CBD Opportunities and Risks

Friends, from this lawyer’s perspective*, serious money is about to flow into the (imminently) legal CBD market.  See, e.g.:

https://www.newcannabisventures.com/village-farms-international-to-aggressively-pursue-hemp-and-cbd-opportunities-following-u-s-federal-legalization/

Village Farms (not a client) is a Canadian produce company and they’re viewing this opportunity as a “nutraceutical phenomenon”**.  Anecdotally, other non-cannabis companies (CPG, institutional investors) are scrambling to enter the (imminently) legal CBD market.

This presents yet another whiplash-inducing opportunity and risk for the industry.  For companies that have both CBD products and THC products, do you spin out the (imminently) legal CBD product line, to take advantage of mundane things like bank accounts and lending, tax deductions, traditional institutional capital, and interstate commerce?  Among the many things to consider:

  • Branding – are the two businesses going to share the same brand name?  If so, how does that relationship work to keep the legal CBD business legal?

  • Local Rules – how quickly will local regulations on CBD use (such as those in CA) change to open up how you want to use the product?

  • Taxes – can you split off the legal CBD assets in a tax-efficient manner? (not a 280E question – a traditional tax question)

  • Structure – how is the legal CBD business going to be owned?

  • Strategy – once you’ve got the CBD business separate, what’s your plan to compete?

In other words, yet another day in the Cannabis business.

*As usual, this is definitely not legal advice.

**I don’t know what that means.

Excelsior!

Written by: Marc Hauser