CBD Products Offer Glimpse Of Retail’s Regulatory Future

The growing CBD industry offers one of the best retail and payments stories in the second half of 2019 — and offers lessons for merchants seeking to keep on the right side of regulatory pressure when it comes to various other products as well.

CBD is short for cannabidiol, a chemical derived from the cannabis plant, and versions of that product are popping up in countless stores, both physical and online. Depending on your point of view, CBD can act as a sort of cure-all for various ailments — or it represents the latest wave of snake-oil commerce.

Federal and state regulators are still figuring out what’s what in the world of CBD retail, and that leaves merchants unclear about age restrictions on the product, as well as other real and potential risks that come from selling such an item.

Merchant Choices

And that’s where Matt Fields, vice president of age verification service AgeChecker.net, comes in. Sooner or later U.S. regulators will provide more clarity on age restriction and other elements involved in the sale of CBD. Most merchants would likely prefer sooner than later, Fields said, because uncertainty can easily lead to fines, bad public relations, and even merchant processors shutting down accounts due to service agreement violations.

The situation also provides a chance for age verification providers to shine, and for others to see just how important online verification services are to the future of online and in-store retail activities.

“Is it really something that is legal or not?” Fields asked about CBD, distilling the issue to that question. “Should people under the ages of 18 or 21 even have access to that stuff? Some companies don’t want it in the hands of minors.”

He wasn’t weighing in on the worth or morality of CBD, but rather describing the questions that merchants and payment services providers face. And such concerns are taking on increased importance now because the U.S. Food and Drug Administration (FDA) seems to have upped its regulatory focus on this and other associated age-related areas of commerce, such as eCigarettes.

Indeed, Fields told PYMNTS about merchants he works with that have received FDA warning letters about allegedly selling age-restricted products online without doing proper age-verification procedures — warning that can lead to cutoffs of payment services as illegal activities violate merchant service agreements.

“This spreads like wildfire, and then our phones start ringing,” he said. “They are clearly starting to crack down.”

Enforcement and Clarity

That seems to be the main thrust of most merchant education on age-restricted retail products these days — reactions to enforcement actions instead of proactive moves. Granted, it can be difficult to be proactive, as that requires a certain clear anticipation of where the regulators are headed. That may be easier in some areas of age-restricted retail — say, nicotine and vaping products whose marketing targets teenagers — than others, such as CBD.

But as more of these products move online — alcohol sales, for instance, and legal cannabis delivery services — it can pay for merchants to at least try to stay ahead of the game when it comes to age-verification services.

Things are improving on that front, at least according to what Fields told PYMNTS.

“At this moment in time, we are starting to see a more educated merchant who is well aware of these pressures from lawmakers and regulators, and who would rather stay ahead of the curve,” he said. “Many of them are not opposed anymore [to new regulations]. They would rather get it in place and not serve as an example.”

What’s next when it comes to CBD and other real or potential age-restricted products? In 2020, Fields said, more clarity on those issues will very likely emerge.

“You’ll see more action next year,” he said, and that might include more movement on legal recreational marijuana sales, not just CBD (which is not intoxicating).

Until then, perhaps, the smart merchant, the one who wants to stay in this game for the long haul, might do best by getting ahead of the age-verification regulatory wave.