U.S, June 19, 2020, (MARIJUANABUSINESSDAILY) This story has been updated to identify some of the states that allow the sale of hemp-derived products in marijuana stores.)
More states are allowing the sale of hemp-derived CBD products at marijuana stores, setting up a competitive marketplace between growers and producers of both plants that could dent the bottom line of some MJ companies.
Previously, states that have banned CBD in stores – including Colorado – allowed the chemical compound only if it was sourced from a cannabis plant with a THC concentration higher than 0.3%.
Hemp-derived CBD has an advantage over CBD containing THC, however. And that could give hemp growers and producers a competitive edge on store shelves over their marijuana counterparts.
Unlike marijuana cultivators, hemp producers have fewer legal and regulatory hoops to jump through – they aren’t required to do seed-to-sale tracking, and they’re taxed at a fraction of the rate of marijuana.
“It’s a sticky issue for marijuana and hemp businesses because they’re competing for the same business,” said Shawn Hauser, a partner at the Denver-based Vicente Sederberg law firm, which specializes in cannabis.
Colorado and Illinois are among the latest to join the ranks of about a dozen states where CBD and other hemp-derived products can be sold by marijuana retailers for the first time, opening a new sales outlet for the growing industry.
In the absence of guidance from the U.S. Food and Drug Administration, states are taking their own approaches as to how to regulate the sale of hemp in medical marijuana dispensaries and recreational stores. Colorado’s change takes effect July 1.
“I think it’s positive for the CBD industry, because the market is struggling right now,” Hauser said.
“It’s starting its lifetime in an economic and health crisis. So I think having another outlet in which it can sell its products is positive for the hemp market and the supply chain.”
According to the most recent Hemp & CBD Factbook, roughly 10% of total CBD product sales in 2018, the most recent year with available data, went through recreational marijuana stores, many of which were selling MJ-derived CBD.
Many of those stores – including retailers in California, Colorado and Washington state – did not allow the sale of hemp-derived CBD.
But at least 10 states have allowed the sale of hemp-derived products in marijuana stores since the passage of the 2018 Farm Bill, according to Hauser.
In addition to Colorado and Illinois, she said, other states that have made the change include:
- Arizona.
- Connecticut.
- Maine.
- Maryland.
- Michigan.
- Nevada.
- New York.
- Oklahoma.
- Oregon.
- Washington.
States take different approaches
Illinois’ policy was announced in March and goes through Oct. 31, which coincides with the expiration of the state’s 2014 Farm Bill authority, Hauser said.
The new policy could be extended beyond that, but it’s future is still unclear. (Illinois is one of at least 20 states that chose to operate under the less restrictive 2014 Farm Bill provisions for the 2020 growing season.)
Although there are similarities among the states’ approach to selling hemp in dispensaries – such as testing for potency and contaminants and verifying that the product was legally sourced – the policies are not uniform, making it difficult for businesses to know and navigate the different requirements.
Illinois allows the sale of any part of the plant. Colorado does not, and stores there are prohibited from accepting or selling plant material, including flower, trim or fan leaves.
The FDA has taken the position that CBD and other hemp-derived products cannot be sold in food and dietary supplements. But the agency has generally not enforced that position, except when companies make false claims about their products.
“We’re still dealing with the FDA preventing ingestibles, but the states are saying, ‘We’re going to ignore the FDA and we’re going to allow ingestibles in our state because consumers want them.’ So it’s really a bit of a confusing moment for everybody,” said Smoke Wallin, CEO of Los Angeles-based Vertical Wellness, a CBD spinoff of the company’s multistate medical and recreational marijuana operations.
More certainty needed
For now, Wallin said, selling hemp in marijuana retailers is not a priority for his company, which has been focused on selling products online since the start of the COVID-19 outbreak.
However, Wallin said he’ll still look for states where he’s sure there might be an opportunity to sell in dispensaries.
“At some point, the FDA and/or Congress has to … decide a set of rules that everybody can follow,” Wallin said. “Because right now. what’s happening is, every state for themselves.”
For years now, CBD and other products, such as smokable hemp, have been easily found online and in convenience stores around the country with little or no oversight from states or the federal government.
But despite the recent changes in state policies, “it’s going to take a lot more work before you see big brands jump in wholesale into this,” said Michael Bronstein, president of the American Trade Association for Cannabis and Hemp.
“Because they don’t feel like they’re seeing necessarily the type of certainty that they would want in regulation. And that doesn’t just apply to the products themselves, that also applies to insurance and banking.”
Jay Evans, CEO of Keirton, a Canadian hemp and marijuana company based in Surrey, British Columbia, said he believes the main reason states are bringing hemp into MJ stores is because of consumer demand for quality CBD products.
Keirton engineers machines and equipment to process cannabis plants for various uses for producers in 30 countries.
“If you’re going to regulate hemp, what better place to regulate it than the dispensaries that already have a system set up versus allowing hemp to be sold by the side of the road?” Evans said.
