Storm Clouds on the Horizon for European CBD Market

By Trevor Yahn-Grode, Data Analyst, New Frontier Data

After an explosively fast rise to international prominence, the CBD industry finds itself encountering serious legal and regulatory challenges in Europe. Authorities in several of the continent’s largest CBD-consuming countries have begun to impose restrictions on the sale and distribution of ingestible CBD products. In Italy, the Ministry of Health issued a decree adding CBD to the country’s list of medicines and declaring that it can only be manufactured with the authorization of the Italian Medicines Agency (AIFA).

In Germany, vending machines carrying CBD products were recently seized by local law enforcement agencies who claimed the machines to be in violation of the narcotics act. German law enforcement has also targeted several retail CBD shops, claiming that CBD purchases in the country require medical prescriptions. Vending machines were likewise seized in Poland.

The crackdowns follow on the heels of the European Commission (EC)’s July preliminary decision to classify CBD as a narcotic. Doing so means that CBD will be treated more as a pharmaceutical compound than as a supplement. For companies such as GW Pharmaceuticals, that is welcome  news: The company’s patented drug Epidiolex  is the first CBD-based drug cleared to treat patients suffering from Dravet syndrome or Lennox-Gestaut syndrome, two debilitating forms of childhood epilepsy. At the cost of $32,500 USD annually, the EU represents more than $400 million USD in potential revenue to the company.

Whether the legal crackdowns on CBD products will continue and spread will be greatly influenced by an upcoming United Nations vote about cannabis scheduling recommendations. Included in said vote are two CBD-specific recommendations which would respectively remove extracts and tinctures from being classified as Schedule I drugs under the 1961 U.N. Single Convention on Narcotics, and free medical CBD containing less than 0.2% THC from international control. The U.S. has opposed the measures — despite the latter’s support by the World Health Organization (WHO) — by citing “legal ambiguities and contradictions that would undermine effective drug control.” While the EU has been silent on the issue, the EC’s preliminary decision is an ominous sign for industry operators. A positive ruling could lead to a more welcoming regulatory environment for CBD, but a negative ruling could signal further and even more restrictive regulatory measures worldwide, slowing demand for CBD products in emerging markets like Latin America.

The CBD industry has been developing at a breakneck speed, often outpacing the governmental agencies tasked with regulating its production and distribution. Between the events in Europe and the DEA’s interim final rules, the industry is facing its first real legal challenges to growth on a global scale. Despite the setbacks, industry stakeholders remain optimistic in the long-term prospects for CBD. For each of the restrictive measures, numerous legal challenges have been launched by investors and trade groups. It is now past the point where the legal ambiguities of cannabinoids can be ignored, and the industry seems on the brink of a decisive legal battle to determine the future of CBD.

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