The Emerging Hemp Industry: Government Regulation Can Help Businesses Grow

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Hemp cultivation and processing could be a boon for the struggling farmers and small businesses. Economists estimate consumer demand for the (non-psychoactive) hemp-derived CBD market could reach $22 billion by 2022. While COVID-19 has triggered record high unemployment, driving job growth in the industry would prove particularly timely. 

In 2018, the passage of the Agricultural Improvement Act (the “Farm Bill”) expanded the nascent hemp industry and created significant opportunities for farmers struggling to survive by growing other crops. However, the legislation falls short, and legislators must take the next critical steps, setting a sound foundation for the industry by mandating the safe production and transparent description of products, providing increased banking access, and leveling THC limits to appropriate thresholds. 

The Food and Drug Administration (FDA) has refused to issue any guidance or regulations on the use of CBD, other than taking enforcement actions against medical claims. The lack of regulation has slowed CBD’s rate of adoption with larger retailers, online platforms, and consumer-goods producers.

The FDA should move quickly to improve regulations for the use of CBD and other non-psychoactive cannabinoids in products for human use and consumption. Fair, transparent, and standardized rules for hemp cultivation, processing, and sale would encourage investment, open new markets, and reward growers, processors, and small businesses that play by the rules. By dictating the quality of product ingredients, establishing package-labeling requirements, and evaluating claims made about the benefits of cannabinoids, regulation would legitimize the hemp industry and catalyze enormous growth.

Confusion continues to exist over the relationship between hemp, CBD, and cannabis. Botanically, hemp and hemp-derived products originate from the same plant species, but hemp and CBD products must contain no more than 0.3% of delta-9 tetrahydrocannabinol (THC), the compound in cannabis that creates the psychoactive effect.

By discontinuing hemp as a controlled substance, hemp farmers and businesses should be able to take advantage of the financial, governmental and tax benefits afforded any other legal business. However, in practicality, hemp businesses face restricted access to banking, loan, and financing services, which severely hinders their ability to raise capital necessary to increase production and hire workers. At the Federal level, clarification, both legislatively and regulatorily, would allow this legitimate industry to participate fully in the U.S. banking and capital systems.  

As the interim final rule notes, the 2018 Farm Bill includes procedures to identify and attempt to correct certain negligent acts, such as failure to obtain proper licensing. However, the interim final rule establishes a negligence threshold for hemp at0.5% THC. We have heard concerns from growers and researchers that the threshold is arbitrary and impracticably low because a reasonably prudent hemp producer could take the necessary precautions to produce hemp, such as using certified seed, yet still produce hemp plants that exceed this concentration. 

If the USDA is concerned that a producer would intentionally grow illicit marijuana plants under the guise of the U.S. Domestic Hemp Production Program, the rule should reflect the actual potency of cannabis samples confiscated by the DEA (typically greater than 10%), rather than this exceptionally low THC level. 

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One of my companies, Green Rock Hemp Holdings, LLC, is a vertically integrated hemp grower, processor, and marketer of hemp-derived CBD products. Green Rock Hemp Holdings does not participate in the cannabis side of the industry and favors clear rules for hemp cultivation, processing, and sale. Throughout the U.S., there are thousands of similarly situated, licensed hemp businesses ready to fill the rapidly growing needs of the industry. However, to accomplish this, the United States Department of Agriculture (USDA) must take the next critical steps and modify the interim final rule for its U.S. Domestic Hemp Production Program. 

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