California Ban on Intoxicating Hemp Products Goes Into Effect

A controversial emergency ban on hemp products containing THC took effect last Monday, bringing the state’s intoxicating hemp market to a halt. 

The emergency ban took effect after it was approved by the state’s Office of Administrative Law last Monday afternoon. 

SFGate reported that the emergency rule is effective immediately, making hemp THC products illegal across the state.

Immediately after the ban went into effect, a group of hemp companies led by the U.S. Hemp Roundtable filed a lawsuit against the California Department of Public Health claiming the ban violates state and federal laws. 

U.S. Hemp Roundtable General Counsel Jonathan S. Miller said the ban will destroy a multi-billion dollar industry in the state. 

“The irreparable harm to our industry would be considerable. It would shut it down…which is another reason that it should go through the standard regulatory process.” 

The Hill reported that Newsom said the ban is an “interim solution” meant to hold bad actors responsible until lawmakers pass new legislation. 

Governor Newsom Issues Emergency Rule that Could Erase the State’s Intoxicating Hemp Market

Upon announcing the ban in early September, Newsom said “we will not sit on our hands as drug peddlers target our children with dangerous and unregulated hemp products containing THC at our retail stores.”

He added, “we’re taking action to close loopholes and increase enforcement to prevent children from accessing these dangerous hemp and cannabis products.”

On September 12, New Jersey passed Senate Bill 3235, which prohibits the sale of THC-containing hemp products to anyone under age 21 and restricts the sale of the products to state-licensed cannabis businesses. 

The law includes a provision to allow hemp-derived beverages to be sold in liquor stores once the state adopts those regulations, cannabis law firm Vicente LLP reported last week. 

Under New Jersey law, the hemp products in question are any that contact a total THC concentration of greater than 0.5 milligrams per serving or 2.5 milligrams per package. 

In August, Missouri Governor Mike Parson issued an executive order that would have restricted sales of intoxicating hemp-derived products beginning September 1st. The order was rejected by Missouri Secretary of State Jay Ashcroft, who said the Governor's office did not provide the required legal justification for the emergency rule. 

”It’s really not sustainable”

Vicente LLP Partner Shawn Hauser, co-chair of the firm’s Hemp and Cannabinoids Department said that these measures highlight the problematic nature of the current legal status for hemp and cannabis.”

“At the end of the day, two products made from the same products are being sold in different channels with different rules and that's really not sustainable.”

She added that it “really just underscores the need for a federal regulatory framework.”

Hauser said that some hemp companies could pivot to products that contain no THC but that “practically and economically it's very difficult for companies to have to reformulate products and labels and distribution. That's what makes the constant changing of state laws very difficult.”

She also mentioned the fact that better regulation would also mean safer products. 

“Regulation matters and that's a big issue with hemp right now,” she said adding “consumers can't tell the difference between responsible operators who are doing the testing and complying with product safety and the irresponsible operators who aren't.

How big is the market?

The intoxicating hemp-derived products market should expand to $3.5 billion per year by 2028, with a compound annual growth rate (CAGR) of 5%,  according to a study by the market research firm the Brightfield Group.

“This exponential rise is a testament to promising consumer demand and the rapid diversification of product offerings in the sector. In the absence of comprehensive regulations imposing substantial restrictions on the sale of these products, the market is anticipated to expand to $3.5 billion by 2028, exhibiting a compound annual growth rate (CAGR) of 5%,” the report states.

To learn more about the issues facing the intoxicating hemp products market, join us on October 23rd for the Rootwurks webinar "Is the Legal Intoxicating Hemp Market in Peril," featuring Shawn Hauser, partner in the cannabis law firm Vicente LLP, and the co-chair of the firm’s Hemp and Cannabinoids Department. Grab your spot here.