As the hemp industry awaits guidance from the US Food and Drug Administration on its regulation of hemp-derived CBD, one interesting result has been that federal courts have adopted the same wait-and-see approach. Earlier this week, a federal judge presiding over a consumer case against CV Sciences, Inc. decided to stay (effectively, putting on hold) the case pending FDA rulemaking on the marketing of CBD ingestible products (link).

On its face, this is yet another example of how the hemp-derived CBD industry, and, as a result, the broader industrial hemp industry, has been stuck in idle because the FDA has not yet acted. If the wheels of justice can’t move until the FDA passes judgment, what can? At least, this is a perspective on hemp that I’ve heard countless times over the past year from industry participants.

At the same time, it seems to me that the hemp industry should not lay blame exclusively at the feet of the FDA. Biomass prices have plummeted since mid-2019 due to oversupply, just as legal industrial hemp cultivation took root. Combined with consumer demand challenges, that oversupply also hurt the pricing for hemp byproducts such as crude and isolate.

What drove that oversupply? Recall that industrial hemp was relieved of its federal controlled substance status at the end of 2018, just as valuations and capital markets for non-hemp cannabis were moving towards a peak in spring 2019. With the prospect of getting in on the ground floor of an (almost) entirely new industry, hemp provided a unique opportunity to play in cannabis without the overhang of federal illegality. Riding a similar wave of capital as its THC-laden cousin at that moment in time (link), the hemp industry, and particularly the CBD consumer product business, benefitted from a quick jolt of capital to capture that spark, not very different from early cycles in other products. Product ensued.

Certainly, it seems logical to me that hesitancy of companies to break into ingestible CBD products pending FDA resolution has squelched the marketplace; however, it also seems logical to me that regulation (or, in this case, the lack thereof) is not the only factor.