, identifying products that pose risks and acting within our authorities.” As FDA-watchers are aware, the agency has not initiated any industry-wide compliance action, but has more selectively targeted companies marketing products that in FDA’s view, threaten the public health and/or are marketed to children. The agency has particularly focused its compliance actions on products that make claims to treat diseases or other specific health conditions.10


FDA’s action (or inaction), depending on your viewpoint, likely disappointed some in industry who expected that FDA would issue a regulation. Ultimately, FDA’s stance leaves Congress in the driver’s seat when it comes to establishing a regulatory path forward for CBD. In fact, shortly after FDA’s announcement, Rep. Morgan Griffith (R-VA) (House Energy & Commerce Oversight Subcommittee Chair) announced that he was in contact with FDA regarding the CBD announcement and “look[s] forward to working with the FDA so we may create a safe pathway for these products to come to market.”11Rep. Griffith, and others in Congress, would not be starting from scratch. Dozens of bills, including those on which he worked, have been introduced in both the House and Senate that propose to regulate cannabis and/or CBD. Arnold & Porter’s comprehensiveCannabis State-of-Play Advisory highlights the legislation related to cannabis and CBD introduced by the 117th Congress.

As noted above, FDA did not announce a new compliance policy or stance with respect to CBD, and we expect that FDA will continue to regulate CBD largely the same as it has in the preceding years—by taking selective compliance action, particularly with respect to disease claims or products marketed to children, as it deems necessary. We will continue to monitor developments with respect to both CBD and cannabis.

© Arnold & Porter Kaye Scholer LLP 2023 All Rights Reserved. This Advisory is intended to be a general summary of the law and does not constitute legal advice. You should consult with counsel to determine applicable legal requirements in a specific fact situation.


1 Statement from Janet Woodcock, M.D., Principal Deputy FDA Commissioner, FDA Concludes that Existing Regulatory Frameworks for Foods and Supplements are Not Appropriate for Cannabidiol, Will Work with Congress on a New Way Forward (Jan. 26, 2023),availablehere.

2 7 U.S.C. 1639o(1).

3 Section 12619(b) of the 2018 Farm Bill also amended Schedule I of the CSA to exclude the THC found in hemp from the definition of “tetrahydrocannabinols.”

4See2018 Farm Bill, section 10113, § 297D(c)(1).

5 By the time the 2018 Farm Bill passed, FDA had already approved a highly purified form of CBD in a prescription drug, Epidiolex.

6 Statement from FDA Commissioner Scott Gottlieb, M.D., on signing of the Agriculture Improvement Act and the Agency’s Regulation of Products Containing Cannabis and Cannabis-Derived Compounds (Dec. 20, 2018),availablehere.

7 Statement for FDA Commissioner Scott Gottlieb, M.D., On New Steps to Advance Agency’s Continued Evaluation of Potential Regulatory Pathways for Cannabis-Containing and Cannabis-Derived Products (Apr. 2, 2019),availablehere.

8 FDA Response to NDI 1199 – Full Spectrum Hemp Extract (FSHE), FDA-2021-S-0023-0050,availablehere.

9See21 U.S.C. 321(ff) (excluding from the dietary supplement definition, an article that is approved as a new drug or authorized for investigation as a new drug for which substantial clinical investigations have been instituted and made public, which was not before such approval or authorization marketed as a dietary supplement or foodunlessFDA issued a regulation finding that the article would be lawful under the FD&C Act). FDA reached this conclusion because CBD is the active ingredient in an approved drug product, and the existence of substantial clinical investigations involving CBD had been made public. Additionally, FDA determined that CBD was not marketed as a dietary supplement or conventional food before it was authorized for investigation as a new drug.

10See, e.g., FDA Warning Letter to Naturally Infused LLC (Nov. 16, 2022),availablehere, (“[T]he Agency is particularly concerned that some of your products are in forms that are appealing to children. For example, your CBD Lollipops, CBD Gummies, and Delta-8 THC Gummies are in forms that would be attractive to children and could easily be mistaken for traditional foods that are commonly consumed by children. Furthermore, you market other products that consumers may confuse with traditional foods for humans, including CBD Infused Sugar and CBD and Delta-8 THC Infused coffees. Therefore, there is a risk that consumers of these products, including children, will unintentionally consume CBD or Delta-8 THC ingredients. Additionally, we note that the CBD coffee products appear to contain caffeine. Evidence suggests that CBD may affect caffeine metabolism and may increase and/or prolong caffeine’s effects.”).

11 Griffith Offers to Work with FDA to Develop CBD Pathway,InsideHealthPolicy(Feb. 2, 2023),availablehere.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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How can it help distressed cannabis companies today?




Without the option to declare bankruptcy—due to federal illegality—the only recourse for cannabis businesses in distress to become solvent and / or distribute assets to creditors is to enter into an expensive and difficult judicial cannabis receivership. Receiverships are inherently adversarial, and the required input from third-party experts, lawyers and regular engagement with the courts can be incredibly costly.

Meanwhile, businesses operating in mainstream sectors have the ability to declare bankruptcy. This is also a court-ordered procedure that allows companies to satisfy lenders by liquidating assets, restructuring operations and finances, and to enjoy a break of sorts to make deals with creditors and renegotiate contracts and leases. Without a change to federal banking laws, cannabis companies are blocked from the benefits of bankruptcy, and the situation is only getting worse.

Given the current tight capital market environment, the increase in cannabis distressed assets, and the shortage of options to cannabis operators to address said challenges, is there a possible alternative option to alleviate the rather dire situation?


Genesis—Transition from Equity Financing to Debt Financing

Equity financing has been the most prominent way to raise capital in cannabis for the last several years. However,recent data collected by Viridian Capital Advisorsreveals that debt currently makes up 93% of capital raised by U.S. cannabis cultivation and retail companies, compared to 55.7% in U.S. industries overall.

This change in the capital-raising environment, which has led to an increased number of creditors in the sector, combined with continued market pressures on cannabis businesses to remain competitive, make it highly likely that the industry will inevitably see more receiverships.

Ultimately, while debt financiers are willing to lend cannabis businesses money, they expect to be paid back on time and often with high interest. If the business begins to struggle and enters a distressed phase that leads to receivership, the business assets will be sold off and the secured lenders will be the first to get paid, while the business itself is likely not to recover much.

Consider an Administrative and Collateral Agent

With receiverships punishingly expensive and the debt financing landscapebordering on predatorial, distressed cannabis businesses are desperate for any assistance or support available.  An Administrative and Collateral Agent (ACA) could be the alternative support required, benefitting borrowers, lenders and regulators alike, and offering a more cost-effective and less punitive option to courts, receivers and lawyers.

Instead of dealing with the courts and an expensive court-appointed receiver, cannabis companies seeking relief could turn to an ACA to facilitate mediation between parties and create alignment within the industry, which does not exist today.

An ACA could create a level of trust, transparency and complementary positioning with industry participants that simply has not yet existed in cannabis. The use of an ACA could challenge the competing perceptions that there is already alignment between regulators, operators and lenders, or that a useful alignment between these parties could ever exist.

An ACA could be a real and valuable tool for state governments and regulators as they begin to understand that it is in their best interests to assist cannabis businesses in their states in the face of continued federal illegality and restrictions. Under a private agreement between parties, the ACA would conduct something more akin to an administrative receivership as opposed to the traditional judicial receivership that is the only current option for insolvent cannabis businesses to seek relief.

Building upon a Cannabis Credit Rating Framework

Ideally, an ACA would work within an industry-specific credit rating system for cannabis businesses in distress in order to work within an established framework for potential investors. If cannabis companies are ranked across an equitable, systematic and formulaiccredit rating system, borrowers, lenders and regulators would benefit from the quantifiable transparency afforded by said rating, and debt financing would have an inherent regulatory-like structure to prevent predatory lending. By avoiding the courts, the distressed cannabis company would save time, money and create a more attractive scenario for potential lenders.

Initial Path to Mitigating Solutions

While the current challenges facing cannabis businesses today are well documented and have risen to both creditors and regulators attention, a viable solution has yet to be identified. Most likely no one solution exists beyond waiting for the economic and capital environments to evolve. Yet, mitigating options do exist.

The introduction of an ACA is one such option. Questions remain as to the mechanics, regulatory, operative and fiscal alike, as well as who to trust to take it on. The introduction of a credit rating framework is the first step to creating a solid foundation from within which an ACA can operate transparently and equitably. Any potential buy-in from regulators, creditors and operators remains an open question.

All of that said, there is today an unprecedented set of market forces that is pushing all cannabis stakeholders to think outside of the box. The still growing opportunities in the cannabis industry, the will of operators to survive and succeed, as well as the increasing exposure from creditors, all point to not only an acceptance for the need of an alternative, but to the drive to do things differently.

Is your cannabis business in distress? Would you benefit from expert guidance and support in deciding on whether to enter into a receivership?Reach out to United CMC today.

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United States: Alex Malyshev And Melinda Fellner Discuss The Intersection Of Tax And Cannabis In New Video Series – Part VI: Licensing (Video)




Carter Ledyard is pleased to announce the launch of our short-video series on the cannabis industry focusing on business and legal issues for those companies and entities interested in doing business in New York.

This series offers a perspective on tax policy and specific statutes affecting cannabis businesses today. Our cannabis shorts are a great way to get to know our professionals, Alex Malyshev and Melinda Fellner, in quick and easy to watch clips, packed with the salient information you need.

In Part VI of our series, Alex and Melinda discuss licensing for cannabis businesses in New York. Watch below!


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Pennsylvania Court Holds that It Is “High Time” Employers Reimburse Employees Who Use Medical Marijuana to Treat Work Related Injuries




On March 17, 2023, the Commonwealth Court of Pennsylvania issued a decision regarding employee use of medical marijuana in the workers’ compensation context.  The decision in Fegley v. Firestone Tire & Rubber (Workers’ Comp. Appeal Bd.) addresses an issue of first impression.  The court held that an employer’s failure to reimburse an employee’s out-of-pocket costs for medical marijuana to treat his work-related injury was a violation of the Pennsylvania Workers’ Compensation Act (“WC Act”).  The decision is significant for Pennsylvania employers.  Given this decision, Pennsylvania employers could be subject to penalties under the WC Act if they do not reimburse employees for medical marijuana use—even though marijuana is illegal under federal law and cannot be prescribed by any doctors.


The employee in the underlying case sustained a work-related injury to his back.  After decades of taking prescribed opiates and narcotics, the employee began using medical marijuana at the recommendation of his doctor.  His pain level improved through use of marijuana, to the point that he was able to wean himself off of the prescription drugs.  An entity responsible for evaluating the appropriateness of treatment for work-related injuries under the state workers’ compensation system found that the employee’s medical marijuana use was reasonable and necessary.  However, the employer refused to reimburse the employee for the cost of his medical marijuana treatment.

The employee filed a claim seeking penalties for the employer’s alleged violation of the WC Act by failing to pay for the cost of his medical marijuana use.  The employer prevailed at the agency level on the grounds that the Pennsylvania Medical Marijuana Act (“MMA”) says that coverage is not required for medical marijuana and requiring an employer to fund marijuana use would violate federal law and did not violate the WC Act.  The employee then appealed to the Commonwealth Court of Pennsylvania.


In a 5-2 decision, the Commonwealth Court of Pennsylvania disagreed with the agency ruling below, and thus reversed and remanded.  In reaching its decision, the Court analyzed the contours of, and the relationship between, the WC Act, the MMA, and related federal law.

Starting with the basics, the Court observed that the WC Act requires reimbursement to employees for reasonable and necessary medical expenses resulting from work-related injuries.  The Court also observed that the MMA deems marijuana to be a legitimate therapy for treatment of medical issues under proper circumstances.  And the MMA seeks to protect individuals who use medical marijuana by stating that medical marijuana patients shall not be “denied any right or privilege, . . . solely for lawful use of medical marijuana . . .”

The MMA, however, also has a section entitled “Conflict”, which provides that “[n]othing in [the MMA] shall be construed to require an insurer or a health plan, whether paid for by Commonwealth funds or private funds, to provide coverage for medical marijuana.”  This did not end the Court’s inquiry.  The Court found that the absence of the word “reimbursement” in this Conflict provision is significant.  While a well-reasoned dissenting opinion described “coverage” and “reimbursement” as “two sides of the same coin”, the majority disagreed.  The Court held that “coverage” and “reimbursement” have materially distinct definitions.  The Court reasoned that the MMA does not require coverage for medical marijuana, but there is no language in the MMA precluding a WC carrier from reimbursing a claimant for medical expenses that are reasonable and necessary to treat a work-related injury.  In the Court’s view, employers must therefore reimburse employees for medical marijuana treatment that is reasonable and necessary for work-related injuries.  This conclusion, the Court noted, is consistent with the WC Act’s reimbursement requirement, along with the MMA’s endorsement of medical marijuana and corresponding prohibition against the denial of rights or privileges based solely on medical marijuana use.

The Court also addressed the relationship between state and federal law.  The MMA contains a provision stating that [n]othing in [the MMA] shall require an employer to commit any act that would put the employer or any person in violation of federal law.”  Under federal law, it is unlawful for “any person knowingly or intentionally – [] to manufacture, distribute, or dispense, or possess with intent to manufacture, distribute, or dispense, a controlled substance[.]” 21 U.S.C. § 841(a).  The Court did not find this to be a persuasive reason for reaching a different decision because reimbursement is not the same as manufacturing, distribution, or dispensing of marijuana.  Thus, reimbursement is not illegal.

In her dissent, Judge Christine Fizzano Cannon discussed the interplay between state and federal law.  She wrote that “[a]lthough the MMA legalizes the use of medical marijuana in Pennsylvania, a provider still cannot legally dispense medical marijuana under federal law” because it is illegal.  She reasoned that an illegal treatment cannot be reasonable or necessary under the WC Act and, in turn, an employer should not be responsible for reimbursement.


This decision—unless it is overturned or superseded—has immediate impact on employers in Pennsylvania.  Indeed, they are now required to reimburse employees for medical marijuana treatment for work-related injuries under the WC Act.  Failure to do so could result in penalties.  This holding is consistent with holdings in New Mexico, New Jersey, New Hampshire, New York and Connecticut.  However, it is contrary to holdings in Massachusetts, Maine, and Minnesota.

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