Demand for CBD Derivatives Hinges on Regulations

Demand for CBD Derivatives Hinges on Regulations

The hemp industry contends with major headwinds resulting from strict historical drug laws

One cannot underestimate how pervasive the roots of drug laws are in the seedbed of our economy.  Eligibility for student loans can be lost for those with a felony possession conviction.  The U.S. policy on Schedule 1 drugs reaches far afield too, leveraging trade, banking, immigration policies, and financial assistance to ensure other countries aligned.  We see this trend reversing globally now, as countries like Thailand, with historically stringent anti-cannabis laws since the 1930’s, relax their stance on the plant and its derivatives.  Newly introduced legislation there would allow a family to cultivate up to six marijuana plants, an approach very similar to state laws in the US.  Latin American countries are also following our lead, and interest in all aspects of hemp commerce is exploding.  Columbia recently exported its first shipment of cannabinoid products to the U.K..

Given the tangled web these marijuana policies formed, it makes sense that the legal and regulatory systems will require time to adapt to the change in hemp’s status.  Hemp’s regulatory status is the primary obstacle to large businesses entering the market.  After the passage of the 2018 Farm Bill, hemp regulatory burden shifted from DEA to FDA.

Law enforcement is still trying to adapt to the new law, which inadvertently has made marijuana possession cases difficult to pursue.  Until testing is available for law enforcement to distinguish low THC hemp from illegal marijuana, prosecutors have urged all levels of the judiciary, as well as law enforcement, to overlook reasonable amounts possessed by citizens, and only pursue traffickers.  The unfortunate result of this reality is that thousands of drug sniffing dogs nationwide will lose their jobs, something that helps to fuel law enforcement frustration with the legal whiplash brought on by the legislative changes.

Now that hemp products are regulated by the FDA, corporations will need assurances that the marketplace will not suffer from excessive regulations.  A clear regulatory framework is the only way a business can determine the costs to bring products to market.  Currently the FDA has officially stated that CBD is not legal to sell, but only intends to pursue unauthorized product claims.  Large corporations cannot develop plans based on a wink and a nod from the FDA.  Especially banks.

Banking is a critical bottleneck for hemp commerce.  This is an example of the piecemeal legislation needed to fully legitimize hemp as an agricultural commodity.  The Jacobsen has reported on the SAFE Banking Act previously.  Senate Banking Chairman Mike Crapo (R-ID) said this week that he intends to bring the bill to a vote before the end of the year.  More details on the latest here:

https://www.politico.com/story/2019/09/13/crapo-cannabis-banking-vote-1729925

The USDA is the other key regulatory body that must take action for commerce to normalize.  Legal arguments in the Idaho hemp seizure contend that without regulations from the USDA, hemp is not guaranteed interstate transport.  When the USDA releases interim final rules, states can then craft their own regulations.  This will clarify the local laws any business may be subject to.  This is also a mandatory piece in order for Federal Crop Insurance to begin to cover producers under the 2018 Farm Bill.  Pilot program participants working under the 2014 Farm Bill are eligible in 2020.

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