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Earlier this month, Gov. Gavin Newsom proposed new emergency restrictions on California’s hemp industry, citing an urgent need to protect children. His concern: a class of loosely regulated products that contain intoxicating levels of THC, the compound known for causing cannabis highs.
While many agree some changes are necessary, a number of business owners and consumers worry the governor’s new rules are too strict and will kneecap a nascent industry just as it’s hitting the mainstream.
Critics say the proposed regulations would effectively outlaw a wide range of popular tinctures, capsules, beverages and other products derived from industrial hemp, including those that contain mostly CBD, a non-intoxicating cousin of THC.
Growing in popularity
Such offerings — ranging from mild CBD sleep gummies to potent THC-infused drinks — are growing in popularity. While they can have similar effects, hemp-based products differ from those containing cannabis-derived THC, which is sold at licensed dispensaries.
Hemp products are widely available at liquor stores, gas stations and smoke shops, a key concern Gov. Gavin Newsom cited in prompting his action.
Newsom announced the state’s proposed emergency rules on Sept. 6, after a bill to regulate the hemp industry failed in the Legislature. The regulations are under administrative review; if enacted, they would make it illegal for hemp products to contain any “detectable” amount of THC.
The proposed rules also ban about 30 “comparable” compounds known as cannabinoids, some of which are naturally occurring, while others are synthetic chemicals that mimic the effects of THC, or tetrahydrocannabinol.
While most hemp industry advocates acknowledge the need to adjust the rules to ensure products are safe and sold only to adults, they argue that Newsom’s zero-tolerance approach goes too far.
Among those concerned are Jacob and Lindsey Dunn, proprietors of Sow Eden Organics in La Verne, California. They produce, package and ship an array of industrial hemp-infused gummies and tinctures, which customers use to improve sleep or alleviate pain, anxiety and other conditions.
Halve that total
When the Dunns, who have a 2-year-old son and another baby on the way, first met a decade ago, Jacob was still working from his kitchen table, selling CBD capsules to medical dispensaries. They now generate around $500,000 in annual gross sales, but Jacob said the new rules could potentially cut that total in half overnight, as many of their products contain low doses of THC.
For example, each of Sow Eden’s popular sleep gummies contains 2.5 milligrams of THC. By comparison, many recreational cannabis products have 5 to 10 milligrams or more per serving.
“This is a full-on, family-run small business,” Lindsey Dunn said Monday. “It’s hard to know whether we can launch new products right now. … It’s a huge deal. It’s a huge expense.”
Newsom’s office and the state Department of Cannabis Control referred questions to the California Department of Public Health, which said the emergency rules were a response to “increasing health incidents related to intoxicating hemp products, which state regulators have found sold across the state.”
The agency noted it had received “a growing number of complaints about illegal, intoxicating industrial hemp products in retail environments.”
If approved by the state Office of Administrative Law, the emergency regulations would remain in effect for at least 180 days. Gov. Gavin Newsom has said that products in violation would need to be removed from shelves immediately after the changes are implemented.
Both cannabis and THC remain tightly regulated under federal law. However, hemp — a low-THC variant of the cannabis plant long used for products like paper and rope — received a boost from the 2018 Farm Bill, which eased federal restrictions.
Surge in interest
Across the country, states are grappling with how to manage the growing interest in consumable products infused with hemp-derived THC.
Some states have embraced the trend. In Minnesota, projections suggest hemp drinks could generate up to $200 million per year in sales. The state has implemented registration and testing requirements. At a hemp beverage festival in Minneapolis in June, attendees sampled dozens of brands. The event’s flier emphasized, “No smoking.”
Advocates argue that such approaches limit access to adults while allowing the industry to thrive.
In Missouri, a lawsuit prompted the state to roll back Gov. Mike Parson’s executive order regulating hemp products less than two months after it was enacted. In New Jersey, new restrictions are also facing legal challenges.
Hemp product companies argue that strict bans are misguided.
“It’s catastrophic for a lot of people,” said Christopher Lackner, president of the Hemp Beverage Alliance, a Colorado-based trade group.
“Why does this have to be contentious?” Lackner added. “Regulate it, put it on the shelves near beer, wine, or hard seltzer, age-gate it and tax it like an adult beverage. Regulate it like an adult beverage, and everybody wins.”
Ajay Narain, chief executive of Beacon Beverages, based in Campbell, near San José, said his company shifted from alcoholic beverages to mocktails infused with hemp-derived THC and CBD in February.
Business started slowly, but picked up after Beacon’s alcohol-free key lime margaritas and gin and tonics hit the shelves at major retailers like BevMo and Total Wine & More.
‘Kill the industry’
Now, Narain says he is worried that Newsom’s “absurd” new regulations will effectively “kill the industry” across the state.
“A ton of businesses are going to close down,” Narain said. “He’s just pulled the rug out from under them. And again, it’s just completely unnecessary. Regulate, don’t eliminate.”
In 2021, Newsom approved a state law that capped the total concentration of THC in hemp-infused food, beverages and cosmetics at 0.3%, and outlined how such products must be tested and labeled.
However, Newsom and his administration have argued that many companies are exploiting “loopholes” that allow them to sell products with intoxicating levels of THC, sometimes in places where minors have been able to purchase them.
On a recent Tuesday evening, an aisle end cap at the front of a BevMo location in Torrance prominently featured an assortment of cans with flavors like lemon lavender and a mock old-fashioned cocktail. Signs displaying “THC INFUSED” were affixed in bold letters under each row of beverages.
A study released this month by BDSA, a Colorado-based company that analyzes cannabis and hemp industry data, noted that these products have carved out “a lucrative niche that sidesteps many of the challenges faced by the regulated cannabis industry.”
“Unlike their cannabis counterparts, these products… can be produced, distributed and sold with minimal legal hurdles, making them a hot commodity,” the report said.
Some, including the California chapter of the National Organization for the Reform of Marijuana Laws (Cal NORML), believe Newsom is right to rein in sales at everyday retailers.
Be made illegal
Critics argue the proposed regulations could harm people with medical and mental health conditions who rely on non-intoxicating products, which would also be made illegal.
“We totally support keeping intoxicating hemp products off the retail market … but they’re going overboard. They’re targeting non-intoxicating hemp medicinals, which have been widely used for years now,” said Dale Gieringer, director of Cal NORML.
Ted Whitney, chief beverage officer for Danville, California-based Cheech & Chong Global Holding Company — which sells both recreational cannabis products and intoxicating hemp products — said that without the impending changes, hemp could grow into a nine-figure industry within a decade.
”}]] Earlier this month, Gov. Gavin Newsom proposed new emergency restrictions on California’s hemp industry, citing an urgent need to protect children. His concern: a class of loosely regulated products that Read More