As we mentioned in our last post, lots of bills are headed to Governor Gavin Newsom’s desk to be signed into law. One of which is Assembly 45, which is a measure to create a formal pathway and for hemp-based CBD to be used legally in foods, beverages, cosmetics, and other products in the state of California.
The majority of people in the cannabis and hemp industries are excited for this bill, seeing it as a huge victory and an opportunity to open up the market for retail as well as small farmers and businesses throughout the state. Eventually, it would lead to cannabis businesses being allowed to sell hemp products alongside their cannabis provisions.
However, the bill also includes a temporary ban on hemp products intended for smoking, including CBD flower to help launch the uptick in CBD-infused products, which could generate as much as $1 billion in fresh sales. With that in mind, many hemp farmers are completely against Assembly Bill 45.
One coalition of hemp farmers is preparing a lawsuit that would halt the application of the bill. Since smokable products will be banned, hemp pre-rolls and cigarettes, concentrates, and flower would be illegal to sell in California. While the bill would allow California hemp farmers to sell these products out of state, they won’t be able to in California until the Legislature establishes a new taxing system.
Assembly Member Cecilia Aguiar-Curry has already accounted for this issue, stating that she plans to run a tax bill next year to compensate. However, there’s a good chance that the Legislature wouldn’t approve the proposed bill for several years.
Many hemp and CBD farmers in California are small businesses that may not be able to wait that long. The key complaint from the coalition is that this bill would sacrifice these small farms in favor of larger CBD manufacturing companies.
Josh Schneider, president of the California Hemp Farmers Guild said, “We have already started working on (a lawsuit to halt AB 45’s implementation). We don’t know all the ramifications of this bill, but there are at least as many really bad things that will be caused by it as good things.”
Before the bill was amended, it included a complete ban on smokable hemp products, so getting that moved to a temporary ban was a small victory, but it’s still essential for the future of hemp farmers to have the opportunity to sell their inhalable products. There will be significant impacts on both the marijuana and hemp industries.
Those taking the biggest hit will be those in the hemp industry. In 2018 the state Department of Public Health banned hemp additives in consumable products, including foods and beverages. AB 45 reverses that ban and hands over California’s consumer market to massive hemp goods manufacturers.
As for legal cannabis businesses, the bill will crackdown on unlicensed CBD stores that have been able to sell marijuana and intoxicating hemp products. It might also create an uptick in high-CBD cannabis sales, shifting up to $1 billion back to the cannabis industry and further taking from the hemp industry.
Many cannabis farmers and dispensaries may even begin growing their own CBD strains since they’ll be the only ones able to provide it. As unlicensed CBD stores are pushed out of business under the AB 45 regulations, more market-share opportunities will be created for licensed cannabis retailers.
Another opponent of the bill, the Humboldt County Growers Alliance (HCGA), also has concerns about the testing standards for smokable hemp products. There’s a huge disconnect between testing standards for cannabis and for hemp, and the HCGA policy Director Ross Gordon said that, as written, AB 45 doesn’t “quite get there.”
Smokable hemp should be tested at the same standards as cannabis, considering the hemp industry is going to be changing drastically. As it’s currently worded, this issue hasn’t even been addressed.
As far as the next steps go, the health department will need to establish emergency regulations for implementing the bill over the next few months. The Department of Cannabis Control will need to have a report ready by next July to outline how newly legal hemp is products will be overseen.
The Legislature will also need to consider the possibility of a new tax for smokable hemp products that could be difficult to agree on politically. There are many oppositions against new taxes in any capacity.
However, bringing a tax measure forward for hemp while lowering some of the cannabis taxes might make it more attainable. Broader tax reform could earn more support.
Ultimately, time will tell what will happen with AB 45. Farmers may sue to halt the bill to protect their businesses, but if the bill ends up passing, lots will need to be done to help regulate the industry with taxes and remove the temporary ban.