FILE - In this Friday, Jan. 4, 2018 file photo, a worker adds CBD oil to a drink at a coffee shot in Fort Lauderdale, Fla. Cannabidiol is one of more than 100 compounds found in marijuana. (Jennifer Lett/South Florida Sun-Sentinel via AP)/South Florida Sun-Sentinel via AP)

  • Major cannabis companies traded lower Friday during a Food and Drug Administration hearing on CBD products. 
  • The cannabis industry has been in a legal haze as the FDA decides how to police products with CBD.
  • Wall Street thinks the $1 billion CBD industry could grow to $16 billion depending on how it’s regulated. 
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Cannabis stocks traded lower Friday during a hearing held by the Food and Drug Administration where federal regulators will hear arguments that will inform policing of the substance cannabidiol, or CBD.

Shares of cannabis companies Tilray, Cronos, Canopy Growth and Aurora Cannabis all traded down more than 3% Friday. The FDA hearing, which began at 8 a.m. ET, is a public meeting where regulators will gather feedback on how to police foods, drinks, and drugs made with CBD or other cannabis compounds.

US equity markets sank to a 12-week low Friday, down around 1%, as trade tensions increased after President Donald Trump threatened to hit Mexican goods with tariffs until the “illegal immigration problem is remedied.”

During the hearing, the FDA will be presented with remarks from manufacturers, consumers, health professionals, academics, and more on scientific data and information about products that contain cannabis or cannabis-derived compounds, such as CBD.

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Cannabis is a swiftly growing industry with huge potential, depending on how the substance is ultimately regulated. Wall Street thinks that the $1 billion market for CBD, a compound found in cannabis that does not get you high, could balloon to as much as $16 billion by 2025. It’s an active ingredient in an epilepsy drug, Epidiolex, which became the first FDA approved cannabis-derived drug in June 2018.

But apart from drugs that require a doctor’s prescription, CBD is also used in a number of beauty and food products — from face masks to cupcakes and lattes. The industry has been in a legal haze as the FDA decides what’s legal — such as CBD products derived from hemp, a cannabis strain that is very similar to marijuana and has been legalized.

What the FDA decides could have a major impact on companies such as Tilray, which has partnerships with both AB InBev and Authentic Brands Group. These partnerships will help Tilray bring new cannabis-based products to market. The Canadian cannabis producer recently purchased Manitoba Harvest, the world’s largest hemp food company in February and acquired Natura Naturals, the parent company of a licensed cannabis cultivator, in January. 

The FDA could decide to ban CBD products, monitor the amount of the compound allowed, or decide that the products are legal so long as they’re derived from hemp. During a congressional hearing in February, former FDA Commissioner Scott Gottlieb suggested the agency would take a flexible approach to monitoring CBD products. But Gottlieb left the FDA in April. His successor has not yet been announced. Ned Sharpless, the acting FDA commissioner, is leading the meeting Friday.

Before his departure, Gottlieb created a working group to focus on CBD and explore potential ways for dietary supplements and foods containing CBD to be marketed lawfully. The group is cochaired by Principal Deputy FDA Commissioner Amy Abernathy and Principal Associate Commissioner for Policy Lowell Schiller.

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