- Medical marijuana state question 788 and banking issues
Editor’s note: This month’s Legal Briefs section has been ceded to one of the OBA’s strategic partners, McAfee & Taft, to allow their insight on medical marijuana and the resulting banking issues. As a disclaimer, however, the following does not necessarily reflect the views or advice of the OBA, its legal department or its members. It’s simply meant as an opportunity to get more information out from a credible source on an important, timely topic.
MEDICAL MARIJUANA STATE QUESTION 788 AND BANKING ISSUES
by Robert T. Luttrell, III, McAfee & Taft
Generally, bankers are interested in knowing that their customers are not conducting illegal activities. There are legal and reputational risks to the bank otherwise. Because of the recent activity around the legalization of industrial hemp and the ubiquitous sale of its derivative CBD, the following reviews the background of the criminalization of marijuana (and its cousin industrial hemp); to what extent is industrial hemp cultivation, processing and sale legal federally and in Oklahoma; and what legislative relief may coming.
Cannabis was widely used as a medicine in the United States. And hemp was used for its fiber to be used in industrial products. The states and federal government ended that practice with state-level bans and the Federal Marijuana Tax Act of 1937. Since the Controlled Substances Act was enacted in 1970 “marihuana” (which definition included hemp) has been a Schedule 1 drug (Schedule 1 drugs also include heroin and LSD). Consequently, almost any activity involving growing, processing, transporting, possessing or dispensing marijuana is illegal. As is almost any activity related to the proceeds of these activities. Violators are subject to criminal penalties ranging from 10 years to life and fines up to $2,000,000
Nevertheless, the states began to legalize marijuana in some form. Texas was the first state to reduce possession of small amounts of marijuana to misdemeanor status in 1973. This decriminalization phase ran until 1978. California legalized medical cannabis in 1996. Colorado and Washington were the first states to adopt a recreational cannabis regime in 2012. Oklahoma legalized “medical” marijuana in 2018. Now 26 states have decriminalized small amounts of marijuana. This generally means possession is a civil or local infraction or lowest class misdemeanor with no possibility of jail time. Fourteen states and territories have legalized recreational marijuana. Thirty-four states have some form of medical marijuana program. https://www.pewresearch.org/fact-tank/2019/06/26/facts-about-marijuana/
Then, the federal government legalized industrial hemp grown under certain programs starting in 2014.
On June 26, 2018, Oklahoma approved State Question 788 which added statutes legalizing marijuana. Among other things, it gave the Oklahoma State Department of Health 30 days to develop applications for licenses and post them to its website.
The Oklahoma Medical Marijuana Authority reported that as of October 1, 2019, 205,899 patient licenses (just over 5% of the state’s population and the highest in the country) and 1,434 caregiver licenses had been issued. There were also 4,063 grower licensees, 1,651 dispensary licensees and 1,168 processor licensees. https://twitter.com/OMMAOK/status/1179152489477746689; https://www.statista.com/statistics/743485/medical-marijuana-patient-population-united-states-by-state/
Marijuana sales topped $23 million in May, 2019 and the state collected more than $1.6 million in excise taxes and $2 million in state and local taxes. Total state tax collections were almost $10.7 million. https://www.koco.com/article/medical-marijuana-sales-soaring-in-oklahoma-top-dollar23m-in-may/27843098# This growth has been attributed to low barriers to entry on the commercial side and lack of a requirement to have a specific medical condition on the user side. https://mjbizdaily.com/chart-medical-cannabis-license-growth-sizzling-oklahoma/
A number of legislative enactments followed SQ788 to do things like: decriminalizing possession of small amounts of marijuana (1.5 ounces); cleaning up the language of SQ 788; tightening some of the restrictions; transferring marijuana licensing to a newly created Oklahoma Medical Marijuana Authority; setting rules for the disposal of marijuana waste; setting rules for the disposal of marijuana inventory in the event of death, insolvency, bankruptcy of the license holder and for foreclosure of a security interest or by a receiver; and applying tobacco smoking limitations to smoking marijuana. The principal bill was House Bill 2612, the Oklahoma Medical Marijuana and Patient Protection Act, more commonly called the “Unity Bill”. It became effective on August 29, 2019. See also House Bill 2601; House Bill 2613, Senate Bill 31, Senate Bill 162, Senate Bill 532, Senate Bill 811, Senate Bill 882, Senate Bill 1030. See, 63 Okl. Stat. § 420 et seq. & OAC 310:681-1-1 et seq.
As a result of the passage of so many bills in the same legislative session, there are some inconsistencies that may need to be reviewed in particular cases. For example, Senate Bill 162, Senate Bill 1030, and House Bill 2601 all became effective November 1, 2019 and all amended 63 Okl. Stat §420. Senate Bill 162 and House Bill 2601 both contain the same subsection B reading:
B. Possession of up to one and one-half (1.5) ounces of marijuana by persons who can state a medical condition, but are not in possession of a state-issued medical marijuana license, shall constitute a misdemeanor offense with a fine not to exceed Four Hundred Dollars ($400.00).
However, in Senate Bill 1030, subsection B adds that no prison sentence may be imposed, that only a citation may be issued and that if the violator written promise to answer as specified in the citation, the police must release the person upon personal recognizance. Since these bills became law at the same instant, there is no way to tell whether the restriction on a prison sentence will be applied.
There are a number of commercial marijuana license categories, all of which relate to handling marijuana, although several do not involve growing, processing or dispensing marijuana.
Transportation licenses permit the holder to transport marijuana from an Oklahoma licensed dispensary, licensed grower, or licensed processer, to an Oklahoma licensed dispensary, licensed grower, licensed processor, or licensed researcher. Cannabis must be transported in a locked container, shielded from public view, and clearly labeled “Medical Marijuana or Derivative.”
Commercial Establishment License
A commercial establishment license covers dispensary, grower, processor, or researcher and is shall be issued for a period of twelve (12) months.
Medical marijuana waste disposal license
The holder of a Medical marijuana waste disposal license shall be “entitled to possess, transport and dispose of medical marijuana waste.” “Medical marijuana waste” is “unused, surplus, returned or out-of-date marijuana and plant debris of the plant of the genus Cannabis, including dead plants and all unused plant parts, except the term shall not include roots, stems, stalks and fan leaves.” 63 Okl. Stat. §428.
Medical marijuana testing laboratory license
“A medical marijuana testing laboratory may accept samples of medical marijuana, medical marijuana concentrate or medical marijuana product from a medical marijuana business for testing and research purposes only, which purposes may include the provision of testing services for samples submitted by a medical marijuana business for product development.”
The State Department of Health can require medical marijuana businesses to submit samples to a medical marijuana testing laboratory for testing.
Ownership of Licensees
Oklahoma requires that 75% of all principals of a marijuana license holder be Oklahoma residents. That may not be enforceable.
On June 29, the Supreme Court of the United States released its opinion in Tennessee Wine & Spirits Retailers Association v. Thomas, 588 US ___ (2019). Tennessee had a statute requiring all applicants for a license to operate a retail liquor store to have been a resident of Tennessee for 2 prior years, for a renewal license be a resident for 10 years and that all stockholders of corporate applicants be residents. SCOTUS held these requirements violated the dormant commerce clause.
“Under our dormant Commerce Clause cases, if a state law discriminates against out-of-state goods or nonresident economic actors, the law can be sustained only on a showing that it is narrowly tailored to “‘advanc[e] a legitimate local purpose.’”
If we viewed Tennessee’s durational-residency requirements as a package, it would be hard to avoid the conclusion that their overall purpose and effect is protectionist. Indeed, two of those requirements—the 10-year residency requirement for license renewal and the provision that shuts out all publicly traded corporations—are so plainly based on unalloyed protectionism that neither the Association nor the State is willing to come to their defense. The provision that the Association and the State seek to preserve—the 2-year residency requirement for initial license applicants—forms part of that scheme. But we assume that it can be severed from its companion provisions, see 883 F. 3d, at 626–628, and we therefore analyze that provision on its own. Since the 2-year residency requirement discriminates on its face against nonresidents, it could not be sustained if it applied across the board to all those seeking to operate any retail business in the State.”
Even though it is doubtful that the federal courts would deal with this issue, Oklahoma state courts could apply this rule to invalidate the residency requirement. That might become important as the business matures and outside players want to come into the state to acquire existing licensees.
Restraints on Prosecution
Because of the federal law implications, why, then, do people seem to feel comfortable dealing in marijuana or accepting the proceeds from marijuana in payment for product or services or for deposit or as rent? There are a number of constraints on federal agencies respecting their prosecution of marijuana related crimes.
Under the Obama Administration, the Department of Justice (DOJ) took a forbearance approach to much of the marijuana-related activities (both medical and recreational) rather than pursuing all activities that violate the CSA. In August 2013 the DOJ issued what is known as the Cole Memorandum advising U.S. Attorneys that their offices should focus their limited resources on the following marijuana-related crimes:
A. Preventing the distribution of marijuana to minors;B. Preventing revenue from the sale of marijuana from going to criminal enterprises, gangs, and cartels;
C. Preventing the diversion of marijuana from states where it is legal under state law in some form to other states;
D. Preventing state-authorized marijuana activity from being used as a cover or pretext for the trafficking of other illegal drugs or other illegal activity;
E. Preventing violence and the use of firearms in the cultivation and distribution of marijuana;
F. Preventing drugged driving and the exacerbation of other adverse public health consequences associated with marijuana use;
G. Preventing the growing of marijuana on public lands and the attendant public safety and environmental dangers posed by marijuana production on public lands; and
H. Preventing marijuana possession or use on federal property.
The Sessions Memo
The Federal position changed in January 2018 when the Cole Memorandum was rescinded by Attorney General Jeff Sessions. U.S. Attorneys were advised that the decision on whether to prosecute marijuana-related crimes should be guided by the DOJ’s traditional principles that apply to all criminal prosecutions.
A. Federal law enforcement priorities as established by the DOJ;
B. The seriousness of the crime;
C. The deterrent effect of criminal prosecution; and
D. The cumulative impact of particular crimes on the community.
The DOJ asserts that this merely returned the USAs to the position prior to the Cole Memo and that this does not represent a change. This is the guidance they had before the Cole Memo and, says the DOJ, the Cole Memo was unnecessary.
AG Barr’s Position
During a Senate hearing, William Barr said of the current state of affairs:
“The situation that I think is intolerable and which I’m opposed to is the current situation we’re in, and I would prefer one of two approaches rather than where we are. Personally, I would still favor one uniform federal rule against marijuana but, if there is not sufficient consensus to obtain that, then I think the way to go is to permit a more federal approach so states can make their own decisions within the framework of the federal law and so we’re not just ignoring the enforcement of federal law…. I would like to see Congress address this issue.”
Consolidated Appropriations Act of 2018 (also referred to as the Rohrabacher-Farr Amendment or the Blumenauer-McClintock-Norton Amendment)
Congress used the 2015 and 2016 appropriations bill to further limit enforcement of federal marijuana laws in states that have legalized medical or recreational marijuana. And, like “old Man River” it just keeps rolling along having been continued in appropriation bills or by continuing resolution since. The current version is contained in Consolidated Appropriations Act of 2019 (Pub.L. 116–6) Sec. 537 which was effective until September 30, 2019. Now continued until November 21, 2019 (Continuing Appropriations Act, 2020 (HR 4378) (Pub. L. 116-59 §§101(2) &106(3))
None of the funds made available under this Act to the Department of Justice may be used, with respect to any of the States of …Oklahoma… to prevent any of them from implementing their own laws that authorize the use, distribution, possession, or cultivation of medical marijuana.
The same provision is included in the FY 2020 Commerce, Justice, Science And Related Agencies Appropriations Bill §531 which would take the prohibition through 2020. But it also contains a provision (§550) which would restrict funds being used to interfere in any marijuana regime, whether or not medical.
We should note that the term “medical” is not defined in the bills. To be truly “medical,” marijuana would have to have an accepted medical use. The FDA in 2016 found that “[T]he available evidence is not sufficient to determine that marijuana has an accepted medical use.” This means that marijuana has been determined to have “a high potential for abuse,” “no currently accepted medical use in treatment in the United States,” and “a lack of accepted safety for use of the drug or other substance under medical supervision.”
It could be argued that, because of Oklahoma’s lack of a “presenting condition”, there is not enough “medical” in Oklahoma to make the marijuana laws “medical” notwithstanding the name.
Effects of restrictions. lying on these appropriations bills, defendants in several federal marijuana prosecutions in California and Washington moved to dismiss their cases. On August 16, 2016, in United States v. McIntosh, 833 F.3d 1163 (9th Cir., 2016), a panel of the Ninth Circuit held that the appropriations bills entitled marijuana defendants to an evidentiary hearing “to determine whether their conduct was completely authorized by state law, by which we mean that they strictly complied with all relevant conditions imposed by state law on the use, distribution, possession, and cultivation of medical marijuana.” The panel deferred to the district courts on remand to decide what remedy would be appropriate, noting the transitory nature of the potential relief
Safe Banking Act of 2019
The “Secure And Fair Enforcement Banking Act of 2019”, HR 1595 (“SAFE Banking Act of 2019”) was passed by the House on September 25, 2019 on a vote of 321 to 103 and has been referred to the Senate. It does not legalize marijuana. It restricts action which can be taken against depository institutions and ancillary business that deal with marijuana related firms. To obtain the benefits of the Act, the covered entity must be dealing with a “Cannabis-Related Legitimate Business”. That is,
“a manufacturer, producer, or any person or company that—
(A) engages in any activity described in subparagraph (B) pursuant to a law established by a State or a political subdivision of a State, as determined by such State or political subdivision; and
(B) participates in any business or organized activity that involves handling cannabis or cannabis products, including cultivating, producing, manufacturing, selling, transporting, displaying, dispensing, distributing, or purchasing cannabis or cannabis products.” §14 (4).
Cannabis is “marijuana” as defined in the CSA A cannabis product is “any article which contains cannabis” §14(2) & (3).
In respect to a customer of a depository institution that is a cannabis-related legitimate business, federal banking regulators may not:
1. take adverse action related to deposit insurance,
2. discourage the offering of financial services, or
3. take adverse or corrective supervisory action on a loan.
For ancillary businesses, proceeds from a transaction involving activities of a cannabis-related legitimate business are not considered proceeds from an unlawful activity.
Depository institutions, insurers and their officers, directors and employees, cannot be held liable under any federal law for providing financial services to a cannabis-related legitimate business.
Collateral is not subject to forfeiture.
The FinCEN is required to issue SAR related guidance and examination procedures consistent with the Safe Banking Act.
Federal banking regulators must:
1. confirm “the legality of hemp, hemp-derived CBD products, and other hemp-derived cannabinoid products, and the legality of engaging in financial services with businesses selling hemp, hemp-derived CBD products, and other hemp-derived cannabinoid products,” and
2. “provide recommended best practices for financial institutions to follow when providing financial services and merchant processing services to businesses involved in the sale of hemp, hemp-derived CBD products, and other hemp-derived cannabinoid products.”
The Strengthening the Tenth Amendment Through Entrusting States Act has been introduced in the Senate. It would return to the states and Indian tribes the right to control the “manufacture, production, possession, distribution, dispensation, administration, or delivery of marihuana.” It has gone nowhere.
Where does industrial hemp and it derivative CBD fit?
The most movement has been in regard to industrial hemp.
Hemp Specific Legislation
The Agriculture Improvement Act of 2018 (Public Law 115–334) (the “2018 Farm Bill”) became law on December 20, 2018. The Agricultural Act of 2014 (P.L. 113-79) (“2014 Farm Bill”) was became law on February 7, 2014. Both have provisions relating to hemp. Both define industrial hemp as:
the plant Cannabis sativa L. and any part of that plant, including the seeds thereof and all derivatives, extracts, cannabinoids, isomers, acids, salts, and salts of isomers, whether growing or not, with a delta-9 tetrahydrocannabinol concentration of not more than 0.3 percent on a dry weight basis. (7 USC §§ 5940 and 1639o).
Exclusion from the definition of marijuana?
On the federal level, the 2018 Farm Bill excludes hemp from the definition of marihuana in the CSA with no apparent restriction on how or where it is produced. This raises an interesting issue in that hemp production is only permitted under the 2014 Farm Bill under a state pilot program and under the 2018 Farm Bill in accordance with a USDA plan or an approved State or tribal plan. The 2014 Farm Bill authorization remains in effect until one year after the USDA adopts its rules. Hemp may be produced under the 2014 Farm Bill notwithstanding the CSA, but is not excluded from the definition of marijuana by that bill. It appears that the 2018 Farm Bill declassified industrial hemp grown under the 2014 Farm Bill as well as that grown under the 2018 Farm Bill. There are penalties in the 2018 Farm Bill for cultivating hemp not in conformance with a plan. But there are none in the 2014 Farm Bill because before the 2018 Farm Bill that would have made the hemp grower subject to the CSA. One of the penalties in the 2018 Farm Bill is the referral of the offender to the Attorney General of the United State and, in Oklahoma, the state Attorney General. There seems to be no reason to do this if there are no penalties except loss of privileges under the program. But, there do not seem to be any.
In Oklahoma, industrial hemp is excluded from the definition of marijuana under certain circumstances.Two amendments to the definition of marijuana in 63 Okl. Stat. §2-101(23)(h) were adopted in the last legislative session which cloud the matter. One was by Laws 2019, SB 868, c. 91, § 10, emerg. eff. April 18, 2019 (“Version 1”) and by Laws 2019, SB 848, c. 428, § 16, emerg. eff. May 21, 2019 (“Version 2”). They both exempt “industrial hemp” from the definition of marijuana.
Version 1 exempts “h. industrial hemp…and any part of such plant…which shall only be grown pursuant to the Oklahoma Industrial Hemp Program and may be shipped intrastate and interstate.”
Version 2 exempts “h. industrial hemp… and any part of such plant…which shall not be grown anywhere in the State of Oklahoma but may be shipped to Oklahoma pursuant to the provisions of subparagraph e or f of this paragraph.”
Since Version 2 became effective last, it seems that industrial hemp grown in Oklahoma is not exempt from the definition of marijuana in Oklahoma. I am confident that this is not what the Legislature intended. But, I think because of the effective dates of the Acts, this is what happened. I have been told that this will be cleaned up next session. I don’t know how a court would handle this in the interim. It is inconsistent to have an Industrial Hemp Pilot Program to grow hemp in Oklahoma and have penalties for growing hemp in Oklahoma.
“Retail sales of industrial hemp and hemp products may be conducted without a license so long as the products and the hemp used in the products were grown and cultivated legally in this state or another state or jurisdiction and meet the same or substantially the same requirements for processing hemp products or growing hemp.” 63 Okl. Stat. §1-1431(C).
Transportation of hemp and hemp products produced under the 2018 Farm Bill can be transported through any state or Indian Tribal lands whether or not legal in that jurisdiction. §10144. Except that, as noted above, the only authority to transport Oklahoma hemp is in the version of 63 Okl. Stat. §2-101(23)(h) first effective, now repealed.
2018 Farm Bill
The hemp grower must be licensed in an USDA approved state or Indian tribal plan or, absent such a plan, by the USDA under a plan established by the USDA. The USDA published its Interim final rule effective on October 31, 2019. The USDA will continue to receive comments and you should expect the rules to change. Some interesting items in the rule:
1. Samples for testing must be collected with 15 days of anticipated harvest. Oklahoma has not set a schedule and Washington has a 30 day schedule and has trouble meeting it.
2. Sampling must “be sufficient at a confidence level of 95 percent that no more than one percent (1%) of the plants in the lot would exceed the acceptable hemp THC level.
3. The “Acceptable Hemp THC level” could test above .3% THC and still be hemp depending on the confidence level of the test. The USDA is considering establishing a hemp laboratory approval process for this reason.
4. Hemp testing a 0.5%THC or below will not be subject to action under a plan. Nevertheless, hemp testing above .03% must be collected and destroyed by a person authorized under the CSA to handle marijuana.
Oklahoma has adopted an Industrial Hemp Program and a set of rules. But, it has not been approved by the USDA. So, Oklahoma is still operating under the 2014 Farm Bill.
2014 Farm Bill
The 2014 Farm Bill authorized state pilot programs to “study the growth, cultivation, or marketing of industrial hemp.” Oklahoma authorized such a program. 2 Okl. Stat. §3-401 et seq. Colleges are authorized to contract for the production of hemp. The OSDA licenses the operation. The license application shows the intended use and disposition of the crop. So, to determine if the industrial hemp is being grown in accordance with the Oklahoma Pilot Program it is necessary to:
Review the license,
Review the license application,
Ensure that the activity is taking place on the described real estate,
Ensure that the activity is covered by the license,
Review any test reports’ and
Review harvest reports.
Hemp in Oklahoma is eligible for crop insurance. https://www.farmers.gov/manage/hemp
What about CBD?
There are least 113 cannabinoids in the plant Cannabis sativa L. The most well known is (was?) delta-9 tetrahydrocannabinol (“THC”) which is the principal psychoactive constituent of cannabis (and a controlled substance on its own divorced from the marijuana plant). One of others, Cannabidiol (“CBD”), is reputed to have medicinal qualities. The FDA has approved a CBD containing prescription drug, Epidolex, for the treatment of two seizure conditions: Dravet syndrome and Lennox-Gastaut syndrome.
CBD being an extract of the “marihuana” plant is, along with THC, a Schedule 1 Controlled Substance and cannot be legally grown, processed or sold. That is, unless the CBD isn’t a Schedule 1 Substance.
CBD (and, hence, CBD oil) is not a Schedule 1 substance if it is made from industrial hemp. Oklahoma has made industrial hemp farming legal. So have a number of other states. Assuming away for a moment the conflicting amendments and assuming that a court holds or the legislature confirms that Version 1 applies, CBD oil derived from industrial hemp is not a controlled substance under certain circumstances.
There are some obvious problems. The 2014 Farm Bill is silent on how to obtain or transport hemp seeds. The 2014 Farm Bill does not define “research”. The 2014 Farm Bill does not specifically address the legality of hemp’s constituent compounds such as CBD.
Colorado CBD as an example
Oklahoma Version 1 of 63 Okl. Stat. § 2-101(23)(h) would make Colorado CBD not legal because is was not a “part of such plant…grown pursuant to the Oklahoma Industrial Hemp Program.”
Oklahoma Version 2 would make Colorado CBD not legal because is was not “shipped to Oklahoma pursuant to the provisions of subparagraph e or f of this paragraph.”
And for CBD, it may be shipped into the State only under e & f.
“e. for any person participating in a clinical trial to administer cannabidiol for the treatment of severe forms of epilepsy pursuant to Section 2-802 of this title, a drug or substance approved by the federal Food and Drug Administration for use by those participants,
f. for any person or the parents, legal guardians or caretakers of the person who have received a written certification from a physician licensed in this state that the person has been diagnosed by a physician as having Lennox-Gastaut Syndrome, Dravet Syndrome, also known as Severe Myoclonic Epilepsy of Infancy, or any other severe form of epilepsy that is not adequately treated by traditional medical therapies, spasticity due to multiple sclerosis or due to paraplegia, intractable nausea and vomiting, appetite stimulation with chronic wasting diseases, the substance cannabidiol, a nonpsychoactive cannabinoid, found in the plant Cannabis sativa L. or any other preparation thereof, that has a tetrahydrocannabinol concentration of not more than three-tenths of one percent (0.3%) and that is delivered to the patient in the form of a liquid,”
So, almost all of the CBD where ever it is being sold is illegal.
The Consolidated Appropriations Act of 2019 (Pub.L. 116–141) (effective until September 30, 2018; now also continued to December 7, 2018) prohibits the use of funds to contravene the Farm Bill:
None of the funds made available by this Act or other Act may be used—
(1) in contravention of section 7606 of the Agricultural Act of 2014 (7 U.S.C. 5940); or
(2) to prohibit the transportation, processing, sale, or use of industrial hemp, or seeds of such plant, that is grown or cultivated in accordance with subsection section 7606 of the Agricultural Act of 2014, within or outside the State in which the industrial hemp is grown or cultivated.
2018 Farm Bill preserved the Food and Drug Administration’s authority to regulate products containing cannabis or hemp. The FDA has approved CBD in the drug Epidiolex for treatment of Lennox-Gastaut syndrome or Dravet syndrome in patients 2 years of age and olderand THC in the drugs Marinol and Syndros. Consequently, the FDA’s position is that:
“Under the FD&C Act, any product intended to have a therapeutic or medical use, and any product (other than a food) that is intended to affect the structure or function of the body of humans or animals, is a drug. Drugs must generally either receive premarket approval by FDA through the New Drug Application (NDA) process or conform to a “monograph” for a particular drug category, as established by FDA’s Over-the-Counter (OTC) Drug Review. CBD was not an ingredient considered under the OTC drug review. An unapproved new drug cannot be distributed or sold in interstate commerce.”
The FDA has sent warning letters to that effect.
Unsurprisingly, the FDA takes the position that, since CBD is an approved drug, it is illegal to label products containing CBD as a dietary supplement.
Any manufactured product containing CBD must include on its label:
1. The country of origin of the cannabidiol; and
2. Whether the cannabidiol is synthetic or natural. 63 Okl. Stat. §1-1431(A).
The FDA takes the position that, since CBD is an approved drug, it is illegal to put it in human or animal food.
“The addition of derivatives of hemp, including hemp-derived cannabidiol, to…products intended for human or animal consumption shall be permitted without a license and shall not be considered an adulteration of such products.” 63 Okl. Stat. §1-1431(C). But, any establishment selling or manufacturing marijuana or CBD products included in foodstuffs or ingested orally as a major component of their business operation is a “Food Establishment” and is subject to 63 § O.S. 1-1118 and is required to obtain a food license.
Businesses extracting CBD or processing or warehousing food items containing CBD are subject to the licensing and inspection requirements of 63 O.S. § 1-1119 and OAC 310:260.
“A cosmetic is defined in 201(i) as “(1) articles intended to be rubbed, poured, sprinkled, or sprayed on, introduced into, or otherwise applied to the human body or any part thereof for cleansing, beautifying, promoting attractiveness, or altering the appearance, and (2) articles intended for use as a component of any such articles; except that such term shall not include soap.”
Under the FD&C Act, cosmetic products and ingredients are not subject to premarket approval by FDA, except for most color additives. Certain cosmetic ingredients are prohibited or restricted by regulation, but currently that is not the case for any cannabis or cannabis-derived ingredients.”
“The addition of derivatives of hemp, including hemp-derived cannabidiol, to cosmetics, personal care products…shall be permitted without a license and shall not be considered an adulteration of such products.” 63 Okl. Stat. §1-1431(C).
Legalized marijuana presents challenges for bankers. Until Congress acts any business having a relationship with marijuana or its proceeds fraught. So, too, with industrial hemp and CBD until the USDA issues its final rules and Oklahoma both corrects conflicts in its statutes, conforms its plan to the final rules and receives USDA approval. So, proceeding cautiously should be the rule. Stand by you will get the latest news from the OBA.