World's 5th biggest economy now fully open to hemp/CBD products

The bill, which passed the California Legislature in mid September with bipartisan support, landed on Newsom’s desk just prior to his recall election.  As expected in a state with many more Democratic than Republican voters, Newsom easily survived the challenge​​.

Bill’s provisons

Among other things the new bill would:

• Allow CBD and hemp extracts to be used in foods, beverages and cosmetics.
• Put forward new rules for hemp farmers and businesses including lab testing standards, similar to what is already in place for the recreational and medical cannabis industries.
• Mandate that all products, including those imported from out of state, meet the new standards.
• Ban sale of THC isomers, including delta-8 THC, outside of regulated dispensaries.

Bill seen favorably by some medical marijuana players

The bill has enjoyed wide industry support.  According the publication Marijuana Business Daily​, which covers the recreational and medical markets, cannabis businesses are supportive because it means CBD/hemp companies will have to incur the same regulatory compliance costs as do the marijuana firms, thus leveling the cost playing field.

Within the CBD/hemp space the bill reportedly had the support of the  US Hemp Roundtable, California Cannabis Industry Association, California Hemp Council, Cannabis Beverage Association and a few marijuana companies such as Canadian producer Canopy Growth.

David Culver, Vice President of Global Government Relations at Canopy Growth, said the new legislation will help cement the importance of California in the hemp trade.

“By signing AB-45 into law, Governor Newsom has further demonstrated his commitment to the cannabis industry. This is a pivotal day for California’s growing hemp industry, and it would not be possible without the Governor and Assemblymember Aguiar-Curry’s leadership. We’re excited to bring our broad range of high-quality hemp-derived CBD products to Californians, and we look forward to working closely with policymakers on establishing a regulated, responsible, and thriving marketplace," ​​Culver said.

Full market opening comes at a critical time for CBD trade

It’s a significant moment in the industry because it opens fully such a significant market for these products.  California, when considered in isolation with its more than $3 trillion state GDP, is the world’s fifth largest economy, ahead of India, the UK and France​​.  California’s economy is also more than 50% larger than the next US State, Texas.

While the sales of CBD products took a significant hit in 2020​​ according to the recent American Botanical Council Herb Market Report (down more than 30% in the natural channel), adding this new, huge market to mix should enable them to recover quickly.

“We are thrilled that AB 45 is now official California law – the era of CBD prohibition in the Golden State is over.  The past three and a half years have been difficult for California hemp farmers and businesses given state agency guidance arguing that CBD products are illegal.  Now not only has this barrier been removed, but strong consumer protections will be put in place through regulation.  There still is much work to be done to ensure these regulations are appropriate and fair, and we look forward to working with the Newsom Administration to make California’s program a model for the nation,”​ said Jonathan Miller, an attorney with Frost Brown Todd who is the chief legal officer of the US Hemp Roundtable, an industry group.

Hoffman:  CBD products can venture beyond the dispensaries

Steve Hoffman is a marketing consultant and principal in the firm Compass Natural Marketing.  Hoffman has worked on CHAMP, or the Colorado Hemp Advancement and Management Plan, a collaborative effort set up by Colorado Gov. Jared Polis.  While many marketers have been flouting the state’s position on the legality of CBD products, Newsom’s action will allow many of the bigger, better connected companies that have been sitting on the fence to get into the game, Hoffman said.

“The passage of California’s AB45 bill will create one of the nation’s largest intra-state markets for CBD products, including food and beverage products infused with hemp-derived CBD. California law had previously followed FDA guidance that CBD is not permitted as an ingredient in food and beverage products, though certainly a large market already exists in California for such products,” ​Hoffman said.

“​Previously, CBD infused foods and beverages could only be sold through licensed cannabis dispensaries in California. Now, the new law, effective immediately, goes against the FDA’s policies on CBD, allowing for these products to be sold in retail stores throughout the state. Such a law protects consumers and businesses, alike. Hopefully, too, it will move the needle in other states and on a federal level with the FDA, which will allow the stalled hemp-derived cannabinoid market to flourish,”​ he added.

CHPA: Another brick in the wall of rational regulation

Carlos Gutiérrez, vice president of government affairs for the Consumer Healthcare Products Association (CHPA), said Newsom's action is a welcome milestone on the path of rational CBD regulation in all jurisdictions.

“CHPA thanks Governor Newsom for signing AB 45 into law. There is strong consumer and commercial interest in CBD and hemp-derived products, and we applaud California for its leadership in creating a regulatory pathway to meet consumer demand, all while protecting the public from potentially unsafe products,"​ he said.

"CHPA continues to advocate for legislation allowing CBD to become a legally marketed dietary supplement ingredient and will work with federal and state government leaders to develop a regulatory pathway,"​ Gutiérrez concluded.