California hemp stakeholders celebrate as restrictions are scuttled – for now

California hemp interests are celebrating after a push by marijuana regulators and the governor to strictly regulate intoxicating hemp-derived cannabinoids under state law failed in the Legislature.

Assembly Bill 2223, which posed an “existential threat” to hemp in California, according to the U.S. Hemp Roundtable advocacy organization, failed in the Senate Appropriations Committee on Thursday when it was not called for a hearing ahead of a deadline.

That means the bill is dead for the year.

AB 2223 was heavily modified earlier this month from earlier versions by the state Department of Cannabis Control (DCC) with the approval of Democratic Gov. Gavin Newsom, according to state capitol sources.

However, the sources suggested Newsom or a friendly lawmaker could make a last-second push to insert hemp regulations into another bill before an end-of-month deadline.

Hemp’s ‘work is not done’

Newsom’s office said in a statement to MJBizDaily that “we are deeply disappointed by the Legislature’s inaction.”

“Misleading and intoxicating hemp products harm consumers and put our kids’ health and safety at risk,” said Izzy Gardon, spokesperson for the governor’s office. “They should be subject to reasonable health and safety regulations, just like similar cannabis products.

“The administration is actively exploring further action to close loopholes, increase enforcement, and prevent children from accessing unsafe hemp and cannabis products.”

Gardon did not respond to subsequent inquiries about possible last-minute avenues, and the DCC did not respond to an MJBizDaily request for comment.

Jonathan Miller, the U.S. Hemp Roundtable’s general counsel, acknowledged in a statement that the bill’s failure is a temporary victory.

“Our work is not done,” Miller said, in part. “The war on hemp continues on Capitol Hill and in state capitals across the country.”

California’s marijuana industry continues to shrink under pressure from both the illicit market as well as taxes and regulations that the industry has long said are too onerous.

In addition, as in the rest of the U.S., regulated marijuana in California is facing market pressure from hemp-derived competitors, which are not subject to the same taxes or product-safety and sales rules.

Saving marijuana from hemp

In fact, “hemp products are specifically prohibited” under California’s Medicinal and Adult-Use Cannabis Regulation and Safety Act, according to a state Senate analysis of AB 2223.

Despite that, major marijuana multistate operators as well as smaller companies are flogging popular products such as beverages with low amounts of hemp-derived THC that can be sold in traditional retail channels.

Cannabis industry advocates say such products only serve to further damage a struggling marijuana industry.

For Newsom, who closely associated himself with marijuana legalization and endorsed 2016’s Proposition 64, such a failure might be personal.

AB 2223 would have clarified the “prohibition” of hemp-derived products with 0.3% or more THC sold outside the regulated marijuana system.

Any “final-form” product sold outside regulated marijuana stores would be limited to no more than 1 milligram of THC per package and 0.25 milligrams per serving – restrictions that hemp advocates said amounted to a de facto ban of products now on the market.

The bill also would have banned any “synthetically derived cannabinoid” not approved by state health regulators.

That language that would have criminalized delta-8 THC and similar so-called “novel cannabinoids.”

‘A dangerous game’

In a statement, the California Cannabis Industry Association’s board of directors called the bill’s failure a “terrible misstep.”

“The state is playing a dangerous game with public health, while losing the viability of the entire legal cannabis framework in California,” the group said, in part, in a statement.

Legal cannabis tax revenue has declined 20% since 2021, and “an untaxed and untested hemp market (that) sidesteps every critical measure the state has put in place to regulate this plant” is partly to blame, the statement added.

Chris Roberts can be reached at chris.roberts@mjbizdaily.com.