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Federal Officials Give Hemp Legalization Update At Senate Hearing

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The Senate Agriculture Committee heard from federal agencies about efforts to implement the legalization of hemp at a hearing on Thursday.

In the months since the crop and its derivatives were federally legalized under the 2018 Farm Bill, lawmakers and industry stakeholders have made repeated calls to expedite the development of regulations providing for the lawful marketing of hemp products.

The panel requested updates to that end from invited witnesses, which included representatives of the U.S. Department of Agriculture (USDA), Food and Drug Administration (FDA) and Environmental Protection Agency (EPA).

Agriculture Committee Chairman Pat Roberts (R-KS) said the hearing was meant to provide “certainty and predictability for farmers” and that “this developing industry has great opportunity but—to be truthful—also has much uncertainty and risk for farmers.”

“There are complex questions in this space. Is hemp the crop of a generation? What will this industry look like in 10 years?” he said. “I do not know the answers to these questions, and I am not sure if anyone actually can answer them.”

Sen. Debbie Stabenow (D-MI), the committee’s ranking member, discussed the history of hemp in the United States, calling it a “new, old crop” that is part of a “great American tradition.”

Noting that founding fathers like George Washington, John Adams and Thomas Jefferson all grew hemp, she joked that “maybe Lin-Manuel Miranda will make his next musical about that,” referring to the “Hamilton” creator.

“We also need to ensure that these new opportunities in hemp production are fair and equitable for all farmers,” she said on a more serious note. “Given the USDA’s troubling history of discrimination, the Department must be proactive to ensure socially-disadvantaged farmers have the same opportunity to get a license to grow hemp. It’s also critical that there is fair testing and enforcement of harvested hemp across the board.”

Witnesses on the first panel at the hearing included USDA Under Secretary for Marketing and Regulatory Programs Greg Ibach, USDA General Counsel Stephen Vaden, FDA Principal Deputy Commissioner of Food and Drugs Amy Abernethy and EPA Office of Chemical Safety and Pollution Prevention Assistant Administrator Alexandra Dunn.

The second panel consisted of National Hemp Association Executive Director Erica Stark, Red Lake Band of Chippewa Indians Tribal Chairman Darrell Seki and Kentucky farmer Brian Furnish.

Watch the hearing below:

Thursday’s hearing marks the second congressional cannabis-related meeting of the week after the Senate Banking Committee convened on Tuesday to discuss banking issues in the broader marijuana industry.

Even after hemp’s legalization, lawmakers and industry participants have raised concerns about ongoing problems accessing financial services businesses involved with the crop and its derivatives, some of which have said they’ve been denied credit lines and insurance policies due to a lack of guidance from federal regulators. That issue also came into play during Thursday’s hearing.

While few GOP senators attended the week’s earlier marijuana-focused meeting, hemp has garnered strong bipartisan support and this hearing reflected that shared political interest. Senate Majority Leader Mitch McConnell (R-KY) has been a particularly vocal proponent of the crop, shepherding his hemp legalization provision to passage as part of the large-scale agriculture legislation that was signed by President Donald Trump in December.

McConnell made an appearance and said that he’s “glad” the crop is “making a comeback, and it’s generated incredible excitement all across my state.” He noted that it is being grown in 101 out of 120 counties in Kentucky.

“This product is incredible—from food to clothing to wellness products, what a diversified product,” he said, adding that there are some remaining issues that need to be resolved. Those issues include ensuring that hemp farmers have access to crop insurance and financial services.

McConnell led Agriculture Secretary Sonny Perdue on a tour of a Kentucky hemp farm earlier this month and also met with Acting FDA Commissioner Ned Sharpless, advising the official to create a pathway for CBD to be lawfully marketed in food items and dietary supplements. Former Commissioner Scott Gottlieb said that developing such regulations could take years absent congressional action.

FDA’s Abernethy recognized in her testimony that a multi-year process for rules to be developed “is a long time to wait for regulatory clarity, particularly given the significant public interest in hemp products, and CBD in particular.” FDA said earlier this month that it is speeding up its rulemaking effort for CBD, adding that it plans to issue a status update by early fall.

The official acknowledged that the Farm Bill “unleashed a wave of interest and innovation in hemp agriculture” and stressed “how significant of a policy sea change this has been.”

Abernethy said that “FDA’s approach to cannabis and cannabis derived products, including hemp products, is to treat these products just like we do any other.”

“FDA is committed to advancing hemp products through the Agency’s existing regulatory pathways, and we are further exploring whether it would be appropriate to make additional regulatory pathways available to hemp products such as those containing cannabidiol (CBD). FDA believes taking this approach protects patients and the public health, fosters innovation for safe and appropriate products, and promotes consumer confidence.”

She went on to say that FDA is “wrestling with questions not only about the intrinsic safety of CBD, but also about potentially unsafe manufacturing processes for products containing CBD.”

“FDA knows from CBD products it has tested that they may not contain the amount of CBD indicated on a label, or they may contain other potentially dangerous compounds that are not listed on the label,” she said. “Therefore, FDA must consider questions related to good manufacturing practices for CBD products and potential labeling that might be appropriate for these products to address any potential risks to consumers.”

Further, Abernethy described the complications the agency faces as it considers allowing for the lawful marketing of CBD products in the food supply or as dietary supplements. She suggested FDA would have to create exceptions for hemp under all of its regulations because carving out just one exception could “end up generating additional confusion in the marketplace—a result the Agency believes all stakeholders would prefer to avoid.”

“FDA will only consider creating legal pathways for CBD to be marketed as a dietary supplement or in a food if the Agency is confident that it can develop a framework that addresses safety concerns,” she said.

“Another issue that FDA plans to consider is whether allowing CBD to be marketed as a dietary supplement or in a food will deter clinical research to substantiate additional therapeutic uses for cannabis-derived compounds,” Abernathy added. “Less research into the promise of cannabis-derived compounds and fewer drug approvals in this area would be a significant loss for American patients.”

She also said that confusion generated from the legalization of hemp and its derivatives has led some companies to engage in interstate commerce and that “storefronts and online retailers have flooded the market with these products, many with unsubstantiated therapeutic claims.” Just this week, FDA sent a warning letter to CBD business Curaleaf for selling “unapproved products with unsubstantiated therapeutic claims,” sending the company’s stock plummeting.

“As this new market emerges, we have seen substantial interest from industry, consumers, and Congress,” she said. “However, in the midst of the excitement and innovation, FDA’s role remains the same: to protect and promote the public health.”

USDA, for its part, initially said that it was aiming to release an interim final rule for hemp in August, but the Department’s Ibach said in his testimony that while officials are “committed to timely establishment of this program,” the rule “is currently undergoing interagency review and we hope to issue regulations in the Fall of 2019 to accommodate the 2020 crop year.”

“Once the regulation is published and becomes effective, [Agriculture Marketing Service] will move quickly to establish the program,” Ibach said. “AMS will begin accepting and reviewing state and tribal plans as well as license applications submitted by individuals who are located in States or territories of Indian Tribes that will not operate their own State or Tribal plan, and who wish to be licensed under the USDA plan.”

EPA’s representative discussed the agency’s role in approving pesticides for hemp plants, saying that officials anticipate that “pesticide registrants will intensify their interest in gaining crop protection approvals for use” on the crop thanks to “strong economic forecasts for hemp production.

“I can report that the agency has recently begun to receive a number of registration requests seeking to add hemp to pesticide labels,” Dunn said. “Currently, there are 10 product registration requests under review at the EPA.”

Dunn also said that the agency is prioritizing and reviewing on an expedited basis requests involving biological and microbial chemicals because they tend to have a low environmental impact.

“I anticipate these will be the first of a group of decisions that will support growers and this new industry,” she said.

An interagency dialogue is underway across EPA, USDA, FDA and the Justice Department, she said. Additionally, EPA is “also in discussions with the Health Canada Pest Management Regulatory Agency about their approved pesticide labels and approaches to regulating hemp.”

During the second panel, Furnish, who was one of the first hemp farmers in Kentucky, talked about the potential of the hemp industry but also the unique risks that cultivators face.

Since the crop is now legal, “we need to take a close look and remove, one by one, the barriers to success so hemp can be on the same production playing field as all the other crops,” he said.

He also brought up part of Dunn’s testimony and emphasized the lack of EPA-approved pesticides for hemp.

“Most folks in the government and even in production agriculture probably don’t know or realize that hemp has no legal pesticide or herbicide or fungicide,” Furnish said. “A grower can lose its entire crop to weeds or pests. Without an approved herbicide or pesticide we may have to pay labor between $500 – $2500 an acre to pull the weeds to keep our hemp crop pure and healthy.”

Echoing a point that his home state senator, McConnell, has made on numerous occasions, he said hemp stands to be an economic benefit to Kentucky as tobacco farming dwindles.
“The labor necessary to successfully plant and harvest hemp is much the same as tobacco,” Furnish said. “That’s why hemp is and can be a great replacement for the dwindling tobacco production.”

“Corn, wheat and soybeans all have hundreds and maybe thousands of product uses. Hemp can too, but they need the barriers removed and the consistency and stabilization which come from the regulatory framework you all can give us. On behalf of the hemp farmers and growers, I’m asking for that help.”

The farmer also cited the lack of crop insurance and uncertainty about whether FDA will allow hemp derivatives in foods and dietary supplements as issues that lawmakers can help address.

Tribal Chairman Seki argued that USDA has left native populations out of the rulemaking process and he implored the department to take a more inclusive approach as it develops regulations for hemp, saying that officials have “frequently mischaracterized the sovereignty of Indian Tribes in the context of industrial hemp regulation under the 2018 Farm Bill.”

“Despite significant progress in the Farm Bill itself for Tribal sovereignty, USDA decisions to delay regulations are threatening to cripple Tribal industrial hemp projects before they can even begin,” he said. “If Tribes had always been on the same footing with states in terms of growing and regulating industrial hemp, this regulatory delay would merely be a source of frustration. Instead it poses a serious threat to competitive Tribal agribusiness.”

“The legalization of industrial hemp production marks a potential landmark economic opportunity for Tribes and Tribal producers through value-added agriculture. Because of this, it is vital that federal policymakers and agency officials negotiate with Tribal leaders, in robust government-to-government consultation, in shaping the federal regulatory structure implementing the industrial hemp provisions of the 2018 Farm Bill. This commitment must be made real from top to bottom at USDA. Otherwise, there is a high risk of this turning into yet another missed opportunity for Indian Country.”

A USDA memo released in May asserted that Indian tribes can engage with states that have approved hemp research programs authorized under the prior 2014 Farm Bill but they can’t authorize such programs themselves. Seki said it reflects a lack of inclusivity that native tribes are grappling with as states continue to move forward on hemp without the same restrictions.

He also decried delays in implementation, saying that “the more the AMS delays, the less time Tribal producers are given to prepare, plan, finance, and plant for the new crop year.”

Stark, of the National Hemp Association, said that the industry is in particular need of clarification when it comes to testing protocols, sampling, personnel eligibility requirements, cross-pollination and the importation of biomass.

“At the very heart of what we need to move forward is simplicity and clarity,” she said. “We need regulations that create an even playing field across the country. We need to eliminate the unintended consequences of legal ‘gray areas’ caused by each state testing differently and operating under a different set of rules and regulations.”

“The hemp industry has been struggling with legal uncertainties for too long and looks forward to reasonable regulations which will afford the opportunity for all to prosper within a clear legal framework,” she said.

While advocates have cast doubts on interest within the Republican-controlled Senate to pursue broader marijuana reform, hemp is one area where lawmakers from both parties have expressed support. And that sentiment was made clear during Thursday’s hearing.

Kentucky GOP Congressman Touts ‘High Hemp IQ’ Of His Constituents

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Marijuana Moment is made possible with support from readers. If you rely on our cannabis advocacy journalism to stay informed, please consider a monthly Patreon pledge.

Kyle Jaeger is Marijuana Moment's Los Angeles-based associate editor. His work has also appeared in High Times, VICE and attn.

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GOP Senator Presses Treasury Secretary On Tax Credits For Marijuana Businesses

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A Republican senator recently pressed the head of the Treasury Department on whether marijuana businesses qualify for a federal tax benefit.

During a Senate Finance Committee hearing on Wednesday, Treasury Secretary Steven Mnuchin was asked about the “opportunity zone” tax credit, which is meant to encourage investments in “distressed,” low-income communities through benefits such as deferrals on capital gains taxes.

Sen. James Lankford (R-OK), whose state’s voters approved a medical marijuana ballot measure in 2018, told Mnuchin that businesses that derive more than five percent of their profits from things like alcohol sales are ineligible for the tax credit, but there’s “not a definition dealing with cannabis businesses.”

“Are they within that five percent amount or are they not at all because there’s a federal prohibition on cannabis sales?” the senator asked.

“I’m going to have to get back to you on the specifics,” Mnuchin replied.

“That’d be helpful to get clarity because there are cannabis businesses across the country that, if they fall in opportunity zones, they’ll need clarification on that,” Lankford said. “When you and I have spoken about it before—it’s difficult to give a federal tax benefit to something that’s against federal law.”

 

Lankford, who opposes legalization and appeared in a TV ad against his state’s medical cannabis ballot measure, has raised this issue with the Treasury secretary during at least two prior hearings. When he questioned whether cannabis businesses qualify for the program last year, he clarified that he personally does not believe they should.

While Mnuchin’s department has yet to issue guidance on the issue, he said in response to the earlier questioning that his understanding is that “it is not the intent of the opportunity zones that if there is this conflict [between state and federal marijuana laws] that has not been cleared that, for now, we should not have those businesses in the opportunity zones.”

Mnuchin has also been vocal about the need for Congress to address the lack of financial resources available to state-legal marijuana businesses. Because so many of these companies are forced to operate on a largely cash-only basis, he said the Internal Revenue Service has had to build “cash rooms” to store their tax deposits.

“There is not a Treasury solution to this. There is not a regulator solution to this,” he said during one hearing. “If this is something that Congress wants to look at on a bipartisan basis, I’d encourage you to do this. This is something where there is a conflict between federal and state law that we and the regulators have no way of dealing with.”

Last week’s Finance Committee hearing was centered around President Trump’s Fiscal Year 2021 budget request, which separately includes a provision calling for the elimination of an appropriations rider that prohibits the Justice Department from using its fund to interfere in the implementation of medical cannabis laws as well as a continued block on Washington, D.C. spending its own local tax dollars to legalize marijuana sales.

American Bar Association Wants Protections For Marijuana Banking And Lawyers Working With Cannabis Clients

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American Bar Association Wants Protections For Marijuana Banking And Lawyers Working With Cannabis Clients

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The American Bar Association (ABA) approved two marijuana-related resolutions during its midyear meeting on Monday.

The group’s House of Delegates voted in favor of proposals endorsing pending federal legislation to protect banks that service cannabis businesses and calling for a clarification of rules to ensure that lawyers will not be penalized for representing clients in cases concerning state-legal marijuana activity.

Under the banking resolution, ABA “urges Congress to enact legislation to clarify and ensure that it shall not constitute a federal crime for banking and financial institutions to provide services to businesses and individuals, including attorneys, who receive compensation from the sale of state-legalized cannabis or who provide services to cannabis-related legitimate business acting in accordance with state, territorial, and tribal laws.”

ABA added that “such legislation should clarify that the proceeds from a transaction involving activities of a legitimate cannabis-related business or service provider shall not be considered proceeds from an unlawful activity solely because the transaction involves proceeds from a legitimate cannabis-related business or service provider, or because the transaction involves proceeds from legitimate cannabis-related activities.”

A bill that would accomplish this goal was approved by the House of Representatives last year, but it’s currently stalled in the Senate, where it awaits action in the Banking Committee. That panel’s chair, Sen. Mike Crapo (R-ID) is under pressure from industry stakeholders to advance the legislation, but he’s also heard from anti-legalization lawmakers who’ve thanked him for delaying the bill.

“Passage of the [Secure and Fair Enforcement] Banking Act or similar legislation will provide security for lawyers and firms acting to advise companies in the industry against having their accounts closed or deposits seized,” a report attached to the ABA resolution states. “This will also foster the rule of law by ensuring that those working in the state-legalized legitimate cannabis industry can seek counsel and help prevent money laundering and other crimes associated with off-the-books cash transactions.”

“Currently, the threat of criminal prosecution prevents most depository institutions from banking clients, including lawyers, who are in the stream of commerce of state-legalized marijuana. This Resolution is necessary to clarify that such provision of legal and other services in compliance with state law should not constitute unlawful activity pursuant to federal law.”

The second marijuana-related resolution ABA adopted on Monday asks Congress to allow attorneys to serve clients in cannabis cases without facing federal punishment.

Text of the measure states that the association “urges Congress to enact legislation to clarify and explicitly ensure that it does not constitute a violation of federal law for lawyers, acting in accord with state, territorial, and tribal ethical rules on lawyers’ professional conduct, to provide legal advice and services to clients regarding matters involving marijuana-related activities that are in compliance with state, territorial, and tribal law.”

Such a change would provide needed clarity for lawyers as more states legalize cannabis for adult use. ABA’s own rules of conduct have been a source of conflict for attorneys, as it stipulates that they “shall not counsel a client to engage, or assist a client, in conduct that the lawyer knows is criminal or fraudulent.” Federal law continues to regard marijuana as an illegal, strictly controlled substance.

An ABA report released last year made the case that there’s flexibility within that rule, however, as “it is unreasonable to prohibit a lawyer from providing advice and counsel to clients and to assist clients regarding activities permitted by relevant state or local law, including laws that allow the production, distribution, sale, and use of marijuana for medical or recreational purposes so long as the lawyer also advises the client that some such activities may violate existing federal law.”

A new report attached to the resolution states that “statutory guidance is needed that explicitly ensures that attorneys who adhere to their state ethics rules do not risk federal criminal prosecution simply for providing legal counsel to clients operating marijuana businesses in compliance with their state law.”

“This Resolution accomplishes this elegantly by harmonizing federal criminal liability with States’ ethical rules regarding the provision of advice and legal services relating to marijuana business. If a state has legalized some form of marijuana activity and explicitly permitted lawyers to provide advice and legal services relating to such state-authorized marijuana activity, such provision of advice and legal services shall not be unlawful under the Controlled Substances Act or any other federal law.”

Last year, ABA adopted another cannabis resolution—arguing that states should be allowed to set their own marijuana policies.

Border Patrol Union Head Admits Legalizing Marijuana Forces Cartels Out Of The Market

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Border Patrol Union Head Admits Legalizing Marijuana Forces Cartels Out Of The Market

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The head of the labor union that represents U.S. Border Patrol agents acknowledged on Friday that states that legalize marijuana are disrupting cartel activity.

While National Border Patrol Council President Brandon Judd was attempting to downplay the impact of legalization, he seemed to inadvertently make a case for the regulation all illicit drugs by arguing that cartels move away from smuggling cannabis and on to other substances when states legalize.

Judd made the remarks during an appearance on C-SPAN’s Washington Journal, where a caller said that “the states that have legalized marijuana have done more damage to the cartels than the [Drug Enforcement Administration] could ever think about doing.”

“As far as drugs go, all we do is we enforce the laws. We don’t determine what those laws are,” Judd, who is scheduled to meet with President Trump on Friday, replied. “If Congress determines that marijuana is going to be legal, then we’re not going to seize marijuana.”

“But what I will tell you is when he points out that certain states have legalized marijuana, all the cartels do is they just transition to another drug that creates more profit,” he said. “Even if you legalize marijuana, it doesn’t mean that drugs are going to stop. They’re just going to go and start smuggling the opioids, the fentanyl.”

One potential solution that Judd didn’t raise would be to legalize those other drugs to continue to remove the profit motive for cartels. Former presidential candidate Andrew Yang made a similar argument in December.

Federal data on Border Patrol drug seizures seems to substantiate the idea that cannabis legalization at the state level has reduced demand for the product from the illicit market. According to a 2018 report from the Cato Institute, these substantial declines are attributable to state-level cannabis reform efforts, which “has significantly undercut marijuana smuggling.”

Additionally, legalization seems to be helping to reduce federal marijuana trafficking prosecutions, with reports showing decreases of such cases year over year since states regulated markets have come online.

In his annual report last year, Supreme Court Chief Justice John Roberts also noted reduced federal marijuana prosecutions—another indication that the market for illegally sourced marijuana is drying up as more adults consumers are able to buy the product in legal stores.

Top Mexican Senator Says Marijuana Legalization Bill Will Be Approved This Month

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