When California Governor Gavin Newsom enacted Assembly Bill 45 in early October, there was great excitement in the state’s cannabis industry, especially among companies and insurance professionals specializing in the CBD business.
The law allows the inclusion of hemp and cannabinoids (such as CBD) as well as hemp extracts in foods and beverages, dietary supplements, cosmetics and pet foods as long as they contain less than 0.3% THC.
It’s a step towards clarifying the 2018 Farm Bill, which legalized hemp at the federal level.
AB 45 amends Sherman’s Food, Drugs, and Cosmetics Act, which prohibits the manufacture or sale of adulterated food, beverages, or cosmetics. It considers any food, beverage or cosmetic product to be “adulterated” if it contains toxic or harmful substances that may harm the health of a person or animal who consume them.
AB 45 would require a manufacturer of dietary supplements and foods containing industrial hemp to register with the California Department of Public Health and provide evidence that all plant parts used come from an area with an established and regulated industrial hemp program. There are also advertising requirements.
The law is a good move, but the resulting regulatory structure could be far more restrictive than most operators who want to jump in right would like.
In our latest podcast on Insuring Cannabis, we spoke to Ian Stewart, founder and co-chair of the cannabis law practice at Wilson Elser, to find out what AB 45 does and what doesn’t.
Below you will find insights from this conversation.
One advantage of AB 45 is that it paves the way for an industry that could create new products, jobs and opportunities for those looking to provide services to the new businesses it creates.
“The appetite for these products is still great,” said Stewart. “The hemp market in California in particular is lagging behind. And there’s a lot of oversupply of CBD out there. But I think there are many companies that would like to sell products in California but have chosen not to because of the dangers of breaking state laws. “
While Stewart sees AB 45 as “a real boon to the hemp-derived cannabinoid industry,” he cautioned against some aspects of the new law, including strict advertising restrictions.
“One of the main differences in the AB 45 legislation compared to other states is therefore the strict requirements for advertising, marketing and testing,” he said. “So in California there can’t be any advertising or marketing for children, but in addition they must be marketing or advertising in any type of media where at least 70% of the audience is reasonably 18 years of age or older. And that through reliable target group data. So that’s an area where some other states don’t really have this requirement on the advertising side. “
Strict testing standards also apply in the new law, which requires that CBD products be tested the same way as regulated marijuana products in California.
“California already has the strictest marijuana testing protocols of any state,” said Stewart. “And there are a lot of tests these products have to go through. In addition to cannabinoid and terpene content, they must be tested to parts per billion for residual solvents, residues of pesticides, heavy metals, microbial contaminants, microtoxins like mold and mildew, moisture content, etc.
The act directs the California Department of Cannabis Control to prepare a report on the steps necessary to include hemp products in the cannabis supply chain, including the inclusion of hemp cannabinoids in manufactured cannabis products and, conversely, sales of hemp products to cannabis retailers.
And if all of that happens, the way could be paved for a potentially booming market in California. According to this year’s Fortune Business Insights report, the global CBD market is expected to grow from around $ 36 billion in 2021 to more than $ 55 billion by 2028.
An opportunity that, added Stewart, “signals in a way that there may be an opportunity for cross-selling in what are now completely different markets.”
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