🏛️ Divergent Cannabis Market Center Stage In CA Bill

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It’s one of the more bemusing ironies of recent times that -- after years of being unfairly cast as vices -- that hemp and cannabis should be freed, only to find themselves somehow unable to reconcile differences. 

I’ll grant myself a bit of poetic license there, but for many cannabis beverage and food brands in California, the state’s current situation is potentially grave this week, as a bill aimed at repairing California’s cannabis oversight is set to enter a decisive phase. Here’s a quick summary of what you need to know:

As we all remember, language in the 2018 Farm Bill that legalized industrial hemp (>0.3% THC by dry weight) helped create the current market for hemp-derived Delta-9 THC products. Essentially, the same cannabinoid (THC) is treated either as part of the licensed cannabis market or not depending on from where it’s been sourced.

California Gov. Gavin Newsom is attempting to fix that loophole as part of a larger effort to rein in the state’s illegal cannabis market, which has seen a state task force seizing over $120 million in illegal products since January. Amendments attached to the bill by his office call for hemp and marijuana to be placed under the purview of the Department of Cannabis Control (DCC), therefore restricting all sales of intoxicating hemp products to licensed dispensaries, with all the requisite taxes and conditions that brings.

Licensed cannabis retailers, which are currently blocked from selling “non-cannabis goods” like hemp products, could start doing so, while cannabis cultivators would be similarly liberated to start growing and selling hemp. But most importantly, it allows out-of-state businesses access to start selling hemp – produced for considerably less, minus the state’s operational costs and fees – in California, creating another front for local cultivators to fight on. 

For CPG brands, the bill means the popular names like CANN -- whose embrace of hemp-derived D9 THC was predicated on its ability to open up markets -- are suddenly facing an uncertain future in the Golden State. Speaking at a session on Monday, Micheal Ramirez, head of the country’s largest cannabis beverage production facility in Los Angeles, told the committee: “We believe in regulation. It needs to be stronger, but it needs to be wise.”

The situation highlights a somewhat bizarre situation: as a product sold in licensed cannabis dispensaries, cannabis beverages have had little broad impact, but within other venues, both low and high-dose hemp-based versions are becoming a big hit. Their popularity with beer drinkers (and brewers) was a big reason why Minnesota moved forward with its own legalization efforts. But states are clearly struggling with how to manage intoxicating THC within the divergent channels of unregulated hemp and licensed cannabis. 

We’ll see what happens this week: August 16 is the last day for fiscal committees to advance legislation this session.

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