Cannabis Stocks Blaze as FDA Expedites Landmark CBD Rules

Cannabis stocks got a boost this week after the US Food and Drug Administration announced it would expedite creating a regulatory framework for CBD.

CBD is the non-psychoactive ingredient in cannabis, which allegedly has wellness properties, and can treat a range of various conditions, including pain management.

The FDA and CBD Regulation Is All Boxed Up

cannabis stocks, YOLO ETF
Cannabis stocks jumped higher on news of the FDA's expedited CBD rule-making, driving the AdvisorShares Pure Cannabis ETF (YOLO) higher. | Source: Yahoo Finance

However, the Food and Drug Administration is boxed in in regards to permitting CBD to be put into food and beverages. That's because CBD is the main ingredient in Epidiolex, which treats childhood epilepsy, and because the FDA permitted CBD’s use in a drug, then it is therefore classified as a drug.

Companies who want to add CBD into consumer products are thus trying to convince the FDA to expedite whatever rules they want to establish to regulate the molecule.

On the one hand, consumer product companies don't want to take the usual route of clinical trials, because those will take years, and there's a high rate of failure.

At the moment, a tacit compromise has been reached in which the FDA permits companies to sell oils and other topicals that contain limited amounts of CBD (less than 0.3 percent on a dry-weight basis) – as long as the seller doesn’t make outrageous claims regarding alleged benefits.

The reason the FDA won’t just throw a blanket approval over CBD is that there is the possibility of liver damage if highly-concentrated CBD is used for the long term, as it is for Epidiolex.

Without some form of regulatory approval, CBD could be sold and used in potentially harmful doses.

In addition, the FDA wants to understand what cumulative exposure to CBD might do to people. How much can be safely ingested? How much can be safely used topically? What happens if someone does both on the same day over a long period of time? Does it affect different people in different ways?

The True Value of CBD is Medicinal

cbd oil, fda regulation, impact on cannabis stocks
Gambling on CBD is a risky bet for pot stock investors. | Source: Shutterstock

Yet for as optimistic as cannabis stocks have become, there is also plenty of reason to be skeptical about publicly-traded pot companies – FDA approval notwithstanding.

The true value of CBD is whether or not it truly has medicinal benefits. A former FDA commissioner says there aren't any.

There are a number of cannabis stocks in the market, and many are related to pharmaceutical use. A number are entirely dependent on the outcome of clinical trials.

Cannabis stocks that can prove CBD in a certain formulation will target specific illnesses is where the big money will be. Cannabis-based biotechnology and pharmaceutical development has the greatest upside, but also the highest risk.

CBD Is a Worthless Commodity

The problem for consumer CBD products is that CBD is otherwise a commodity. Anybody can use it in any product. The only difference between, say, CBD-infused Coca-Cola and CBD-infused Pepsi is the same difference that has existed between these products for decades.

There’s nothing special about CBD being added to any product, unless the CBD alters how the consumer experiences that product. My guess is that experience won’t be terribly different.

Be careful buying cannabis stocks, especially ones that have been recently whacked on the regulatory front.

Disclaimer: The views expressed in the article are solely those of the author and do not represent those of, nor should they be attributed to, CCN.

This article is protected by copyright laws and is owned by CCN Markets.

About the author

Lawrence Meyers
Lawrence Meyers

Lawrence Meyers has published over 2,500 articles on finance and policy at outlets including Breitbart.com, Investorplace, WyattResearch, LearnBonds, Lifezette.com, TownHall.com, U.S. News & World Report, and The New York Observer. He hails from New York City in the USA.

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