'Alphabet Soup' Of Federal Agencies Issue Favorable Rulings Advancing Hemp Industry
The hemp industry notched two wins in the past seven days, with the U.S. Department of Agriculture (USDA) releasing a legal opinion stating that hemp can be transported across state lines and the Transportation Security Administration (TSA) changing its guidance to allow hemp-derived CBD oil on airplanes.
A third federal agency, the U.S. Food and Drug Administration (FDA), is slated to hold a hearing on Friday, May 31 about how to regulate CBD.
"It's a big week for hemp," said Daniel Shortt, an attorney who works with cannabis entrepreneurs.
Federal agencies in agreement
The USDA's legal opinion basically reiterated many of the changes specified in the 2018 Farm Bill, which legalized the production of hemp.
The memorandum stated that hemp has been removed from the Controlled Substances Act (CSA), and that states and Indian tribes may not prohibit the interstate transportation of lawfully marketed hemp products, although they do have regulatory control over production of the crop within their jurisdictions.
Most noteworthy, Shortt said, is the interstate transport argument. The USDA opinion specifically cites and disagrees with a high profile case in Idaho, where the Ada County prosecutor has charged a trucker, Denis Palamarchuk, with illegally hauling hemp from Oregon into Idaho.
Although the federal guidance does not carry the weight of legal precedent, Shortt said, "it is persuasive and certainly could impact that case. It's a good legal conclusion for the hemp industry."
Ryan Shore, the CEO of Big Sky Scientific, the Colorado shipper whose hemp has been confiscated as part of the Idaho case, said the USDA guidance bolstered the company's legal position.
"The messaging from Idaho has always been that their hands are tied because the USDA has not had time to issue any regulations on this issue," Shore said in an email.
"Now the USDA has now spoken and their message is clear. Big Sky's driver was acting legally in using the federal highways to transport industrial hemp."
The opinion also reiterated that the FDA would have authority regulating hemp products. There has been some confusion over varying state laws regulating hemp-derived CBD in food, lotions and dietary supplements, substances that have become enormously popular among consumers.
"Under the 2014 Farm Bill there was not any oversight, so many states were compelled to create their own laws, and there wasn't any federal law to compare it to until now, " said Garrett Graff, managing attorney with the cannabis firm Hoban Law Group.
Hemp legalization: A five-year history
The 2014 Farm Bill was the first step in what has been an incremental five-year process of legalizing hemp in the United States. That bill allowed states to grow hemp but only as part of pilot project or research program.
The 2018 bill legalized hemp federally and transferred regulatory authority over hemp products like CBD from the Drug Enforcement Administration to the FDA. That bill made hemp a lawful substance but raised questions about "how do we ensure it is appropriately integrated?" explained Graff, who will be speaking at the FDA hearing on May 31.
The gathering, he said, will bring together hemp businesses, regulators, scientists and other stakeholders to assist with the "process of reconciling" varying state and federal laws.
Cannabis stocks were mostly higher this week, as investors responded to the USDA ruling and appeared to anticipate a favorable outcome for Friday's hearing.
"The rhetoric issued by the FDA has been optimistic," said Graff, "to ensure there is favorable equitable treatment given to hemp additives as with any other food additive or dietary supplement."
Smaller businesses are equally upbeat. Taylor Lehmann is the owner of Breckenridge Hemp Co. in Colorado, a retailer that sells a variety of CBD infused edibles and lotions, a practice that is legal as of 2018 in the state. Like many small cannabis businesses, he's concerned about the lack of quality oversight.
"We get our product tested from seed to table, but there are a lot of fake products out there," Lehmann said. "From what I've heard, I expect the FDA to regulate and tighten it up."
Flying with CBD
The industry is also getting a boost from the new TSA ruling allowing passengers to carry on all FDA-approved medical marijuana products as well as certain types of CBD. "That should relieve pain points at TSA checkpoints," said Graff noting an increase in CBD arrests at the Dallas,Texas airport this year.
Whether recent regulatory developments will impel the Ada County Idaho Prosecutor's office to drop charges against Palamarchuk and two other truckers remains to be seen.
Bethany Calley, a spokesperson for the Prosecutor's office, said in an email "the office is aware of the USDA's memorandum, but is limited in our ability to comment on pending litigation and are therefore unable to provide any further response."
A cautionary note
Despite this week's favorable developments, shippers should tread carefully, Shortt said.
"I would offer careful consideration with regard to where products are distributed and transported. Because like anything else you want to see how things will play out."
Graff was less constrained in his enthusiasm.
"There is a large alphabet soup of agencies definitively acknowledging the legality of hemp and helping to inform the public that this should be normalized and not stigmatized."
"It's a feather in our cap."
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