More regulation is great!
It's a rare, rare circumstance that I'll actually applaud more regulation. But when it comes to public safety, I think it is appropriate and necessary.
The CBD products being sold today are mostly unregulated and there have been numerous questions regarding product integrity. Many consumers have even filed lawsuits against manufacturers after having products sent to a lab for third party testing. Results have sometimes shown the levels of CBD within the product were not as advertised, sometimes more and sometimes less. Given the premium paid for these products, consumers have even more of a right to get what they are paying for. The only real "enforcement" on a national level has been FDA letters to CBD companies warning them of making unsubstantiated health claims. (at least given current research)
I have been saying that regulation will be coming down this year given instances such as this in the interest of public health. The passing of the 2018 Farm Bill was a gigantic step in legalizing hemp, but many questions still remain. While it is happening slowly, various states are adopting measures to clarify the rules and establish a standard. And I think it will extend to the federal level soon.
Illinois is taking a leadership role and introducing a bill that will require all CBD products sold to meet testing state requirements. The standards will be established by the Illinois Department of Agriculture. To read more about it, here's the Chicago Tribune article -
The health benefits of this are pretty obvious, i.e. we don't want harmful things in these products that we know could hurt us. (ex. harmful pesticides) But what are the investment implications?
Given the ambiguity of existing laws, the competitive landscape has exploded. There has been a race to put SOMETHING on the shelf with "CBD" on it to capitalize on the newest health trend. And like anything else, there are legitimate companies doing the right thing, companies doing the wrong thing, and everything in between.
But a standardized testing bill, similar to what Illinois is trying to pass, will help this problem by pressuring the companies who are not meeting the requirements to bring their product up to code. Some will be able to to do it and some won't, but the good news is that consumers will ultimately be able to have more confidence in the integrity of the products they are using.
The culling of manufacturers will create an opportunity for the companies doing the right thing to stand out from the crowd, especially as the industry matures. Also impacted will be suppliers - such as labs (who will do the testing) and wholesale producers.
Legislation can be a good thing, and I think it is important to remind ourselves of that. I hope the federal government will follow Illinois' lead in this for the protection of consumers.
Sources - Chicago Tribune (see article link)
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