Over the past six months, LegitScript's analysts and policy experts have been conducting a research project to better understand the online CBD landscape. We've looked at the state of compliance, the safety and accuracy of products, and issues around payment processing. What we found in this landmark report is nothing short of disturbing for both consumers and payment service providers.
A State of Noncompliance
For the first part of our report, we conducted a survey of 300 online CBD sellers to better understand the state of regulatory compliance in the e-commerce sector. Although there are many considerations in the realm of CBD compliance, we focused on what we consider to be the three primary types off regulations designed to protect consumers: the types of products sold; the shipping locations of buyers and sellers; and the marketing or health-related claims a seller makes about CBD's potential to cure, treat, or prevent diseases.
Our results found that 294 of the surveyed websites (98%) were noncompliant in at least one of the three categories. Furthermore, 46% were noncompliant in two categories, and 37% were noncompliant in all three categories, meaning that 83% were noncompliant in two or more categories.
Substandard Products
For the next part of our report, we bought and tested 30 CBD products from different manufacturers. We found that 20 out of 30 products tested (66.7%) contained significant deviations in the amount of CBD they contained. Sixteen products contained significantly less CBD than stated, and four contained significantly more CBD than stated. Nine out of 30 products (30%) had less than half the amount of stated CBD. In three cases, there was less than 10% of the stated CBD. In one instance, a product contained only 1% of the amount of CBD it said it had - effectively zero. In another instance, a product contained more than twice the amount of CBD it said it had (107% more).
Of the products LegitScript tested, one contained impermissible levels of lead, failing the heavy metal test. This product contained 9.2618 parts per million (PPM) of lead when the allowable limit is 0.5 PPM. That equates to 18.5 times the allowable amount of lead in a product per California standards, which are a set of standards that are commonly used in cannabis testing. Another product failed the solvents test. This product contained 5.6 times the allowable amount of ethylene oxide, a known carcinogen.
High-risk Financial Activity
LegitScript's financial investigations team looked into payment processing for the 30 products we purchased. We identified one instance of transaction laundering and eight instances of offshore processing, which resulted in unexpected cross-border fees. Many of these payment processors appear to be located in the United Kingdom or the European Union.
During our website survey, we observed some online CBD sellers engaging in other behavior that typically draws scrutiny from payment service providers and is often a violation of their terms and conditions. This includes 19 instances of multilevel marketing and dozens of instances of marketing affiliates. Affiliates aren't inherently problematic; the risk, however, is that affiliates may use messaging that can draw regulatory scrutiny, such as impermissible marketing claims. We also identified two sellers that presented possible indicators of negative-option billing, which is a deceptive approach to ensnaring consumers in ongoing subscriptions without their express consent.
Free CBD Product Certification
We're concerned enough by these findings that we've decided to make changes to LegitScript's CBD Certification program to ensure it is within reach for every CBD manufacturer and brand owner. To demonstrate LegitScript's commitment to consumer awareness and public safety, we are now offering free CBD Product Certification. Standard pricing will be waived, including product application, lab testing, and monitoring fees. The offer applies specifically to CBD Product Certification, while CBD Merchant or Website Certification is subject to standard pricing. As the CBD industry gains credibility, certification programs like those created by LegitScript can help speed adoption and inclusion in the more mainstream channels for sales and transactions.
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