California’s exploding market for hemp CBD products rocked by sporadic crackdowns

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The pink menus at Coffee Dose, a Costa Mesa coffee shop, list lattes infused with trendy ingredients such as tumeric powder and grass-fed butter.

The menus also have several ingredients carefully hidden by lines of Wite-Out. But look closely enough and you can make out two words: “CBD oil.”

Cannabidiol, known as CBD, is one of more than 100 compounds found in cannabis. The chemical doesn’t make consumers high, but international demand for CBD is growing as word spreads about its potential medical benefits, including claims that CBD can ease seizures, calm anxiety and reduce inflammation.

Jeni and Oscar Castro, owners of Coffee Dose, are among many entrepreneurs who’d been treating CBD derived from marijuana’s mellow cousin, hemp, as a dietary supplement. They listed CBD oil as an ingredient in “The Mary Jane” latte and as an optional add-on to other drinks, along with collagen and house-made nut milk. And business was booming, with a diverse range of customers regularly stopping by for CBD boosts.

But two months ago, Orange County health officials impounded all CBD products at Coffee Dose. They told the Castros it’s illegal to sell foods or drinks that contain CBD, and said the Castros could face a civil fine if they didn’t follow the rules.

Now the state has doubled down on that policy.

This month, the Department of Public Health announced it’s illegal to add CBD made from hemp to any food products meant for people or animals. That interpretation throws into question the future of dozens of readily available CBD products, from infused beverages such as VYBES to dog treats such as Canna-Pet.

Unless the growing hemp-derived CBD industry can convince state regulators to reverse course, a legal battle seems likely. On July 19, the trade group U.S. Hemp Roundtable wrote a letter to the state health department disputing the legality of the new guidelines. And the Castros’ attorney, Dana Cisneros, with Cannabis Corporate Law Firm in Anaheim Hills, said she’s seeking corporate sponsors to help the mom-and-pop business fight back.

Meanwhile, CBD products made from hemp are still for sale online and through other area restaurants and stores — including Mother’s Market & Kitchen, a couple blocks from Coffee Dose.

“I think that’s the worst part,” Jeni Castro said. “We feel like we’re being singled out.”

Legality in Question

First, a quick primer.

Cannabidiol can be extracted from hemp or marijuana, which are both strains of the cannabis plant. The only legal difference is that hemp must have 0.3 percent or less THC, the compound in cannabis that makes people high.

Cannabidiol derived from marijuana is only legal in states that have legalized cannabis. And the rules for marijuana-derived CBD oil and infused edibles are pretty clear in California: They can only be manufactured and sold by businesses that get special state licenses, with hefty additional taxes and strict requirements for safety testing, packaging and more.

But things get foggy when it comes to CBD derived from the stalks, leaves and flowers of hemp plants, which are also used to make fabric, building materials, animal feed and more.


Coffee Dose owner Jeni Castro, right, talks about authorities cracking down on places selling food and drinks with CBD in them, a compound in cannabis that doesn’t make you high, with her husband, Oscar, and attorney, Dana Cisneros, on Friday, July 20, 2018 in Costa Mesa.

Even cannabis industry attorneys can’t agree on whether CBD derived from hemp is legal, with multiple different federal and state acts, bills, official statements and court cases at play.

Because they’d been getting so many questions on the topic, the Department of Public Health’s Food and Drug Branch issued a “frequently asked questions” on July 6 that spelled out the state’s current take on the situation.

The document says businesses can sell foods and drinks made with hemp seeds or the oil extracted from hemp seeds, both of which contain trace amounts of CBD. (Such products are widely available everywhere from Whole Foods Market to Walmart.) But state guidelines also say businesses cannot sell foods that contain CBD derived from other parts of the hemp plant until those foods have been deemed “safe to use for human and animal consumption.”

Stuart Titus, co-founder of San Diego-based company General Hemp, said the guidelines came as a “real surprise” to people in the industry. He believes the health department made some statements that aren’t in line with the “full letter of the law,” with industry experts anxious to educate state regulators.

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“I don’t think they really thoroughly grasp what CBD is,” said attorney Cisneros, pointing out it’s the same molecule no matter what type or portion of the cannabis plant it comes from.

But Bill Acevedo, an attorney who leads the cannabis branch of Oakland-based firm Wendel Rosen Black & Dean, said he believes many companies let themselves get caught up in the excitement of the industry’s tremendous growth. He said some seem to have plowed forward in promoting hemp-based CBD products hoping to ask forgiveness rather than permission so they could avoid the same level of regulations and taxation faced by companies making CBD products from marijuana.

“It’s not the wild west,” he said. “You don’t just get to do what you want to do.”

Exploding Market

That questionable legal status hasn’t stopped the market for hemp-based CBD from exploding.

Vape oils infused with CBD are sold at local AM/PM and 7-Eleven gas stations. Spas are offering massages and facials that incorporate CBD topicals. Hotel group Standard International in April announced it was adding CBD-infused gourmet gumdrops to its minibars. Topikal has shops in Tarzana and Venice Beach dedicated entirely to selling CBD products. And singer Willie Nelson just announced plans for a coffee that will contain 5 milligrams of CBD per cup.

Last year, sales of CBD from hemp hit $190 million, according to market research firm New Frontier Data. By 2022, the market is projected to hit $646 million.

The Castros got their first taste of CBD stirred into a drink a couple years ago, from a Newport Beach restaurant that served cocktails infused with hemp stalk derived CBD oil.


Coffee Dose, a coffee shop in Costa Mesa was adding drops of CBD to drinks, but got its products pulled by the Orange County health officials.

Jeni Castro had been mixing nutraceuticals into her lattes at home. And Oscar Castro said roll-on creams infused with CBD eased his frequent backaches. So when they decided to open their edgy coffee shop in late March, Jeni Castro said, “CBD just made sense.”

For two months, Coffee Dose customers could get CBD oil mixed into an espresso drink, with the shape of a marijuana leaf made from green matcha powder floating in the foam. They could also pay $2.50 to add 10 milligrams of CBD to any drink on the menu, served in cups that read “Anti Bitch Serum.” Or they could snag a bottled tea drink infused with 15 milligrams of CBD, made by Los Angeles-based VYBES.

Oscar Castro admits that, when they launched, they were a “bit naive” about the complicated legal status of CBD, but they believed they were doing things by the book. They bought CBD from a reputable Colorado company that tests its products for safety. And the oil is derived from industrial hemp, just like the products they’d tasted or had seen on the shelves at area health food stores.

The Castros were on vacation when county health officials stopped by in response to an anonymous complaint. Inspectors didn’t issue any fines or seize the CBD products at Coffee Dose, instead giving the Castros a chance to return the drinks to the manufacturer and to take the bottles of oil home for personal use.

But since the shop took the CBD products off their menu, Oscar Castro said business has dropped by about 30 percent.

Mixed Enforcement

There’s no established limit for naturally occurring CBD in hemp seed oil. And no regulatory agency is currently overseeing production of hemp-based CBD oil.

The Food and Drug Administration has sent warning letters over the past few years to more than a dozen companies that it said were making unproven health claims or inaccurately advertising the amount of CBD in their products sold across the country. But most of those companies are still alive and well, with no reports of government officials impounding or seizing CBD products that aren’t marketed as foods.

It’s up to the California Department of Public Health to take action against wholesale food manufacturers, processors and distributors using CBD in their products. State health officials said via email that they haven’t identified any such products to date.

Local environmental health agencies are tasked with taking action against retail food facilities. The state health department says it’s received six reports from local agencies who’ve reported finding CBD products in restaurants or retail stores.

The Orange County Health Care Agency’s Environmental Health Division looks for CBD products during routine inspections and in response to complaints, according to spokeswoman Jessica Good.

To date, Good said they’ve identified at least nine food facilities in Orange County that were selling food products containing CBD. Most of the facilities were restaurants, she said, such as coffee shops or juice bars. And inspectors have seen CBD as an “add-on” ingredient to drinks, in candy and baked goods, or being used in processed bottled drinks.

When asked how inspectors determine the difference between legal industrial hemp foods, which have some naturally occurring CBD in them, and CBD food products that are illegal per the state, Orange County officials said they’ll be relying on how the products are promoted. If they see a restaurant advertising CBD as an ingredient in any item on the menu or for sale in the store, Good said they’ll make the facility pull that product.

Some companies have clearly taken to using “hemp” rather than “CBD” on their labels in hopes of avoiding such crackdowns. But Acevedo said they still risk getting in trouble if they’re selling products that aren’t strictly derived from hemp seeds.

“You can’t just call your product one thing when it’s something else,” he said.

General Hemp’s Titus said that even though the industry is disappointed at the state’s current position on hemp-derived CBD, he’s trying to stay positive.

“I think this represents really a tremendous opportunity to us in the industry to promote the health and wellness benefits of CBD.”

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