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Campaign Promises?

Why CBD industry might become next big sponsorship for IndyCar

INDIANAPOLIS – IndyCar has tapped into a new industry for sponsorships.

Arrow Schmidt Peterson Motorsports on Thursday announced its partnership with DEFY – a CBD-based sports performance drink co-founded by Pro Football Hall of Famer Terrell Davis –  at Indianapolis Motor Speedway. The product’s name is displayed on James Hinchliffe’s No. 5 and Marcus Ericsson’s No. 7 Hondas.

CBD stands for cannabidiol, a chemical compound from the cannabis plant. Cannabis is, of course, perhaps best known for producing marijuana. CBD does impart a feeling of relaxation and calm but it's produced by the non-psychoactive portion of the plant — in other words, it doesn't get you high.

The Indy 500 will likely be the first time a CBD sponsorship will be featured during an official IndyCar race. Liquid Gold Processing, a processing company specializing in CBD extraction, also partnered with Jonathan Byrd's Racing last week. It’s not, however, the first time a CBD company has tried to enter the world of IndyCar. Earlier this year, RC Enerson was sponsored by Craft 1861, a CBD health and lifestyle company, during his test with Carlin at Circuit of the Americas in February.

 

As the CBD market continues to grow across the country, it raises the question: How big of a sponsorship effect can the industry have on IndyCar?

“I think that the amount of investment that I’m seeing in the category, they could range from major associate level on cars out here to full primary,” Jon Flack, president of Arrow Schmidt Peterson Motorsports, told the IndyStar this week. “It has that amount of investment behind it.”

 

Flack, the former president and COO of Just Marketing International (JMI), was instrumental in brokering a deal that lifted NASCAR's 50-plus year ban on spirits sponsorship.

CBD has been legal in Indiana since March 2018, and the growing CBD industry has the potential to become a new revenue source for teams. You don’t have to look far to find examples of drivers struggling to find sponsors. During Tuesday’s opening practice for the Indy 500, Juncos Racing’s Kyle Kaiser came out with a white car devoid of sponsors.

In response to the new sponsorship deal with Arrow Schmidt Peterson, IndyCar released the following statement:

“As the CBD category continues to rapidly evolve for sponsorship opportunities across various platforms, INDYCAR has developed a stringent set of guidelines that must be met to allow such sponsorship in our industry. These guidelines were developed with direction from legal representatives and INDYCAR will continue to monitor this space as we move forward.”

Those guidelines require:

  • Ensuring the production, marketing and advertising of the product meets federal, state and local laws/regulations.
  •  The opinion of a reputable law firm to confirm IndyCar’s advertising of the product is legal.
  •   The brand must not produce, market or advertise marijuana-based or cannabis products not derived from hemp.
  • The product continues to meet NBC’s policies.
  • Ensuring that the “team will indemnify, defend, and hold IndyCar harmless from any liability that INDYCAR incurs as a result of the team’s CBD sponsorship.”
 

The sale of products containing hemp-derived CBD is legal in all 50 states if they contain less than 0.3% tetrahydrocannabinol (THC) – the chemical in cannabis responsible for its psychological effects. CBD is also available for retail sale in some states.

DEFY founder Beau Wehrle said the company has been in the process of releasing the product for several years now. DEFY and Arrow Schmidt Peterson said they wanted to “check off all the boxes” before releasing the sponsorship into IndyCar.

“Ever since we’ve gotten involved with this, it’s been a big educational process for people and that’s why we really focused on the science behind this,” Wehrle said. “… As we’ve been going through this process and educating people, it’s getting more real for other people, professions and accepted in a wider manner.”

Flack said that fellow team sponsors, IndyCar and NBC were all open to and approved the idea of allowing sponsorships that advertise products containing CBD. This could change if IndyCar or NBC  change their policies. 

The drink itself, according to DEFY Chief Operations Officer Megan Bushell, uses a patented process that removes all the THC from the product.

 

Although the THC level in DEFY is said to be well below the 0.3% allowed, IndyCar drivers can’t drink it because CBD is on the organization’s banned substance list. This is the same case in the professional sports leagues like the NFL. The World Anti-Doping Agency, which oversees the International Olympic Committee, allows its athletes to use cannabidiol.

 
 

“I think it’s time that there’s other sports leagues who are now starting to say that CBD itself, not CBD with THC in it, but CBD 100 percent free of THC, should be something that players should be able to use for their bodies to aid in recovery and pain management,” Terrell Davis said.

Hinchcliffe said that IndyCar has initiated the process of testing and looking into the possibility of removing CBD from the banned substance list.

“I think the industry in general is really going to take off and that’s what I love about DEFY and what we’re doing here is that it’s really geared towards athletes and the performance side of it,” Hinchcliffe said. “… I think that’s going to be not just popular in motorsports but across sports as a whole.”

While the future of CBD in IndyCar and other professional sports remains uncertain, Flack is positive about its outlook.

“I won’t be surprised that behind this announcement, you’ll see a significant flooding of investment from that category into the sport,” Flack said. “It’s legal, there’s nothing not legal about it and there’s a lot of education to do. Even though our drivers really can’t consume the product today, this platform will spark the discussion for that and we really embrace that.

“We’re glad to be arm-and-arm with (DEFY) to get into the trenches and get into the fire and discuss it.”

IndyStar motorsports insider Jim Ayello contributed to this report. Follow IndyStar sports reporter Robby General on Twitter via @rgeneraljr.

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