America’s hemp industry has been plagued by one major issue since the 2018 Farm Bill legalized industrial hemp: federal inaction. While the legislation allowed the cultivation and sale of industrial hemp under state programs, lawmakers did not create a comprehensive regulatory structure for hemp or hemp-derived products.
The result is a sector that has been referred to as a “wild west” where businesses barely have any rules governing how they operate and which products they can put out into the market. One of the core provisions for legalizing industrial hemp was that it had to contain less than 0.3% delta-9 THC, which is the main intoxicating agent in marijuana.
However, lack of federal action has led to the proliferation of cannabinoids other than delta-9 THC with the ability to intoxicate users. States are now grappling with how to deal with psychoactive cannabinoids such as delta-8 THC, which aren’t explicitly covered in the Farm Bill’s language.
In Tennessee, for instance, the market has been flooded by unregulated products dubbed “frankenweed” due to claims of them being created in laboratories. Lawmakers were faced with the choice of either banning delta-8 THC and other psychoactive hemp-derived cannabinoids or setting safety standards for the market.
Nashville lawmakers were unable to make a decision early enough, leaving the state inundated with intoxicating and possibly dangerous THC products with no safety oversight or age requirements for purchasing. Hemp Alliance of Tennessee president Frederick Cawthon calls the entire ordeal a “roller-coaster ride.”
Federal ambiguity regarding hemp-derived products is to blame for this regulatory roller coaster. The greatest beneficiary of this ambiguity has been CBD, a hemp extract said to have medical applications. As long as the hemp they were derived from met the less than 0.3% delta-9 THC threshold, cannabinoids such as CBD and delta-8 THC are considered legal.
This ambiguity also means that hemp operators may act contrary to some food and drug laws despite following hemp laws. The U.S. Food and Drug Administration (FDA), which has been charged with creating concise hemp rules, has barely made a move to regulate the multitude of hemp extracts that are steadily emerging.
Denver-based lawyer Shawn Hauser says the FDA’s inaction has forced states to step up and craft their own rules for dealing with hemp-extracted intoxicants. During a recent webinar meant to help unravel the resulting complex patchwork of hemp regulations, Hauser said that states still run into problems when they try to set limits on synthetic, or‘intoxicating, hemp products as federal law has no definition for these terms.
Colorado, Kentucky, Virginia and at least 10 other states have considered proposals designed to regulate the sale of hemp derivatives this year while the Minnesota and Maryland legislatures have already passed bills to place limits on the sale of hemp intoxicants.
The lack of federal regulations governing commerce in hemp derivatives poses a big challenge to industry actors, such as Flora Growth Corp. (NASDAQ: FLGC), that would like to establish their footprint across different jurisdictions. This is because it is hard to tweak different products in order to adhere to the patchwork of rules (where they exist) in different states.
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