California Gov. Gavin Newsom on Friday issued emergency orders banning all intoxicating hemp-derived cannabinoids in consumer products from retail stores.
Taking a page out of the Missouri governor’s book, the move follows the California Legislature’s failure to pass a bill that would have brought hemp-derived products into California’s regulated cannabis program.
The new regulations, proposed by the Department of Public Health, would require that all hemp food, beverage and dietary products intended for human consumption have no detectable THC or other intoxicating cannabinoids. This would include CBD products. It sets a minimum age to purchase hemp products to 21 and limits the number of servings of hemp consumables to five per package.
The emergency regulations would take effect immediately upon the approval by the Office of Administrative Law, which a representative at the hemp industry group U.S. Hemp Roundtable said could be in as little as 15 days.
Newsom said the regulations are in response to “increasing health incidents related to intoxicating hemp products,” especially among children.
“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,” Newsom said in a press release. “We’re taking action to close loopholes and increase enforcement to prevent children from accessing these dangerous hemp and cannabis products.”
Newsom said retailers must begin removing products with THC from store shelves. State regulators including the departments of Public Health, Cannabis Control, Alcoholic Beverage Control, and Tax and Fee Administration, as well as local and state law enforcement, will begin immediate enforcement action.
DCC Director Nicole Elliott said the department supports the order. “These rules are a critical step in ensuring the products in the marketplace align with the law’s original intent, and we are committed to working with our state partners to enforce state law,” she said in the governor’s press release.
The Hemp Roundtable, which had been celebrating the defeat of AB 2223, appeared to be caught off-guard. “We’ve only had a few hours with the emergency regulations, but we’re already planning for a major fight,” it said in an email statement.
Hemp Roundtable General Counsel Jonathan Miller, in the statement, called the action a “betrayal of California hemp farmers, small businesses, and adult consumers.”
He said that rather than establish reasonable policies to keep intoxicating products out of the hands of children that would be supported by good actors in the hemp space, “Governor Newsom instead has proposed a complete retail prohibition on 90-95% of popular hemp products for adults, including most non-intoxicating CBD products that he purports to support in his public communications. And in the middle of massive California budget deficits, he is unnecessarily throwing away nearly a quarter billion dollars in tax revenue from legitimate small businesses.”
AB 2223 dies in committee
California, one of the oldest and largest adult-use markets, tried to regulate hemp product sales and manufacturing with AB 2223. But it was Gov. Gavin Newsom’s last-minute amendments to strictly control all hemp-derived THC, as well as the high cost to implement it, that ultimately doomed the legislation for another year.
A similar attempt to regulate the hemp industry last year with AB 420 also failed.
AB 2223 had opponents in both the cannabis and hemp markets, for different reasons. It passed the state Assembly in May. However in the Senate, after being approved by the Committee on Health, it failed to advance in the Committee on Appropriations.
Currently, HDC products are regulated by the California Department of Public Health (CDPH) under AB 45, which was signed in 2021. Hemp manufacturers must register with the CDPH. Food, beverage and cosmetic products must contain no more than 0.3% of any THC. Smokable hemp flower is banned. But unlike many other states, there is no age limit to buy HDC products.
Under AB 2223, the Department of Cannabis Control (DCC) would have taken over hemp regulation. The bill would have allowed licensed businesses to manufacture, distribute and sell hemp and CBD products, but it also would have restricted hemp-derived THC and similar cannabinoids.
A licensed cannabis manufacturer or microbusiness would have been allowed to obtain industrial hemp from a person registered with the CDPH. But it would have prohibited licensed manufacturers from incorporating THC that had been converted from an HDC into a cannabis or hemp product.
Also, industrial hemp products sold outside the regulated cannabis program would have been limited to only 0.25 mg of THC per serving and 1 mg per package, requiring most non-intoxicating CBD products to be sold in licensed stores.
However, following the Assembly’s passage, technical amendments were introduced that would have brought any hemp product that contains “any detectable amount of any cannabinoid,” including CBD, into the regulated market and banned them from ordinary sale outside of licensed retail outlets.
The U.S. Hemp Roundtable’s Miller called the amendments in an Aug. 14 statement a “bureaucratic power grab that poses an existential threat to the California hemp industry.”
He said the DCC proposed the amendments. “These efforts have represented an unholy alliance between regulators and the companies they regulate – the largest marijuana companies who seek to destroy the new hemp industry as a way to capture market share by forcing all hemp products to be sold exclusively in their own dispensaries,” he wrote.
However, DCC Director Elliott told CRB Monitor News before the emergency regulations were announced that the governor provided the technical amendments, noting that the number of changes was unusual. She said while the DCC did not take an official position on the bill, there was proactive engagement at the executive level, behind the scenes.
“The Department regularly provides technical assistance to the Legislature, and mislabeled and misleading products do not belong in any marketplace,” she said.
Elliott said consumer safety is the DCC’s priority by statute, and the existing legal framework for hemp doesn’t have the same “rigor” as the cannabis market.
When asked if she was disappointed that the bill didn’t pass, she responded, “I am disappointed the legislature didn’t do what they should have done to protect consumer safety.”
Senate committees focus on impact on cannabis industry, costs
The Senate Committee on Business, Professions and Economic Development approved the bill in June, and the Committee on Health approved it in July.
The Health Committee in its July 3 report noted that the main issue was how much THC to allow in products. Some industry players felt the 1 mg per product limit in the bill was too low, while others wanted it lower.
“If we were starting from scratch, with no regulatory framework for either cannabis or industrial hemp, this conversation might be different,” the committee report said. “But there is an extensive regulatory framework for cannabis, with significant and costly requirements for cannabis farmers in particular that do not apply to hemp farmers. Permitting THC products to be derived from hemp risks undercutting cannabis cultivators who have invested significant resources in playing by the rules.”
The Health Committee also noted in its report that the bill’s author, Assembly Majority Leader Cecilia Aguiar-Curry, was “considering significant technical assistance (TA) amendments provided by the Administration” that would require any products containing THC to be sold in a DCC-regulated dispensary.
The Appropriations Committee, which focuses on the fiscal impact of the bill, noted in its Aug. 9 report the “significant” costs for the DCC to “modify regulations, reconfigure its track-and-trace system, and for other administrative and enforcement workload” would range in the “millions of dollars.” Likewise for the Department of Public Health to revise its regulations and for enforcement.
But the committee focused on the unknown costs to counties to adjudicate criminal violations under the new law and incarceration, mentioning how jails are increasingly overcrowded.
“If 10 defendants statewide are sentenced annually to an average of six months in county jail for solicitation, the total cost to counties would be $145,000,” the report said.
While violations of the statute would be misdemeanors subject to incarceration, offenders of current cannabis licensing laws are most often fined or face other penalties. Civil penalties would have been $2,500 per violation.
The bill was discussed on its fiscal impact before being sent to the suspense file by unanimous vote on Aug. 12.
Sen. Anna Caballero, chairperson of the Appropriations Committee, did not provide a comment on why the bill did not move forward. But a spokesperson said it was most likely because the bill was expensive while the state is in a deficit year.
However, the committee’s vice-chair, Senate Minority Leader Brian Jones, chalked it up to back-room party politics.
“While this should be an open, public, and democratic process, Democrat leadership routinely holds closed-door meetings where they unilaterally decide which bills will have the opportunity to even be brought up for a vote in the Appropriations Committee. Oftentimes, the governor’s office plays a significant role in these decisions,” Jones said in an email to CRB Monitor News.
Not a war?
The U.S. Hemp Roundtable, relieved that AB 2223 is dead for now, insisted during a recent webinar that there’s no war between the cannabis and hemp industries, especially as major multi-state operators enter the hemp space. While the organization opposes HDC product bans, they do generally support regulations to improve public safety.
“We’re not in a war with ourselves. This being painted as a war is ludicrous to us,” said Cheech and Chong CEO Jonathan Black as a speaker on the Sept. 4 webinar. Cheech and Chong sells both low-THC beverages in stores licensed by the California Alcoholic Beverage Control and a 50 mg drink at licensed cannabis retailers.
“This is a path forward to the legalization of cannabis,” by showing that cannabis can be safely regulated, he said.
Black said they were hoping to amend the bill in the Appropriations Committee to add a 5% tax that would have brought in approximately $250 million in revenue. But the bill was “doomed to fail,” he said, because “it would have cost the state millions and millions of dollars they didn’t have.”
While the bill was supported by cannabis manufacturers, such as CannaCraft and Kiva Confections, and retailers March and Ash, and Embarc, it was opposed by the Origins Council, which represents 800 small and independent cannabis businesses.
According to the Senate Committee on Health’s report, the Origins Council said permitting hemp-derived THC would undercut regulated cannabis cultivators. They requested the bill prohibit naturally occurring hemp cannabinoids until both hemp and cannabis cultivation were equally regulated. They also wanted the THC limit reduced to .5 mg. A spokeswoman for the Origins Council did not attend a scheduled interview or respond to requests for comments.
Hemp Roundtable lobbyist Rand Martin said during the webinar that he believes there will be another attempt to legislate the California market next year. And he thinks there will be greater willingness to listen to hemp industry concerns. “The folks behind 2223, I hope, recognize they can’t do this alone.”
