The Uncertain Legality of Opening a CBD Business
Jean-Gabriel Fernandez | December 14, 2019
This article originally appeared in the May 9, 2019 print edition of the Shepherd Express.
Photo credit: Lawyers of Gimbel, Reilly, Guerin & Brown. Photo Credit: Jessica Kaminski/The Refinery Photo Studio
You may know that it is legal to grow, handle and sell cannabidiol (CBD) in Wisconsin, but the line of legality is blurrier than you might expect.
The cannabis plant is divided in two categories, indica and sativa; while both species contain CBD, only one strand of the sativa variety is what we call hemp. Hemp is legal in Wisconsin under a pilot program as long as it contains CBD with only tiny amounts of tetrahydrocannabinol (THC), the psychoactive component of cannabis. Therefore, all CBD derived from any cannabis plant other than certified hemp is illegal.
“Under the current law in Wisconsin, CBD itself is not legal as it falls under the definition of marijuana, [but] CBD can be legal under Federal and Wisconsin law when it is derived from certified industrial hemp,” explain the lawyers at Gimbel, Reilly, Guerin & Brown, a Milwaukee law firm that helps entrepreneurs launch CBD businesses. “Not all CBD is hemp CBD, and not all hemp-derived CBD is legal CBD.”
CONFUSING CBD LEGISLATION
The law exists in such a gray area that Wisconsin government, itself, struggles to keep up. Months after then-Gov. Scott Walker officially legalized hemp production and processing in Wisconsin, law enforcement agencies still didn’t know how to act towards CBD. Numerous Wisconsin businesses had already started investing in it when then-Attorney General Brad Schimel released a note claiming that, “except under very limited circumstances [such as a doctor’s certification], the production of cannabidiol is illegal.” A few weeks later, the Wisconsin Department of Justice (DOJ) backtracked and announced that CBD produced and sold under the hemp pilot program was legal after all.
“These are new laws, and their applications are unclear and confusing. Thus, a person intending to engage in this business must tread very warily so as to comply with the law and to avoid criminal consequences,” lawyers Jason Luczak, Brianna Meyer and Raymond Dall’Osto say. They have their clients’ safety in mind, as it can be extremely risky not to follow the law to the letter when it comes to handling cannabis-related products.
Last year, a Milwaukee business owner was ordered to pay $4.5 million for selling synthetic cannabis products. The judgment had to be reached through a civil court as the formula of the products sold was not illegal; the DOJ pursued the business for breaching consumer protection laws instead.
Potentially, a CBD business owner could be fined, incarcerated and suffer “significant civil consequences” if they were to errantly approach the issue, Gimbel, Reilly, Guerin & Brown explain. Additionally, “there is no cookie-cutter outline” to open such a business, as the product can be legal or illegal depending on its type, origin and chemical components. For that reason, it can be necessary to have an expert’s opinion before starting to grow or sell any CBD-containing products.
Once certain that a specific business model doesn’t carry any legal risk, Wisconsin law allows anyone to grow and sell hemp “to the greatest extent allowed under federal law,” so long as it follows the strict federal definition and contains less than 0.3% THC. For that, you need a lifetime license to grow or handle hemp, followed by annual registrations, which cost a few hundred dollars each.
