CannaSafe, a California cannabis-testing company, conducted a blind analysis of 20 popular CBD products.

Just three of them, or 15%, actually contained what the labels said, the study found. The results were shared exclusively with Business Insider.

Some of the products also contained dangerously high levels of solvents, Aaron Riley, CannaSafe's CEO, said in an interview.

The test results point to the challenges of meeting the huge demand for a product that was illegal just months ago.

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It's no secret that CBD is booming.

The nonpsychoactive component of cannabis has shown up in products from face masks and lotions to cupcakes and infused lattes. And some CBD brands have even signed deals with mainstream pharmacies like CVS and Walgreens to sell CBD topicals on shelves.

Analysts at the investment bank Cowen expect the CBD market to grow from about $1 billion today to more than $16 billion by 2025.

There's just one problem: Most CBD products actually contain very little CBD, a blind analysis of 20 CBD products conducted by CannaSafe Laboratories, a California cannabis-testing company, found.

Read more: The FDA is putting together a group of experts to figure out how to handle the $1 billion CBD industry

On top of that, the analysis found that many of the tested products — which included vape cartridges, beverages, candies, and creams — contained dangerous gases like ethylene oxide and ethanol that are especially harmful when heated and inhaled.

The results of the study were shared exclusively with Business Insider. It found that out of the 20 popular products tested, only three actually matched what the labels claimed. The Daily Dose syringe and the CBD Softgels were considered passing because they were within the margin of error for the test.

The tests were conducted blindly for accuracy, and the names of the manufacturers weren't reported.

"The results were a little bit worse than I expected," Aaron Riley, the CEO of CannaSafe, said in an interview with Business Insider. "I expected to see like 20% to 30% pass, but it wasn't, like, a total shocker."

Based in Van Nuys, California, CannaSafe uses state-of-the-art chromatographs to test cannabis products for things like potency, pesticides, heavy metals, and assorted microbes on behalf of what Riley said is over 700 clients, mostly smaller cannabis brands.

Riley said some of the tested products had "insanely high levels" of solvents that are particularly dangerous when vaporized and inhaled.

Only about one-eighth of the California market is compliant with regulations, according to Riley. Within that subset, the failure rate is low, with about 5% or 6% of products failing, Riley said.

But things are steadily improving. Riley said that since his company started testing cannabis products in 2017, the failure rate had dropped dramatically from about 70% percent.

While California's Bureau of Cannabis Control earlier this year rolled out regulations around what is and isn't allowed in cannabis products — and has mandated that products be tested in certified labs — CBD is still in a legal gray area at the federal level.

"I'd say the regulations have been very effective in terms of mitigating risk and harm for consumers," Riley said. "I think we're going to see that kind of across the board. And probably in two or three years, it's going to be even lower than that."

Testing products at CannaSafe's laboratory. Courtesy of CannaSafe

'They just see dollar signs'

The problems with these products highlight the challenges of creating supply chains to meet the huge appetite for a product that was illegal just months ago.

After California introduced testing regulations earlier this year, a report from the industry website Leafly said that test results of Chinese-made vapes were showing they often contained lead, which leaches into the cannabis oil and then into the consumer's bloodstream. These products simply weren't being rigorously tested before, the report said.

And in other states, like Oregon, audits have found that laboratory testing standards were often inadequate, exposing consumers of medical and recreational cannabis to harmful pesticides, a risk compounded when the product is combusted and inhaled.

Read more: Wall Street thinks the $1 billion market for CBD could explode to $16 billion by 2025

To Riley, the quality of the operators — and thus the product — boils down to experience.

"There's all these people that are running towards this industry — they just see dollar signs or whatever," Riley said. "You have a very, very fast-growing economy."

The most successful operators, Riley said, come from "correlating industries," like agricultural management, and have experience growing large amounts of crops safely, rather than just "growing weed in their garage."

Illicit or "black market" cannabis products still use lots of pesticides — it's cheaper and easier than growing cannabis in a safer way, and there's no incentive to test illegal products.

CBD entrepreneurs welcome more regulation and clarity

Some CBD brands have said they would welcome more regulatory clarity from the federal government.

Since Congress passed last year's farm bill, which legalized hemp, many in the industry thought it would be legal to infuse products with hemp-derived CBD. But health departments in some states, including New York, have forced retailers and restaurants to pull food products with CBD off their shelves.

The Food and Drug Administration's outgoing commissioner, Scott Gottlieb, has formed a working group to "explore potential pathways" for dietary supplements and CBD-infused food products to be "conventionally marketed."

The FDA is holding a public hearing on the issue in May. The core challenge is whether CBD is a drug and should thus be regulated and sold like a pharmaceutical, or whether it can be considered a food additive or supplement and sold on store shelves.

CBD's existence in a gray area federally "isn't good for the industry or consumers," said Kerrigan Behrens, a former investment banker who's the cofounder and chief marketing officer of Sagely Naturals, a CBD company in Los Angeles.

"We hold ourselves to the same standards as any other" over-the-counter product, Behrens said. "Lots of brands aren't doing that."

Peter Horvath, the CEO of Green Growth Brands, a cannabis company that owns a branded line of CBD products distributed in traditional retailers like DSW and the Simon Property Group, said in a previous interview that more stringent regulation on the FDA's part would hurt competitors.

"If the FDA came down hard, our competitors would be sitting on inventory they couldn't sell," Horvath said. "If I'm being malicious, I hope they come down hard."