Regulators struggle to keep up with burgeoning hemp industry

The hemp industry is growing faster than efforts to regulate it as businesses race to capitalize on a change in the plant’s legal status.

The Agriculture Improvement Act of 2018 allows for any use of cannabidiol derived from hemp and the hemp industry.

The Farm Bill specifically removed hemp and its cannabinoids from the Controlled Substances Act, according to Rod Kight, an attorney with Asheville, North Carolina-based Kight Law Office P.C.

Cannabidiol is the second-most prevalent of the active ingredients of cannabis derived directly from the hemp plant, a cousin of the marijuana plant, according to Harvard Health Publishing.

“The only legal distinction between hemp and marijuana is the concentration of delta-9-THC,” Mr. Kight said.

“Regulation is falling far behind the industry,” Mr. Kight said. The U.S. Department of Agriculture only recently published its interim final rule for the regulation of the production of hemp, which is now in a 60-day comment period ending Dec. 30, after which the agency has up to two years to implement its final rule.

The Food and Drug Administration, meanwhile, has decided that CBD cannot be used as a food ingredient and cannot be marketed as a dietary supplement, Mr. Kight said.

Legal claims in the CBD industry have largely taken two forms, according to Mr. Kight: claims over labeling that cannot be substantiated, often involving concentrations or contents; and claims over medical benefits attributed to CBD.

Beazley PLC is active in the hemp industry, according to Richard Everall, the insurer’s U.S. programs focus group leader, specialty lines in London.

The insurer writes product liability and general liability for risks that comply with the Farm Bill and FDA regulations, including CBD in ingestible bar forms, he said.

“This is a fast-growing segment of the market but — given recent challenges such as the association of CBD and THC products with the current vaping crisis — not without significant exposure,” Mr. Everall said.

“We’re seeing a lot of cannabis companies trend toward hemp as well,” said TJ Frost, U.S. cannabis segment leader for Hub International Ltd. in Bothell, Washington, due to the passing of the Farm Bill.

Greenbrier Holdings Inc. of Fresno, California, is raising hemp in the state, according to CEO Ross Bevevino, with unanticipated success. “We thought we were going to get 1,200 pounds per acre, but we got almost 7,000 pounds per acre,” he said.

Mr. Frost pointed out, however, that hemp and cannabis “are definitely very, very separate risks,” as the coverage is different, and the limits and parameters are different because hemp is mainly an outdoor crop.