The market for hemp-derived CBD is expected to hit $5.1 billion in 2019 and $23.7 billion by 2023, according to new research from CBD and cannabis-focused market research firm, Brightfield Group. But despite bullish projections from researchers, enthusiasm from the industry, and curiosity from consumers, many federal and local agencies still treat it as a forbidden substance.

“Market research firms are coming in and saying, 'this is blowing up.’ And it is,” said Jamie Schau, who oversees CBD research at Brightfield Group. “It hits the nail on the head with a variety of phenomena that are happening in our country right now. The opioid backlash is a huge one, there’s a huge trend toward natural health products, nutraceuticals. People see CBD as something to fill in that gap.”

Following the passage of the 2018 Farm Bill, which removed hemp and derivatives like cannabidiol (CBD) from the Controlled Substances Act, the market for CBD has exploded. Despite a dearth of research on the compound, it has been embraced for its purported therapeutic qualities -- as well as for not getting its users high -- and can be found in everything from lotions and supplements to makeup and coffee. Consumers have embraced the unregulated substance, and the market has grown seven-fold from about $627 million in 2018 to a projected $5.1 billion in 2019, according to Brightfield.

“The space has just happened to blow up very much. The FDA can see that not only are consumers and politicians interested in getting this passed, but there is a huge economic impact potentially for cultivators, for processors, for vendors,” Schau said.

Brightfield’s figures take into account that the FDA, Congress, or both will design regulations that permit CBD in both pharmaceutical medications, like GW Pharmaceuticals’ ($GWPH) Epidiolex, and in lower potency over-the-counter formulations. The firm anticipates tinctures will continue to dominate the market -- they’ll make up about 25 percent of the market in 2019 -- but will slowly be eclipsed by more consumer friendly forms, like capsules, topicals, and beauty products. And mass retailers, like CVS, Walgreens and Kroger, which only entered the market within the past year, are driving the charge. Brightfield estimates they’ll account for 57 percent of sales in 2019.

Regulators haven’t kept up with the rising demand. The Food and Drug Administration held its first public hearing on hemp-derived CBD at the end of May. Without Congressional intervention, establishing regulations for CBD could take three years. In the interim, the agency has cautioned that it’s unlawful to make unsubstantiated health claims about CBD, and use it in food and beverages subject to interstate commerce.

"This lack of research, and therefore lack of evidence, to support CBD's broader use in FDA-regulated products, including in food and dietary supplements, has resulted in unique complexities for regulation including many unanswered questions relating to safety … what if children access CBD products?" Dr. Ned Sharpless, the FDA's acting commissioner, said at the hearing. "These and many other questions represent important and significant gaps in our knowledge."

State and local governments have adopted more liberal approaches to marijuana regulation, but local regulators have mostly fallen in line with the FDA’s recommendations, in spite of rising industry investment and enthusiasm.

The New York City Department of Health announced a city-wide ban on the substance. Beginning July 1, the city said it would embargo items found to be in violation of the FDA’s recommendations, and, starting in October, inspectors will begin issuing fines.

“The Health Department is responsible for promoting the safety of the food available to New Yorkers,” a spokesperson for the NYC Department of Health and Mental Hygiene said in a statement. "The U.S. Food and Drug Administration has advised that it is unlawful to add cannabidiol (CBD) to food or drink. We have been informing businesses in New York City that may sell food and drink about this regulation to help them achieve compliance.”

For entrepreneurs who’ve built their businesses on the growing CBD trend, these bans are disheartening. Ron Silver, chef, restaurateur, and founder of CBD edibles business Azuca, serves up CBD-infused cocktails in the two locations of his Manhattan restaurant, Bubby’s. Azuca’s infused sweeteners promise fast acting, precision dosing, Silver said, and they’re triple-tested in labs for purity and potency.

“What we really want to do quite frankly is be a good example of how to offer a responsible product,” Silver said.

Silver didn’t seem overly concerned about the impact New York City’s ban would have on Azuca, since most of his company’s business is done online with states that permit CBD. But that doesn’t mean it isn’t frustrating.

“It makes it so that I can’t sell my own product in New York or at least in my own restaurants,” Silver said. “We certainly don’t want to be pushing uphill or against the stream when we have opportunities that are more encouraging and more open to development in other states.”

So for Bubby’s and its patrons, the ban means no more infused teas, cocktails, and coffees come October, when the Health Department starts writing fines. Silver did mischievously indicate that “there may be a case to serve [CBD] on the side.”

Brian Baum, president and CEO of Colorado-based Cannovia, which sells an array of CBD-infused products, said he thinks that ultimately local pushback against CBD will be “a blip on the radar” in the grander scheme of the growing CBD market.

“A lot of pressure being applied to the FDA, and I think if they can find a way out of this they will,” said Baum, who has a background in traditional healthcare.

Less than a month after the FDA’s initial hearing, Deputy Commissioner Amy Abernethy issued an update on the agency’s progress for anxious consumers and businesses, first in a statement, then in a series of tweets. The FDA is excited about CBD, she said, but is committed to a “rigorous, science-based approach” to regulation.

“CBD is not a risk-free substance, and we need to make sure we understand its potential adverse effects as well as its potential benefits,” she tweeted.

The FDA will continue to collect public commentary on CBD until July 16. But until regulations are fully fleshed out, Brightfield projects people will just keep buying.

“There should be a regulatory system in place and there should be testing standards ... but in the meantime manufacturers are absolutely still selling a ton of product," said Brightfield’s Schau. "Consumers are absolutely seeking out and purchasing more product. Generally, manufacturers are moving forward with the understanding there isn't much consequence, but there is a lot to be gained.”

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