Despite New Federal Regulation, Hemp Industry Still Riddled With Legal Risks
Last December, hemp farmers and businesses celebrated. After 82 years of heavy restrictions, Congress passed the 2018 farm bill, stating hemp should be treated more like a crop and not like its cousin plant marijuana.
That excitement carried over into the 6th Annual NoCo Hemp Expo, a Colorado convention for the hemp industry. A record 10,000 people attended, nearly double last year’s turnout. But as investors and entrepreneurs clamored to get inside the convention center, they may have been disheartened to learn the industry is still burdened by uncertainty and legal risks.
A majority of the more than 200 vendors were selling CBD products — that’s cannabidiol, the oil made from hemp flowers. Early research suggests CBD could be used to treat a whole host of ailments, from depression to chronic pain.
People like Devin Jamroz believe consumers will want to wake up with a cup of his CBD-infused coffee.
“(It’s) just like you would brew any regular coffee. Grind it up, French press, espresso. However you’d like,” Jamroz said.
He founded the Boulder company Steep Fuze back in 2014, shortly after hemp was legalized in Colorado. Like many people, he hoped the passage of the farm bill would drop barriers to working with major retailers.
“(Everyone thought) oh my god the big wall is falling,” he said. “Most people didn’t realize, hey, there’s another one right behind.”
That’s because the Food and Drug Administration, which Congress has appointed to regulate this market, still hasn’t come out with official rules on how CBD can be sold.
In the meantime, Jamroz and other CBD companies are limited by where they can sell their products; most major retailers aren’t keen on selling goods that lack federal approval.
Immediately after the Agriculture Improvement Act of 2018 was passed, FDA commissioner Scott Gottlieb said adding CBD to foods was “unlawful” because it’s already an active ingredient in a new FDA-approved drug, epidiolex.
But after pressure from lawmakers, Gottlieb gave a new statement, saying the FDA would prioritize “potential regulatory pathways” for CBD dietary supplements and foods. It’s unclear how long that process will take, but the confusion hinders this ballooning industry, which could represent $22 billion by 2022.
As the first day of the expo stretched into the afternoon, attorney Alex Buscher had met with dozens of potential clients all wanting to know more about the 2018 farm bill. Buscher, who specializes in cannabis, said the lack of federal regulation has kicked many issues back to the states, leaving a patchwork of inconsistent laws.
“Most states actually still don’t have a hemp definition that’s exempted from marijuana, that goes beyond research and education,” he said.
According to Buscher, companies trying to sell CBD products in these states could easily find themselves in hot water. Which is exactly what happened in January, when a truck carrying $500,000 worth of hemp from Kentucky — where it’s been legal since 2014 — was pulled over in Oklahoma, where hemp is still heavily restricted.
“A police officer pulled over a truck full of hemp. Didn’t understand the difference between hemp and marijuana ... so they think it’s the biggest marijuana bust of their career,” said Buscher.
Confusion by local law enforcement has led to a number of high profile hemp seizures and the companies rarely recop their lost product. As for the case in Oklahoma, state prosecutors have pushed to charge the drivers with marijuana trafficking.
A pair of men from Montana stopped at Buscher’s table to ask about the risks for growing hemp — federally hemp is defined as cannabis with less than 0.3 percent THC. One of the men, Brian Jackson, wanted to know what happens if the crop goes above that.
“The farmers we work with, they don’t take legal chances,” said Jackson. “They take weather chances but they don’t want to wind up in jail.”
As he’d done many times that day, Buscher explained that with the lack of federal regulations — in this case a provision in the 2018 farm bill — this is legally a grey area. His best advice: pay attention to state laws and know that the industry remains risky, which he admits isn’t great for business.
Editor's Note: An earlier version of this story misspelled Buscher.