Earlier this year, Curaleaf Holdings (OTC:CURLF) received a warning letter from federal regulators cautioning that the claims it was making surrounding its products, including that they could help with Alzheimer's and cancer, were misleading, especially since research on cannabis is scarce and studies are very limited in scope. And it's not just Curaleaf that has been too aggressive in its wording; last week, the Federal Trade Commission announced that three other companies had received warning letters, too.
The FTC did not name names, but it noted that the cautioned companies sold products containing cannabidiol (CBD) in a variety of different forms, including gummies, oils, and creams. The agency reminded the companies that "it is illegal to advertise that a product can prevent, treat, or cure human disease without competent and reliable scientific evidence to support such claims." While there has been some evidence to suggest that there may be a link between CBD and treating anxiety, insomnia, and chronic pain, there just hasn't been enough concrete proof thus far for medical professionals to feel comfortable using CBD to treat cancer and other serious illnesses.
More research desperately needed
CBD has garnered increasing interest in the past few years. The problem is that many people don't even understand the difference between hemp and cannabis, much less what studies have actually been able to prove when it comes to CBD. A lot of evidence has been anecdotal, sometimes even conflicting. Companies making aggressive health claims could not only cause harm to users but also jeopardize the industry's long-term success if people don't get products that are helpful in achieving their goals.
However, with cannabis companies under pressure to reach lofty sales targets, it's easy to see where the urge to stretch the truth might come from. Some of the more troubling wording the FTC saw on websites included claims that CBD "works like magic" and is a "miracle pain remedy." With such assertions abounding, it's no wonder that some are comparing CBD to snake oil.
The reality is that until CBD is moved off the Schedule I classification for drugs, studies on it are going to remain very limited. That's caused a lot of frustration in people who have heard anecdotes about how CBD has helped others.
Takeaway for investors
These latest letters sent out by the FTC show that Curaleaf isn't alone in making big claims; the problem is more widespread in the cannabis industry. However, Curaleaf has the ability, especially as a market leader, to provide more accurate information to the public, which can build trust and help develop the company's long-term relationships with customers.