On December 20, 2018, Donald Trump officially signed the updated Farm Bill into law, fully legalizing industrial hemp cultivation and driving huge gains in one of the highest potential markets out there—the CBD market. The passage of that bill, which Trump described as a "bipartisan success," was heralded as a landmark moment for CBD companies as it fully legitimized their operations and opened up access for a massive new market.
Slow Implementation of CBD Regulation
However, over a year has passed since that watershed moment, and CBD companies in the US remain just as far from their end goal as they did then. This is because the matter was then passed on to the Food and Drug Administration (FDA), which was tasked with drafting up the necessary regulations for hemp-derived products such as CBD. This process of regulatory alignment is a lengthy one and can take years to fully draft and implement, meaning the overnight success that some investors in CBD stocks envisaged remains just a pipe dream.
That is, until now! A bipartisan coalition of congressional lawmakers have recognized the huge potential of the CBD market, which could exceed US$20 billion by 2024, and the damaging implications that the lengthy review process may have on the future growth of the market. Rep. Collin Peterson (D-MN), Chairman of the House Agriculture Committee, has filed a bill that would require food and agriculture regulators to treat hemp-derived CBD as a dietary supplement.
“The last two Farm Bills (2014 and 2018) were landmark successes for hemp, but we are still very early in this process and growers need regulatory certainty,” Peterson said, adding that, “This bill will allow [the] FDA to regulate CBD that comes from hemp as a dietary supplement, providing a pathway forward for hemp-derived products.”
Bipartisan Support a Positive Sign
The bill is supported on both sides of the House, with cosponsors including Reps. Thomas Massie (R-KY), James Comer (R-KY), and Chellie Pingree (D-ME). According to Eric Seenstra, President of advocacy group Vote Hemp, this bipartisan support is a strong indication that lawmakers want to see the hemp industry move forward. “It was really nice to see people on both sides of the aisle coming together to solve this problem, and we’re hopeful that there will be a Senate version of the bill and we could see some action on this in 2020,” Steenstra told Hemp Industry Daily.
The proposed bill has been referred to the Committee on Energy and Commerce and the Committee on Agriculture, which will review it “for a period to be subsequently determined by the Speaker,” according to Congress.gov. This means we have no concrete date as to when we can expect to see this legislation pass, but most appear hopeful that it will happen in this calendar year.
Stocks to Watch
Naturally, the news of some forward movement with regard to hemp regulation sent CBD stocks rocketing across the board, and they could be in line for even further gains as the legislation moves through the houses of government. Let's take a look at two of the biggest gainers:
Charlotte's Web Holdings (TSX:CWEB) (OTCQX:CWBHF) is a major player in the CBD space, with one of the most extensive portfolios of hemp-derived and CBD products, including oils, vapes, topicals, and edibles. The Colorado-based firm, which trades on the main Canadian exchange due to its more relaxed stance to cannabis companies, has had a bit of a rocky year as the regulatory uncertainty in the industry drags on.
Hitting a peak of $32.18 in April, CWEB stock sunk to a low of $8.50 earlier this month. However, news of the new legislation saw this stock pop 40% this week alone. It is definitely one of the CBD stocks worth keeping an eye on as this legislation moves through the political process.
CV Sciences Inc (OTCQB:CVSI) is another big hitter in the CBD space, with its products available in nearly 5,400 locations already. CVSI is a preeminent manufacturer and supplier of a host of CBD products from beauty care to pet care, beverages to edibles, and everything in between. The company signed some impressive deals in 2019, including a partnership with department store chain Harris Teeter to sell its flagship PlusCBD Oil across 150 stores.
As competition mounts in the CBD space, CVSI stock sunk to a low of $0.85 in early December. However, it is up 30% since the turn of the year, and at just $1.14, it looks like an absolute bargain given its already extensive retail visibility, which is only set to grow with the passage of this new legislation.
Although we have no concrete date for when we can expect this legislation to come into effect, if it does at all, it is undoubtedly a sign of positive political will towards advancing the CBD market. 2020 is also an election year, and the subject of federal legalization of cannabis is certainly going to be a prominent talking point among candidates, which could be an acid test as to how the CBD market could develop over the next four years.
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