War, huh, yeah
What is it good for?
Absolutely nothing.
We at Budding Trends have devoted thousands of words (and nearly as many pop culture references) to the escalating tension between the marijuana and hemp industries. It seems that to many in the cannabis industry this is a zero-sum game. But it’s far from a game. The tension has had significant effects on both industries at the federal, state, and local levels and has created a culture of fear amongst potential consumers instead of a welcoming of products that have tremendous potential benefits for so many Americans.
But what if I told you it doesn’t have to be zero-sum? Is there a path forward that would not only allow for the existence of both industries but for both to experience a sort of “rising tide lifts all boats” phenomenon? Hear me out.
A Brief Vocabulary Review
First, for the less initiated, an important vocabulary lesson is needed, because in the world of cannabis, perhaps humorously to some, words and precision matter.
At the federal level, the Controlled Substances Act has defined “marijuana” for more than 50 years as:
The term [marijuana] means all parts of the plant Cannabis sativa L., whether growing or not; the seeds thereof; the resin extracted from any part of such plant; and every compound, manufacture, salt, derivative, mixture, or preparation of such plant, its seeds or resin. Such term does not include the mature stalks of such plant, fiber produced from such stalks, oil or cake made from the seeds of such plant, any other compound, manufacture, salt, derivative, mixture, or preparation of such mature stalks (except the resin extracted therefrom), fiber, oil, or cake, or the sterilized seed of such plant which is incapable of germination.
For almost 50 years, all “cannabis” was essentially grouped into the same category as marijuana.
Starting in 2014, Congress for the first time created a legal definition of “hemp,” which was defined as:
the plant Cannabis sativa L. and any part of such plant, whether growing or not, with a delta-9 tetrahydrocannabinol concentration of not more than 0.3 percent on a dry weight basis.
Thus, both marijuana and hemp are “cannabis” under the law, and I will refer to the term “cannabis” when referring to both “marijuana” and “hemp” and use the more specific term where appropriate to make a distinction.
Shortly after Congress created this separate definition of hemp, savvy (and, in some instances, unsavory) operators concluded that Congress had created a loophole of sorts that would allow for products that contained cannabinoids from the cannabis plant – even those with psychoactive or intoxicating effects – as long as the concentration of delta-9 THC on a dry weight basis is not more than 0.3% on a dry weight basis. It was this interpretation of the Farm Bill, replicated in the 2018 version, that led to the proliferation of consumable products containing delta-8 THC, delta-10 THC, and the like.
To be clear, we doubt Congress intended to permit the introduction of new intoxicating products when it passed either of the two prior Farm Bills. In fact, Congress – to the extent members read the language at all – probably would have added additional provisions to prevent such products. But the Farm Bills say what they say, and they do appear to create a loophole to allow for those products.
How Did We Get Here?
It wasn’t always this way. In the beginning, the cannabis business was collaborative. A bunch of rebels fighting against the Man for a plant they believed held the answers to many of society’s problems, some with more legitimate explanations than others.
So, what has caused the camaraderie of those salad days to evolve into the current battle being waged between former colleagues?
Initially, it is undeniable that the 2014 and 2018 Farm Bills, which for the first time defined “hemp” as a legal term different from “marijuana,” contributed to the divide – even while leading to the growth of the hemp industry. That legislation quite literally created two camps within the industry that previously had been united in the eyes of the law.
Another easy, obvious, and at least partially true answer has to be, for lack of a better word, greed. There is a common understanding that there is a finite universe of customers and money available to participate in the cannabis market. I don’t necessarily believe that is true (or at least a foregone conclusion), and I’ll discuss that more below, but it’s certainly understandable that over time cannabis operators of all stripes came to the conclusion that the cannabis market was finite and competition was a zero-sum game where every dollar spent on marijuana was one less dollar spent on hemp, and vice versa.
I think, though, that in addition to (and maybe in conjunction with) economics, over the years a level of distrust has developed between marijuana operators and hemp operators.
Surely one source of the skepticism, distrust, and dislike by state-licensed marijuana operators or hemp operators – and particularly those who manufacture or sell ingestible hemp designed to create some type of euphoric effect or offering some medical benefit – is the lack of or limited regulation faced by hemp operators compared to the often-stifling regulations faced by marijuana operators. Those marijuana operators that operate by the rules are subjected to crippling taxes and costly administrative burdens (from security to testing to transportation and many others) that hemp operators do not face in most jurisdictions. That is certainly changing to some degree in some jurisdictions – as we’ve written about on many occasions – but it remains the case in most places and the sentiment clearly persists. It’s hard not to understand why marijuana operators bristle at any proposal that would liberalize hemp policy and perpetuate these distinctions.
But the dislike and sense of unfairness is not one-sided. Many hemp operators bristle at what they perceive to be a favored, more protected status enjoyed by what they may characterize as state-sanctioned monopolies for marijuana operators in states that either limit the number of licenses or make them so costly that only wealthy individuals and businesses can participate in the market. With the rescheduling of marijuana on the horizon, marijuana will be federally recognized as medicine that can be prescribed by physicians. This will open substantially more doors for the marijuana industry, perhaps none more important than a substantial infusion of outside money. Meanwhile, the hemp industry is in a fight for its very existence as Congress debates the next Farm Bill and states take various steps to limit access to certain hemp products.
The Downsides of the Battle
The air is heavy with distrust, and the fate of the cannabis industry sometimes appears bleak. But one might ask, so what? Why does this matter to the average American?
This battle has taken its toll on virtually all cannabis stakeholders, from marijuana and hemp operators to regulators, cannabis consumers, and Americans who have no interest in cannabis but are living in a country where the laws are unclear. This creates at least a perceived proliferation of bad cannabis actors that could pose a risk to vulnerable and unwitting Americans, which obviously includes children.
The constant tug-of-war between marijuana and hemp advocates at the state and federal level has led to a two-headed monster: (1) They have created a patchwork of inconsistent laws that make it virtually impossible for conscientious operators to operate compliantly and makes it easier for bad actors to hide in the gray areas, because they will have more potential market space; and (2) the laws seem to change constantly, making it difficult for operators and the public to know what is allowed and what is not.
These two problems risk making people afraid of cannabis as a whole. More applicable to the hemp industry, very few operators or consumers feel particularly comfortable knowing that the products they make or purchase are, at best, part of a loophole or gray area in the law. That is bad for everyone. Customers that are fearful about either the legality or the safety of products will decrease cannabis sales across the board.
Marijuana operators and hemp operators will continue to press and lobby for punitive legislation that would hamstring, if not entirely destroy, the perceived opposition. That is a race to the bottom begging for mutually assured destruction. And while that is taking place, it provides a tremendous incentive to encourage the type of bad actors we see all around us and the proliferation of diversion of illegal products.
Don’t believe me? Tune into a legislative or administrative hearing at the federal, state, or municipal level and listen to what opponents of cannabis liberalization are saying. It’s all talk about cannabis in the hands of children, dangerous and unregulated products, deceptive marketing practices – a parade of horrible that makes marijuana and hemp both look not only immoral but also dangerous.
A Potential Path Forward
If you’ve read this far, maybe you’ll give me a chance to propose a path forward that could benefit all cannabis stakeholders and the American public. My proposal is based on two broad concepts: (1) taking steps to shut down bad actors in the cannabis business, something all responsible cannabis operators seem to agree on; and (2) beginning to treat marijuana and hemp more similarly than we currently do at the federal and state level, recognizing the important but different roles of the products at issue.
So, what does that look like? As to the bad actors, the one thing marijuana and hemp operators seem to agree on is that irresponsible operators are a problem. When I refer to bad actors, I am referring to those who target minors and vulnerable populations, who make false or deceptive claims about the medical benefits and/or efficacy of their products, who utilize unsanitary practices that lead to the potential for unsafe products, and who eschew best practices such as product testing and standardized labeling and packaging.
In addition to taking market share from responsible operators, they significantly reduce public confidence in cannabis products, and they provide ammunition for marijuana operators to attack hemp operators and vice versa. That means both the marijuana and hemp industries have an incentive to eliminate the bad actors. This could take the form of increased self-policing, as well as using a portion of tax dollars derived from the sale of cannabis products to increase law enforcement activities against bad actors.
The second part of my proposal – treating marijuana and hemp operators more equally in the eyes of the law – may seem overly optimistic or even naïve, but I believe there are a series of reform measures that would garner support of the industries and the general public. So, what are we talking about? Here are a few examples:
- Place federal age limit restrictions on all cannabis products – hemp and marijuana – potentially subject to certain narrowly defined exceptions for medical purposes;
- Require the same type of third-party testing for marijuana and hemp products and make the results of those tests available to consumers before they purchase any product;
- Impose the same type of labeling and packaging requirements for marijuana and hemp products, including things like including potential risks on the label and ensuring that products are sold in child and tamper-proof packaging;
- Substantially limit the ability of cannabis operators to make any types of health claims that are not supported by scientific evidence and strictly enforce laws against deceptive health claims;
- Put marijuana and hemp operators on a more similar tax footing. If, as widely expected, marijuana is rescheduled to Schedule III, this will be a much easier ask because marijuana companies will not be subject to the draconian provisions of IRC Section 280E; and
- Put marijuana and hemp products on equal footing when it comes to interstate commerce.
Sound far-fetched or overreaching? Maybe. But many of these proposals are already included in a recent bill by Sen. Ron Wyden and currently working through the Senate process.
And to be clear, this proposal is meant to be a starting point. Maybe all of the provisions will not work once put into practice, and I’m sure there are other ways to further the goals.
Above I expressed skepticism that there is a finite universe of consumers and a finite amount of money available to the cannabis industry. I believe if these provisions are put in place, it will make Americans more confident in and comfortable with cannabis as a whole and they will buy more cannabis. And if the pie grows, everyone gets a bigger slice. That’s the real benefit here.
And to those who believe these regulations would pose an undue burden to certain operators, my response is that some operators may very well not survive. But while that is unfortunate for those operators, if you do not have the wherewithal to meet these requirements then you likely should not be in the business of selling cannabis.
Look, there will always be competition among cannabis operators. That’s appropriate and another way to best serve Americans. But let’s compete on traditional business considerations like price, quality, and the like. To do otherwise would cause harm to the reputation of the cannabis industry and potentially to Americans.
The End of the Beginning or the Beginning of the End?
The cannabis industry is at an inflection point. There are countless moving pieces ranging from rescheduling marijuana to cannabis banking reform, state legislative proposals, and recent opinions from state law enforcement officers. And if you’re not part of the cannabis industry, take my word for it that we are in a pressure cooker – we can either boil over or let off steam and cool down. If we take the former path, both the marijuana and hemp industries will continue to see the types of downsides discussed above and could very well destroy themselves or find themselves regulated out of business.
Or we can choose the better path, one towards mutual growth of the marijuana and hemp industries. That path is consistent with the spirit of the cannabis universe for the past few decades. It would provide clarity in the law to help industry make responsible decisions with confidence, and it would increase consumer confidence that the products available for sale are safe and are what they purport to be.
Maybe all participants in the discussions about marijuana and hemp should take to mind the words of peace from the band (ironically) named War, who started this post, in Why Can’t We Be Friends?:
The color of your skin don’t matter to me
As long as we can live in harmony.
