At the CBD Association, we hear from two broad classes of stakeholders interested in legislative developments involving cannabinoids, especially CBD.

The first are businesses which today have ‘skin in the game’. These include growers, processors, contract manufacturers, brand owners, retailers, and allied industries. The second group includes (a) companies which may have quietly commissioned internal product development projects but which have held off launching their brands wanting first to get clarity as to the regulatory and political landscape – particularly at the federal level OR (b) firms which want to explore the market potential but which have yet to develop formulations.

Today we update three federal legislative developments.

HEMP OPPORTUNITY ZONE ACT

Within the next two months, Virginia Republican Congressman Denver Riggleman plans to introduce legislation called the Hemp Opportunity Zone Act to advance the industry. In a recent interview, Riggleman (who is an alcohol distillery owner) explained his vision:

• Create hemp opportunity zones;
• Hemp tax relief; and
• A marketability study and report.

Phase one involves determining how to identify specific opportunity zones to allow resources to be applied and to look at eligible taxpayers for capital-gains relief.

The second component of the concept legislation would ban any hemp or CBD excise tax as growers get started, and then increasing the qualified business income deduction for anybody with a hemp-related business. This would include a beginning hemp farmer tax credit (and) a small hemp farmer tax credit. Further, landowners renting their farmland to growers would, in theory, be eligible for a tax deduction as well. In addition, actual producers, wholesalers or retailers should also get tax relief.

Within the context of the marketability study, Congressman Riggleman hopes to explore incorporating a THC percentage increase into the study process. In an interview, Congressman Riggleman said, “We need to look at increasing the THC levels considered hot. That definition now is at 0.3% – we need to make sure that we up those levels to where it’s practical. We also have to make sure that farmers are held harmless for any accidental increase in THC that they might not be aware of. There shouldn’t be any criminal penalty for that; there should be some type of remediation or arbitration that allows them to move on.” Also a member of the House Financial Services Committee, Congressman Riggleman is intent on fixing the banking issue. At present banks are not processing credit cards associated with retail sales.

Riggleman is also a co-sponsor of the legislation introduced in January by House Agriculture Committee Chair Collin Peterson (D-MN). That brings us to the second issue warranting discussion.

Peterson Bill Would Allow Marketing of Hemp-Derived CBD in Dietary Supplements

On January 13, Congressman Collin Peterson, Chair of the House Agriculture Committee, introduced HR 5587 (legislation) that would amend the Food, Drug & Cosmetic Act to give the Food and Drug Administration flexibility to allow hemp-derived cannabidiol (just CBD) to be marketed in dietary supplements. As currently written, the Peterson bill does not impact conventional food, cosmetics or pet products. This proposal, which enjoys some bi-partisan co-sponsorship, would also require a study and report from the U.S. Department of Agriculture, which oversees the production of hemp, on the regulatory and market barriers for farmers engaged in hemp production.

In a nutshell, the Peterson proposal would include hemp-derived CBD in the definition of a dietary supplement, overcoming a current obstacle; namely, the so-called ‘race to market’ as CBD was first studied as a drug by GW Pharmaceuticals plc, whose CBD medicine Epidiolex was approved in 2018 by FDA to treat seizures associated with two rare and severe forms of epilepsy. Under Section 201(ff)(3)(B)(ii) of the FDCA, an article doesn’t meet the definition of a dietary supplement if it was first “authorized for investigation as a new drug” and the subject of “substantial clinical investigations” that were publicized. FDA has determined CBD meets the above criteria.

Peterson explained, “The last two Farm Bills were landmark successes for hemp, but we are still very early in this process, and growers need regulatory certainty. This bill will allow the FDA to regulate CBD that comes from hemp as a dietary supplement, providing a pathway forward for hemp-derived products. It would also identify barriers to success for hemp farmers, informing growers and policymakers of the challenges facing this new industry.”

Back in 2018, in Peterson’s home state of Minnesota, only 10 percent of the state’s 700 acres of hemp were used to produce CBD. A year later, Minnesota grew 8,000 acres of hemp and used 400,000 indoor square feet of growing space, 78 percent of which was used to produce CBD.

Some industry stakeholders have expressed concern that the Peterson proposal does not benefit other hemp-based cannabinoids that have promising health benefits, such as CBG (cannabigerol), even if FDA determined those cannabinoids were first authorized for investigation as a new drug.

However, Patrick Delaney, Communications Director for the House Agriculture Committee, in an interview with Natural Products Insider observed H.B. 5587 “would create a pathway for hemp-derived CBD to be used for both dietary supplements and food additives. However, hemp-derived CBD would still be subject to the existing FDA regulatory structures for either dietary supplements or food additives,” he added. “So the bill is not a blanket approval, but would allow the FDA to regulate hemp-derived CBD via existing regulatory pathways.”

In an election year, it is difficult to envision such a ‘standalone’ bill going to the President’s desk; however, if the concepts could be adapted to reflect other stakeholder concerns, and incorporated into a must-pass measure, that would up the chances for consideration.

SAFE BANKING ACT

For the first time in the history of marijuana legalization, a federal bill – HR 1595 — to limit the criminal penalties for marijuana has cleared the House of Representatives and as of September 26, 2019, has been pending before the Senate Banking, Housing and Urban Affairs Committee chaired by Idaho Republican Mike Crapo. The Safe and Fair Enforcement Act of the 116th Congress, included dozens of sponsors from both parties (https://www.govtrack.us/congress/bills/116/hr1595/text).