As we approach the final month of 2019, we continue to await the signs of the pot stock resurrection. We’ve seen the market briefly return to life before dropping back down, but consistent growth has eluded the sector for months. Even CBD stocks, traditionally the most lucrative part of the cannabis space, have been hit by hard times.
Sadly, the hard times may not be letting up anytime soon. Today, Rich discusses a warning letter from the FDA that reportedly “cracks down” on 15 CBD companies.
“We knew when we were going from an unregulated sector to a regulated sector that we were going to have problems like this,” says Rich. So let’s break down this news and what it means for investors in CBD stocks.
The FDA’s Warning Letter
Yesterday, The US Food and Drug Administration (FDA) issued warning letters to 15 CBD companies. The letters claim the companies are acting illegally by selling CBD products in ways that violate the Federal Food, Drug, and Cosmetic Act.
According to the FDA:
“Based on the lack of scientific information supporting the safety of CBD in food, the FDA is also indicating today that it cannot conclude that CBD is generally recognized as safe (GRAS) among qualified experts for its use in human or animal food.”
The letter arrived just as the FDA prepares to publish a revised Consumer Update. This update will more broadly detail the safety concerns regarding CBD products and will determine the growing power of CBD stocks.
“Today’s actions come as the FDA continues to explore potential pathways for various types of CBD products to be marketed lawfully. Work is ongoing to obtain and evaluate information to address outstanding questions related to the safety of CBD products while maintaining the agency’s rigorous public health standards.”
Earlier this month, the current nominee for FDA commissioner, Dr. Stephen Hahn, said that the agency would not be hurried to rush judgment or make exceptions on CBD safety as an ingredient for food, beverages, and dietary supplements. FDA officials have also stated that they need more scientific data to support CBD safety.
Which CBD Companies Got the Letter?
As the FDA is a regulatory body for the United States, all 15 CBD retailers that received the letter are American companies. These include six Californian companies, and one each for the states of Texas, Oklahoma, Colorado, Oregon, New York, Florida, North Carolina, Arizona, and Kentucky.
As with warning letters issued in the past, the FDA has given these companies 15 working days to respond. In their responses, they must provide information on how they will correct the violations. If they fail to respond, the FDA will pursue legal action against them, which could include product seizure and injunction.
“This is a setback, folks. This is why the CBD stocks and cannabis stocks are down today,” explains Rich.
Back in the summer, Curaleaf Holdings Inc. (CSE:CURA) (OTCQX:CURLF) was hit with its own FDA-issued letter. This was because the company was apparently claiming that its CBD products could treat cancer, Alzheimer’s, opioid withdrawal, pain, anxiety, and other conditions and diseases.
Effect on CBD Stocks
While it’s easy to read doom and gloom in these letters, Rich is actually more optimistic.
Ensuring that CBD products are FDA-approved requires them to be lab-tested. Rich believes this will not only help distinguish legitimate CBD products from black market ones, it will ultimately drive CBD sales.
“This is a very good thing, this is what we need,” he says. “This industry needs better testing. Every product should be tested and we should know if something is legal or illegal. More research and more education will lead to more stores.”
What do you think? Are CBD stocks in for hard times? Or is this ultimately a good move for the sector? Let us know your thoughts.
Featured imageL DepositPhotos © rbspace