Servant of Many Masters: Hemp Businesses Have to Answer to Many Regulators (and Few of Them Agree)

No matter what part of the hemp and cannabis industry they are in, participants in this industry are all too familiar with the plethora of agencies they have to answer to. Most businesses – hemp, cannabis or otherwise – don’t have a limitless legal or regulatory compliance budget. Startups have little to no budget. That’s dangerous in an industry where the slide from civil liability and criminal liability is both steep and short. The danger is only increased by the contradicting positions of the federal and state regulating bodies overseeing the hemp industry.

HEMP Regulations

Under the 2018 Federal Farm Bill, hemp and all hemp derivatives are legal if they contain no more than 0.3% delta-9 THC (tetrahydrocannabinol) by dry weight.

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The USDA licenses and regulates growers. Every state must have a USDA plan or may elect to be subject to USDA regulation. The USDA position is that as long as it is grown under the USDA program or a recognized state program, hemp is legal.

The Drug Enforcement Agency (DEA) does not agree that all derivates of hemp are legal. While hemp is an exemption from Schedule I of the U.S. Controlled Substances Act, under the DEA, that exemption is limited and growing smaller all the time.

The Food and Drug Administration (FDA) position is that cannabis and cannabis-derivatives (including all hemp other than things like hemp hearts, hemp seeds, etc.) are not approved for addition/incorporation into products for human or animal consumption.

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Conflicting Laws

With conflicting legal analysis on the federal level, states are forced to regulate hemp and cannabis within their own jurisdictions.

Here’s an example – you are a hemp-derived edibles manufacturer in North Carolina. The USDA regulates the grower who grows your hemp. No one on the state level regulates/licenses the extractor who creates the derivative you use to create your edible products, BUT the DEA has an opinion about how they are making your derivative and whether or not the extraction is “hemp” or “marijuana.” The state of NC Department of Agriculture MAY inspect and regulate your commercial kitchen, but not for hemp. NC law dictates the THC limit of your edibles at the end of production but little else. However, if you want to sell your products into other states, you will need to know and abide by the regulations for hemp-derived edibles in those states.

If a client calls me and asks whether they can ship a product to Tennessee and what, if any, regulations they need to be aware of, I can’t just rely on the general statutes of the state of Tennessee, though that is where I like to start. I also look at the Department of Agriculture, the Department of Health and Human Services (or the equivalent) and I check the Tennessee legislative calendar for any pending legislation that may soon affect my client. I check the administrative rules and regulations for all agencies. I also check for any FAQs and press releases issued that would be relevant to my client. I will call the main regulating agencies to ask anything I can’t find an answer to. Finally, when I can find it, I will call local counsel to confirm anything I have found.

As an attorney serving the hemp industry, I must have a much broader scope of knowledge than just the NC General Statutes. You need to be aware of state regulations in more than just your clients’ primary state of doing business, administrative law, interagency dynamics, federal rules and regulations, legislative trends and industry trends.

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As an attorney focused on cannabis, I strive to meet this need by being both an advisor and a strategic partner for my clients. In addition to advising my clients on what the law is, I help them to look around the corner to try and be ready for what’s coming next on both the federal and state level. When there is no law or regulation to rely on, I work with my clients to develop their own “best practices” based on other, relevant industries.

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