Smoke 'Em if You Got 'Em: The Growing Business of Smokable Hemp
This article was originally published on Hoban Law Group, and appears here with permission.
The 2018 farm bill removed hemp from the controlled substances act, and established that henceforth, hemp is to be treated like any other agricultural commodity, traded freely in interstate commerce to be used as a raw material to make a wide range of products. Products that can be made from this newly legal hemp include CBD and other cannabinoid extracts which can be used as ingredients in foods or ointments, industrial materials such as hemp concrete, hemp-derived “plastics,” hemp flooring, textiles from hemp fiber, and a range of products that can be made from hemp seed. It is now clear that hemp has a multitude of uses as a raw material that can be refined into other valuable products, and that markets for many products that use hemp as a raw material are booming.
While this industrial hemp boom was desired and expected following the removal of hemp from the controlled substances act, the rapid growth of a market for unrefined, raw hemp flower for smoking has been somewhat surprising. Who could have foreseen that so many people would be interested in smoking, vaping, and even dabbing cannabis that does not get you high? The rise of smokable flower is an enigma, especially considering the growing availability of legal high-THC cannabis.
Regardless, at this point in cannabis history, in the crazy summer of 2020, there can no longer be any question that smoking hemp flower is hugely popular. People enjoy smoking hemp flower for its CBD (and other non-THC cannabinoids), for the terpenes, for the entourage effect, and for all the benefits of cannabis without the THC. For some hemp growers, especially in Vermont, smokable hemp has proven to be an important part of the income derived from hemp cultivation.
As the popularity of smokable hemp flower skyrockets, several questions arise. Why are some jurisdictions banning smokable hemp? Are such bans constitutional? What about THC, THCA and “theoretical” THC levels in smokable hemp flower? What about shipping? What about law enforcement? These are just a few of the important questions facing the smokable hemp industry in 2020.
“Smokable” Hemp Flower and “Theoretical” THC
One of the first issues in question is how to measure the THC content of raw cannabis flower. The 2018 farm bill defines “hemp” as cannabis containing less than 0.3% Delta 9 THC. This sounds straightforward enough, until you consider “theoretical” THC. A raw cannabis plant contains some small amounts of Delta 9 THC, and a much larger amount of THCA. When the plant is heated, either by smoking or as part of an extraction process, the THCA is converted to Delta9 THC. This dichotomy can result in two separate test results for the same plant matter: one result that considers only the existing Delta9, and another result that incorporates the THCA in anticipation that it will be converted to Delta9 when the plant matter is heated or burned.
On the federal level, the testing parameters have been established by the USDA’s interim hemp rules, which was issued in October of 2019. Under that interim rule, plant matter must have under 0.3% THC, including the theoretical Delta9 from THCA. As a practical matter, requiring the inclusion of Delta9 THC in potency tests makes much of the smokable hemp flower unlawful, as this method of testing will result in THC levels over 0.3% for much of the current hemp crop. This is one of the reasons that some states have so far refused to adopt their state plans to comply with the interim USDA rule, and requested the rule be revised.
For an example of another approach, consider the method outlined in the Vermont hemp rules, which were issued in May 2020. Like the interim USDA rule, Vermont requires analysis of both Delta9 THC and THCA. However, so long as Delta9 remains under 0.3%, the total theoretical THC (including THCA) can be has high as 1.0%. This may seem like a small difference, but it is an essential difference to growers of smokable hemp flower. Some states (including all states with a USDA approved hemp plan) already require adherence to the limits in the interim USDA rule. It will much more difficult to grow legal smokable hemp in these states. Hemp growers are constantly working to develop strains that are high in cannabinoids other than Delta9 THC. But in the meantime, the ability to work legally with strains that may contain slightly higher levels of THCA is essential to the smokable hemp flower business.
Attempts to Ban Smokable Hemp Flower
In some states (Vermont, Colorado) there is a vibrant smokable hemp flower industry, doing an unexpectedly brisk business both in stores and online. The industry has the full support of state governments, and agencies have created rules for testing and labeling smokable hemp products.
In other states (North Carolina, Texas, Iowa, Massachusetts, Louisiana) there have been attempts to ban the possession and sale of smokable hemp.
For example, Iowa’s recently enacted law makes it a serious misdemeanor to smoke hemp, or to sell smokable hemp, although the hemp flower itself is legal. The new law sets fines for violators of the new hemp regulations – including the possession and sale of smokable hemp products and food and beverages containing CBD – at up to $300 for the first offense, up to $1,000 for the second violation and up to $5,000 for third and subsequent convictions.
Iowa’s rule also attempts to limit hemp products coming from out of state, making it legal only if the product comes from a USDA-approved state. Because USDA approved state hemp plans have very strict limits on THC, very little smokable flower is likely to come from a USDA approved state.
In Texas, the legislature has prohibited “the processing or manufacturing of a consumable hemp product for smoking.” Tex. Health & Safety Code § 443.204 (4). The Agency responsible for crafting the regulation (THSA) has indicated it will go further and ban the commercialization of hemp products for smoking.
The rationale for these attempts to ban smokable hemp comes down to law enforcement. It is impossible for a law enforcement working in the field to tell the difference between lawful hemp flower (less than 0.3% THC) and unlawful psychoactive cannabis flower (greater than 0.3% THC). For decades officers have justified arrests and warrantless searches, based on the odor of cannabis, especially when questioning people of color. If smoking hemp flower is legal, this justification will no longer suffice. In some jurisdictions, this is the real reason behind the attempt to ban smokable flower.
The existence of legal cannabis flower also makes prosecution much more difficult for state’s attorneys. Traditionally, the presence of THC (and the illegality of the substance in question) was proven by testimony from a trained officer stating that it looked and smelled like marijuana, and evidence that a color changing reagent showed the presence of THC. This still works to identify cannabis and to detect the present of THC in flower, but because legal hemp flower can contain up to 0.3% THC, the mere fact that it is cannabis containing THC does not prove that a substance is illegal. To prosecute someone for possession or distribution of illegal psychoactive cannabis, the state will have to get a much more expensive potency test. This is another reason law enforcement seeks to ban smokable hemp flower.
Constitutional Challenges to Bans on Smokable Hemp Flower
In the absence of federal regulation, State bans on using a legal product in a certain way, or restrictions on a legal commodity that was grown in another state may face Constitutional challenges.
In 2019, a Federal Court in the Southern District of Indiana ruled that Indiana’s law criminalizing the manufacture, finance, delivery, and possession of smokable hemp is preempted by federal law. The Judge ruled that the 2018 Farm Bill removed hemp from the federal list of controlled substances and redefined the plant as an agricultural commodity. States cannot pass laws that interfere with the right to transport lawfully produced hemp in interstate commerce. By not limiting its prohibition to intrastate activity, “Indiana’s law … does just that,” Barker wrote in the ruling. This was just a preliminary injunction, but there is ample precedent for this ruling.
State hemp laws that favor in-state businesses over their out-of-state competitors may violate the dormant commerce clause, which prohibits this sort of protectionism.
A state cannot, in most circumstances, prohibit the importation of goods or other materials from other states. The Supreme Court determined this principle in City of Philadelphia v. New Jersey, 437 U.S. 617 (1978), after New Jersey passed a law to prevent Philadelphia from shipping its waste to New Jersey landfills.
Under this rationale, Massachusetts cannot prohibit the importation of goods, such as trimmed hemp flower, or pre-rolls, lawfully manufactured in Vermont.
States cannot enact laws requiring local processing of goods imported into the state or intended for shipment out of the state. In Minnesota v. Barber, 136 U.S. 313 (1890), for example, the court struck down a law requiring that meat products imported from out of state be inspected by a Minnesota inspector. Arizona could not require an in-state cantaloupe grower to use an in-state packer to crate their product before shipping it to California, according to Pike v. Bruce Church, Inc., 397 U.S. 137 (1970). These cases suggest that bans on finished products from other states, such as pre-rolls, might be invalid.
Jeff Frazier, senior attorney with the Hoban Law Group, describes the situation in Texas, and his belief that the Texas ban on smokable hemp will not withstand constitutional scrutiny:
This proposed agency action exceeds the legislative mandate and amounts to ultra vires legislation. Had the legislature wanted to ban distribution, it certainly knew how to do so. Further, the statute itself is so arbitrary and burdensome as to be oppressive and violative of Due Course of Law under the Texas constitution. And as a federal judge has ruled in Indiana: it is unconstitutional for states to ban one type of hemp because police cannot easily distinguish it from marijuana. Law enforcement does not have a constitutional dog in this hunt.
Bans on smokable flower may be unconstitutional limitations on interstate commerce, enacted to allow law enforcement to unfairly persecute the war on drugs, but legal challenges to these laws and their ultimate resolution could take years. In the meantime, there is no doubt that the legal landscape will be confusing, to say the least, for a smokable hemp company doing business in multiple states.
Shipping Raw Hemp
Interstate shipment of raw hemp, including smokable flower, has been problematic to say the least. After the passage of the 2018 farm bill, hemp is now supposed to be treated like any other commodity, and the farm bill specifically allows the interstate shipment of the crop.
While the law is clear on this point, putting it into practice has proven difficult. Large shipments of cannabis flower arouse suspicion on the part of shipping companies, the postal service, and law enforcement. The best practice is to include a copy of the certificate of analysis (showing a THC content of under 0.3%) with each package or shipment. In most cases, this should suffice to satisfy the unwanted curiosity of confused law enforcement. However, this is not universally the case.
Add to that the fact that we now have some states with hemp plans that are “USDA approved” and other states with hemp plans that have not yet been approved by the USDA. Can efforts like the one in Iowa which seek to prohibit lawful products from another state withstand constitutional scrutiny? What about bans on such products transiting through a state like Iowa? Can Iowa prevent these products from be moved in interstate commerce? It may take litigation to answer these questions.
It should go without saying that the interstate shipment of hemp flower does not always go smoothly. Contracts involving interstate shipment of smokable hemp must address issues like shipping costs, insurance, and risk of loss during shipping. Private carriers, specialized in transporting cannabis, armed with an understanding of the rules in various jurisdictions (and the phone number of a good cannabis attorney) may be a possible solution.
Vermont and Smokable Hemp
The tiny State of Vermont is poised to become a national leader in smokable hemp. This is true for several reasons. First, Vermont has a long tradition and strong cultural connection to small batch, high quality hand-crafted agricultural products. Everything from maple products (syrup, candies, creamies, etc.) to a range of high-end dairy products (Cabot cheeses, Ben & Jerry’s) to local beers and ciders, the products that come from Vermont are small batch, high quality products. The same tradition exists for cannabis. From the beginning, the Vermont hemp industry has been different than those of other states. Vermont is small, and the cannabis fields are small.
In Vermont, hemp is most usually grown like high-THC cannabis, with a relatively small number of plants, spread out, cared for individually throughout the growing season, and hand trimmed at harvest time. This produces buds rich in CBD and terpenes; buds that are indistinguishable from their high-THC counterparts. Growers in Vermont have always grown smokable hemp flower, even before they recognized the potential of the market.
Another reason Vermont will become one of the major producers or smokable flower is due to the support of the Vermont Agency of Agriculture. The agency supports the smokable hemp flower industry and recognizes its importance to the Vermont growers. This is one reason Vermont did not submit its hemp plan to the USDA for approval: the strict THC limits and testing requirements would have been impossible for smokable flower growers to comply with.
The 2020 Vermont hemp rules, which may eventually be approved by the USDA if the interim rule is changed, allow a total theoretical THC level of 1.0% although the Delta9 THC must be below 0.3%. This rule gives the Vermont grower the flexibility needed to develop strains with lower and lower THC values.
In other ways, in terms of labeling and testing for example, the 2020 Vermont rules treat smokable flower much the same as any other hemp product. Trimming and packaging the hemp is considered “processing,” so a grower seeking to sell smokable flower must obtain a processor’s license in addition to a cultivation license. But, a Vermont grower can grow and sell smokable hemp flower with the full support of Vermont law and the Agency of Agriculture behind them.
The Outlook For The Future Of Smokable Hemp
Although there are certainly some challenges ahead, including the need to comply with the USDA’s strict limits on THC levels, attempts to ban the products in various states, and challenges with interstate shipping, the future for smokable hemp flower looks promising. There is growing demand, and as cultivators develop compliant strains, and attempted bans are overturned, smokable hemp flower could be an important component of the cannabis industry going forward.
An Informal Poll of Some Notable industry leaders Shows Agreement on Smokable Hemp
Attorney Rod Kight, of the Kight Law Office, is optimistic about the future of the smokable flower business:
Although it first appeared to be both a novelty and a surrogate for marijuana in states that had not experienced meaningful cannabis reform, the smokable hemp market has proven to be resilient. I am confident that its lawful status will continue to expand despite the current crackdown by many states. This is due in part to legal challenges to state laws that prohibit it, such as the pending case in Indiana, and pressure on state lawmakers by hemp growers, such as in North Carolina. Additionally, smokable hemp will continue to meet a growing consumer demand for cannabis, particularly high CBD cannabis, that is not overly psychoactive. My prediction is that the market for high quality, mostly indoor grown, smokable hemp will grow rapidly, but that lower quality smokable hemp will struggle to find a market other than as biomass for oils or as filler for mass-market hemp cigarettes.
Patrick Goggin, senior hemp attorney with the Hoban Law Group, reports that the California industry for smokable hemp flower exists but is mostly under the radar at this point. Mr. Goggin summed up the smokable flower challenge in California (and nationally) this way:
The challenges with smokable hemp flower are maintaining THC compliance and law enforcement/regulators’ ability to distinguish hemp from marijuana. We need advanced and affordable field tests that accurately measure flower THC content. With these mechanisms in place, this sector of the hemp industry has the potential to thrive long-term.
While the long-term prospects for smokable hemp flower look good, some companies, especially in states with supportive state governments, are moving into this space now.
So long as the product is lawfully manufactured in its home state, it can be shipped direct to a consumer via an online sale. If a company is complying with state law, and staying within FDA and FTC labeling guidelines, the risk of violating local rules about smokable hemp can be passed to the consumer. Most companies selling smokable hemp include within their terms and conditions a warning that the consumer is responsible for complying with all the laws and rules of their jurisdiction. This should suffice to protect the company from liability if the goods are seized or even destroyed by another jurisdiction. While a company should avoid engaging in a conspiracy to violate criminal law, shifting responsibility for regulatory compliance to the buyer is an acceptable strategy under the present regulatory framework.
Read the original Article on Hoban Law Group
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