The cannabidiol (CBD) market is projected to grow at a fast pace. According to some estimates, sales of CBD-based products will reach $20 billion by 2024, up from just $1.8 billion in 2018. This is in part because the entire cannabis industry is on a dazzling upward trajectory but also because CBD is sometimes perceived as a "safe" alternative to marijuana, since it contains negligible amounts of tetrahydrocannabinol (THC), the psychoactive ingredient in weed that gets users high.

However, a new warning by the U.S. Food and Drug Administration (FDA) claimed that contrary to what many people think, using CBD-based products comes with serious health risks. Let's look at what exactly the FDA said and what it means for Charlotte's Web Holdings (OTC:CWBHF), one of the leading companies in the fast-growing U.S. CBD market.

CBD oil in a small bottle with cannabis leaves all around.

Image Source: Getty Images.

CBD might not be healthy after all

In its latest consumer update regarding the use of CBD-based products, the FDA emphasized that the substance could cause various negative health consequences, including liver injury, changes in alertness and mood, and drowsiness (when used with alcohol or other depressants). The FDA also noted that these side effects can occur even if the user is not aware of them.

Further, according to the health industry regulator, many of the alleged health benefits of CBD are unproven, despite the fact that CBD-based products are sometimes marketed as having health benefits, including pain relief and even cancer-fighting properties. 

And finally, there is little data as to what CBD-based products do to our bodies when used for long periods of time, which is something consumers should keep in mind, according to the FDA.

Is Charlotte's Web doomed?

Charlotte's Web -- which sells various CBD-based products such as oils and capsules -- claims the largest market share in the U.S. CBD market, and the company's products are found in almost 10,000 stores throughout the country. This strong (and growing) retail presence could help the company maintain a healthy share of this market as it continues to evolve. But could the FDA's warning derail the company's plans?

Probably not, and here's why.

First, this new development won't affect the company's leading market position. The FDA did issue warning letters to companies selling CBD products illegally -- that is, making unsubstantiated or false claims about the health benefits of their products. Charlotte's Web was not one of those companies. During its third-quarter earnings conference call, Charlotte's Web CEO Deanie Elsner said about the FDA's stance on unproven claims regarding the health benefits of CBD: "We fully support the FDA's position on unsubstantiated claims and we are working closely with our partners on these efforts."

Second, while the FDA has issued little regulatory direction regarding CBD products, Charlotte's Web seems to be gearing up to adapt accordingly once it does. Elsner said, "We continue to progress our expansion plan so that when the FDA regulations are set for the CBD category, we are ready with the infrastructure and capacity to disproportionally capture that growth." Indeed, the company is looking forward to the FDA setting regulatory guidelines, particularly for dietary supplements. Once this happens, so the company claims, Charlotte's Web will be able to expand both its portfolio of products and its distribution channels across the country.

Finally, it seems unlikely that this warning will significantly reduce demand for CBD products and permanently hinder the long-term growth of the industry. For those reasons, Charlotte's Web will likely be A-OK in the long run. However, investors should remember that the legal landscape regarding CBD is still a work in progress, and it is important to factor that in when evaluating whether to purchase shares of a company that offers such products.