McAllister Garfield, P.C. assists new businesses and investors in the hemp and CBD industry by drafting corporate agreements, business transaction documents, commercial leases and financing documents and by providing legal advice on how to successfully obtain all required licenses. Beyond start-up, the Firm helps clients understand and maintain full compliance with the rules in this highly regulated industry. The following is a general summary of hemp law. This summary is educational information only and is not final legal advice. Prior to engaging in any activity discussed below, consult with an attorney regarding the risks.
I. Industrial Hemp
a. Federal Law
In 2014 Congress passed the Farm Bill, which defines industrial hemp as any part of the plant Cannabis Sativa L. possessing no more than .3 percent THC. The Farm Bill created a framework for hemp cultivation in the United States and subsequent sale of hemp products. State departments of agriculture, universities, and private growers contracted with either of these entities may grow industrial hemp for research purposes in states where hemp is legal under state law. Research includes marketing, and under the current federal legal regime for industrial hemp, private growers may sell Farm Bill compliant hemp products free from federal interference.
The domestic hemp industry continues to grow, with farmers planting nearly 10,000 acres of hemp and selling nearly $700 million in hemp products in 2016. However, despite a proliferation of hemp acreage in the U.S. since 2014, U.S. hemp products companies still import nearly all their hemp from abroad. McAllister Garfield, P.C. believes that industrial hemp is an agricultural commodity distinct from marijuana, and that it should be regulated as such. A lack of legal clarity with regard to industrial hemp has hindered growth of the domestic hemp industry, and the Firm is engaged with local, state, and federal lawmakers to create effective regulations with clearer pathways to hemp cultivation and production of hemp products.
b. State Laws
To date, thirty-two states now define industrial hemp as distinct from marijuana and have authorized its production.
Industrial hemp grown in Colorado must be grown under an active registration certificate from Colorado Department of Agriculture. Private growers, including business entities and/or sole proprietors, engaged in the sale of hemp products must apply for a commercial registration from the CDA, and universities must apply for research and development licenses.
Individuals and/or companies seeking to grow industrial hemp must submit an application to the Kentucky Department of Agriculture (“KDA”) and receive certification before planting hemp crops. Universities and colleges participating in Kentucky’s pilot program must be registered and certified by KDA. A separate, grower/processor/handler registration is required for individuals and companies seeking to be considered for participation in the State’s pilot program.
The California Department of Food and Agriculture (“CDFA”) is developing a program to administer the state’s Industrial Hemp Farming Act. Until this occurs, there is no effective registration process for private commercial growers. Only established agricultural research institutions, including public and private institutions, are exempt from registration and may currently grow hemp in California. When registration is available, private growers must register with their local county agricultural commissioner, rather than with the CDFA.
II. Hemp-derived Cannabidiol (“CBD”)
a. Federal Law
CBD, touted for its use in treating epilepsy and other medical ailments, has become a major player in the cannabis market. Sales of CBD products are expected to exceed $2.1 billion by 2021. CBD products can be found in many states, but the legal landscape for CBD is murky, and depends largely on the source of the extract. The 2014 Farm Bill creates a framework for the production and sale of hemp-derived CBD, under which Farm Bill compliant CBD possessing a THC concentration below .3 percent is not subject to the CSA. However, DEA considers CBD a Schedule I drug, regardless of THC concentration, if derived from the flowering tops of the hemp plant. Also, FDA does not authorize sales of CBD as a dietary supplement or food additive.
Questions remain regarding the agencies’ authority to regulate non-psychoactive hemp products, and the Spending Bill prohibits federal agencies from interfering with the processing, transportation, sale, and use of farm bill compliant hemp products, including CBD. McAllister Garfield, P.C. believes CBD products should be regulated based on their THC concentration and the Firm is engaged in dialogue with federal agencies to provide more clarity regarding the legal framework for CBD products.
McAllister Garfield, P.C. assists new businesses and investors in the CBD marketplace in navigating the complex framework of federal and state laws impacting CBD products. The Firm’s work in this area includes drafting, corporate agreements, commercial leases and financing documents and providing legal advice on how to successfully obtain all required licenses. Beyond start-up, the Firm helps clients understand and maintain full compliance with the complicated rules in this highly regulated industry.
b. State Laws
To date the following (17) states allow CBD possession and use for the treatment of various medical ailments: Alabama, Delaware, Florida, Georgia, Iowa, Kentucky, Mississippi, Missouri, North Carolina, Oklahoma, South Carolina, Tennessee, Texas, Utah, Virginia, Wisconsin.
i. State Law Enforcement Actions
To date, there have been no federal enforcement actions against CBD retailers. There have been a handful of raids by state regulators, including a raid by the Texas Department of Public Safety. More recently, local police raided a CBD retailer in Kansas and confiscated CBD products.
CBD can be produced in Colorado under the relevant licensing regimes for either marijuana or industrial hemp. Colorado did not specifically legalize CBD, however, state law compliant CBD products are legal under the broader state laws for marijuana and hemp. Local laws in Colorado, however, may impact CBD sales points. For example, the city and county of Denver prohibit the sale of CBD products manufactured outside Colorado and intended for human consumption.