By Blake Schroeder, CEO of Medical Marijuana, Inc. and Kannaway
With cannabis still not federally legal in the U.S., the cannabis industry has been a challenging market to monetize, relying on specific state’s laws. Meanwhile, although THC remains a scheduled substance, the FDA made clear that another cannabinoid, cannabidiol (CBD), is federally legal to market, sell and consume when hemp was defined in the Farm Bill in 2018. Since its passing, this legislation enabled CBD to receive mainstream approval and acceptance throughout the United States. The marketplace has generated $5.6 billion in sales nationwide, with 66 percent of those sales generated through e-commerce. According to a 2019 consumer report, 64 million people have tried CBD in the U.S.
There’s a lot to be learned from this market. With cannabis posed for federal legalization and reform measures being made across the country, the CBD market presents a unique opportunity to build a customer base and lay the groundwork for THC product sales in the near future. Just as the THC space is struggling to gain footing now, the CBD marketplace also struggled before the Farm Bill was signed. This entire industry faced challenges working with lawyers, accountants, credit cards, and banks.
The THC space faces similar struggles now, for instance, getting fire insurance and working with banks and credit card processors. Federal law makes it difficult for cannabis companies to put money in banks, mainly because of THC’s inclusion in Controlled Substances Act. There is also a real fear that companies operating in the non-psychoactive CBD space could face consequences if they were to enter the mainstream marijuana business.
As companies benefitted from the rapid growth of the CBD, and consumers benefitted to free access to cannabis products, the same will be true when cannabis is fully federally legalized. It is crucial that companies stay on the cutting-edge by leveraging the established CBD market. By using ingenuity, marketing power, mergers and acquisitions, legal prowess, and an agile business mindset, companies that sell CBD products are in a unique position to use these target audiences to garner more sales, attracting more business and investors once cannabis is legalized on a federal level.
A clear understanding of the law is helpful is this dynamic and ever-changing space. In 2009, MJNA researched cannabinoids and whether here was a legal way to bring non-psychoactive cannabis to the U.S. market. We found a farmer in the Netherlands growing a unique species of cannabis that contains a high quantity of CBD and low amounts of THC. Shortly thereafter, the world’s first legal CBD product was launched in the U.S. and a new industry was born.
It’s important that safety and testing measures are in place to sell cannabis responsibly. When the CBD industry was still in its nascent stages, we tested the first products we sold, and have done so ever since. Now, an entire testing industry has grown around CBD and rigorous testing, which can be applied to THC. To ensure quality THC products are sold, anticipate using certificates of analysis, SKU testing, and other diagnostic tools available. This way, consumers are always aware of what’s in the product and can be comfortable using it.
From my experience with international markets, I’ve witnessed the importance of being nimble and adaptable. When cannabis is made federally legal in the U.S., it won’t be turnkey; infrastructure will need to be set up. As the industry awaits federal legalization, it’s important to have plans in place to incorporate THC products into the pipelines. Once the supply chain is place, it will be crucial to have operations on the ground, so that operators can move quickly and adapt when as regulations change around the world.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.