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On September 6, 2024, California joined a growing number of states to restrict or ban hemp products containing intoxicating cannabinoids by issuing proposed emergency regulations. The emergency regulations ban any hemp products that contain detectable amounts of various forms of tetrahydrocannabinol or other intoxicating cannabinoids.
“We will not sit on our hands as drug peddlers target our children with dangerous and unregulated hemp products containing THC at our retail stores. We’re taking action to close loopholes and increase enforcement to prevent children from accessing these dangerous hemp and cannabis products,” California Governor Newsom stated in a press release.
The California ban highlights mounting public health and safety concerns and attempts to rein in the hemp-derived product industry across the United States. This trend may indicate that the regulatory pendulum is swinging towards the ban of products containing hemp-derived intoxicating cannabinoids across the United States.
Evaluating Bans
Public health and safety policy objectives are top priorities for any jurisdiction promulgating cannabis regulations. These objectives were emphasized byTomás Aragón, California Department of Public Health Director and State Public Health Officer, in Governor Newsom’s intoxicating hemp product ban press release.
“Intoxicating industrial hemp products can cause illness and injury to California consumers. We are working to ensure products in the marketplace comply with state laws that protect consumers against these public health risks and have proposed emergency regulations that will improve protections for consumers,” Aragón said.
However, a recent article by Lester Black of SFGATE suggests that California’s ban may already be harming consumers who rely on intoxicating hemp-derived products to treat medical conditions. This begs the question: are bans like California’s the best way to achieve these objectives? My recent conversation with Justin Swanson, Cannabis Practice Chair at Bose Public Affairs Group LLC, centered around this question.
“Blanket bans on hemp products that are protected in interstate commerce are counterproductive to addressing genuine market concerns. All these bans do is shift market share away from responsible actors and force consumers to the bad actors making products that are confusing to adults and attractive to children. At best, blanket bans are a lazy approach to policy making and at worst a thinly veiled market share fight,” he says.
Reasonable regulation rather than an outright ban may be a more practical approach. Swanson outlined what an approach to regulating hemp products may look like.
“The better approach to addressing genuine market concerns is the 4 pillar approach universally supported in the hemp industry—that is 21+ age restrictions along with uniform packaging, labeling and testing requirements,” he explains.
The four-pillar approach outlined by Swanson is the hallmark of regulatory structures governing the marijuana industry, hemp’s cannabis counterpart containing more than 0.3% delta-9 tetrahydrocannabinol. The absence of comprehensive hemp product regulatory structures has created tension between the marijuana and hemp industries at times.
Marijuana Licensee Perspective
Where might state-licensed marijuana entrepreneurs stand on the ban of intoxicating hemp products, given this tension? Hilary Bricken, a Partner at Husch Blackwell LLP, recently shed light on how marijuana businesses in California may react to their state’s recent intoxicating hemp-derived cannabinoid ban.
“I imagine that the majority of state-legal/licensed cannabis companies in California are satisfied with this move from CDPH. I think those state licensees see this restriction as creating an even playing field in the cannabis realm when licensees are so heavily taxed, locally controlled, and subject to voluminous operational requirements under state law (which is wildly expensive),” she says.
However, Bricken also points out that marijuana companies may have diversified and entered the hemp market.
“There may also be state-licensed cannabis companies that had separate businesses that were making and/or selling these hemp-derived intoxicating cannabinoid HDIC products (outside of the state-licensed supply chain) that are disappointed in these emergency regulations since it was the easier path to gaining customers and wasn’t half as regulated as the state-licensed cannabis side,” she explains.
Possible Collaboration And Consolidation
There may also be an opportunity for licensed marijuana operators in California to collaborate with hemp companies impacted by the recent ban, according to Lauren Mendelsohn, Junior Partner at Law Offices of Omar Figueroa.
“In the meantime, it seems clear that California wants THC products to be sold at state-licensed cannabis dispensaries, so I anticipate that at least some hemp product companies will be looking to collaborate with cannabis companies or obtain DCC licenses themselves,” she says.
Mendelsohn also pointed out that the California ban could lead to out-of-state hemp companies coming to California.
“I also think that this will open up new doors for collaboration between multistate hemp companies that have largely stayed out of California’s licensed cannabis market and smaller companies who have experience operating licensed cannabis companies in California,” Mendelsohn says.
Could California’s ban also lead to the regulatory consolidation of the marijuana and hemp industries? It’s possible, according to Bricken.
“I do think there’s a solid chance that the result of these emergency regulations is that the hemp industry is further pushed into/combined with the state licensed cannabis industry in California. It would make it easier on regulators to oversee both under the same set of regulations but, at the same time, combining the two would likely defeat the current purpose of pursuing the HDIC route in that, now, those hemp companies would be subject to the same licensing, fee-laden, locally controlled, operationally strapped regulations that exist under the department of cannabis control,” she says.
It’s also possible that a regulatory line is being drawn in the sand to reinforce the original intent of California Assembly Bill No. 45, California’s pre-existing hemp law, signed into law by Governor Newsom on October 6, 2021.
“These rules are a critical step in ensuring the products in the marketplace align with the law’s original intent, and we are committed to working with our state partners to enforce state law,” Nicole Elliot, Director of the California Department of Cannabis Control, said in the Governor’s hemp-derived intoxicating cannabinoid ban press release.
Regulatory Band-Aids
Should intoxicating hemp products be banned? The answer may depend on whether bans like California’s are long-term solutions or temporary regulatory band-aids to protect consumers. According to Mendelsohn, California’s ban still has hurdles to clear before becoming permanent.
“Even if the proposed emergency regulations do go into effect, they are only temporary, and CDPH would have to conduct a full formal rule-making before adopting non-emergency rules on this topic,” she explains.
Could California legislators have already tipped their hand regarding future hemp regulation plans? Maybe, according to Bricken.
“AB 2223 (which failed to pass this year) is essentially a preview of what’s maybe to come for the hemp industry in California, and this is just the state’s way of putting the brakes on the hemp industry until it can convene a more robust licensing and registration framework for hemp companies making HDIC food products (although the state was already charged with this directive with the passage of AB 45),” Bricken says.
At least for now, California hemp entrepreneurs operating under AB 45 may have to take a wait-and-see approach.
“}]] On September 6, 2024, California joined a growing number of states to restrict or ban hemp products containing intoxicating cannabinoids. Read More