Hemp is one of the oldest domesticated crops in the world, with the first traces found in 8000 BC in territory that is now part of China and Taiwan. Hemp quickly became integral in everyday life and today counts buildings, boats, blenders and cars amongst its 50,000 uses. Hemp was introduced to North America in 1606 and farmers quickly saw its value and began to produce paper, sails, clothing, ropes and lamp fuel. The US government accepted tax payments in the form of hemp from 1631 to the early 1800s, when farmers were legally required to grow hemp as a staple crop.

Hemp production was heavily impacted by the passage of the Marijuana Tax Act in 1937. In 1970, the Controlled Substances Act (CSA) grouped this versatile crop with drugs such as heroin and LSD despite its lack of psychoactive properties. Over the years, the true benefits of this plant faded from public conscience. Unclear federal hemp policy continues to hamper growth in the US, earning it the distinction of being the only developed nation in the world without industrial hemp as an established crop.

Plant a tree today; someone may enjoy its shade tomorrow

Federal policy on hemp began its advance with the passage of the 2014 Farm Bill. Congress federally authorized domestic cultivation of industrial hemp so long as state-level legislation had been enacted in accordance with the Farm Bill. The bill’s definition of “industrial hemp” is “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.” Hemp was therefore once again legal, under very limited circumstances, to cultivate. Policy at the federal level effectively prevents full-scale, industrial production of hemp despite their ‘marihuana’ definition exemptions which include industrial hemp fiber, sterilized seed and seed oil.

In order to avoid any ambiguity at the federal level, Congress enacted the Consolidated and Further Continuing Appropriations Act of 2015 and has since expanded and re-authorized such provisions through at least September 30th, 2018. This legislation contains provisions to block federal law enforcement authorities from interfering with state agencies and hemp growers or otherwise contravene the Farm Bill. While a step in the right direction, confusion continues at the federal level.

The DEA has continued to persecute legal hemp businesses since the Farm Bill’s passing in 2014. At the end of 2016, the DEA applied a “Controlled Substances Code Number” to cannabis extract products that contain one or more cannabinoids, including hemp-derived CBD. This code effectively opened the door for potential federal enforcement against hemp businesses for producing and selling products with those cannabinoids.

A recent court case out of the 9th Circuit Court of Appeals between the Hemp Industry Association (HIA) and the DEA resulted in a negotiated settlement requiring the DEA to take several actions. Most significantly, on May 22, 2018, the DEA issued internal and external directives to federal agencies clarifying that the mere presence of cannabinoids does not render any material a controlled substance. This directive should provide greatly needed clarity and guidance to federal agencies to minimize interference with the expanding flow of hemp commerce.

Recent developments:

  • Senator Mitch McConnell introduced the Hemp Farming Act of 2018. In addition to federal legalization, this would remove restrictions on banking access, water rights and other roadblocks currently faced by farmers and processors.
  • Democratic Senator Elizabeth Warren and Republican Senator Cory Gardner recently unveiled legislation that would fully protect state-legal marijuana programs in addition to supporting national industrial hemp legalization.

It is difficult to overstate the positive impact that full-scale industrial hemp production would have on the US economy. The hemp market may well exceed the cannabis market as regulation, information and transparency work to drive greater adoption. For farmers and hemp-related businesses, the opportunities are unprecedented. For investors, this means an opportunity for significant returns in an industry that is growing at an extremely rapid pace.

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