Marijuana Business Magazine September 2018

Suddenly, cannabis growers had a route to producing cannabinoids within the law.The formula: • Find a state that allows hemp. • Find a hemp variety rich in CBD but low in THC. • Grow the hemp. • Extract CBD and make lots of money. It has proved a tempting pathway for entering the cannabis market. “It’s very different from the THC market,” said Janel Ralph, CEO of Palmetto Harmony, a South Carolina company that makes CBD tinctures, topicals and vape pens. “If you’re looking at the THC market, you’re constrained to your state line. With hemp and CBD, you’re not constrained by your state line. “Our products are mainstream prod- ucts.They’re at mom-and-pop wellness stores.They’re at grocery stores.They’re at pop-up stores.” Easier Than Marijuana? Hemp’s business advantages over mari- juana are obvious: Provided a state author- izes hemp production and CBD extraction from the plant, entrepreneurs there are free to grow many acres of low-THC hemp and turn the crop into a product that faces a fraction of the regulatory hurdles faced by marijuana. Hemp producers don’t have to track their crop from seed to sale. Also, product testing in most states is required only to check the THC content of a CBD product. And because hemp is legal under federal law, growers of the plant can seek organic certification by the U.S. Department of Agriculture, a market advantage not avail- able to marijuana cultivators. Perhaps most tantalizing to many marijuana entrepreneurs: A legal hemp business isn’t subject to 280E, the notori- ous section of the federal tax code that blocks cannabis companies from taking the standard deductions that traditional busi- nesses use to lower the amount they owe the government. The lure was enough to tempt Harold Jarboe to flee Washington state’s marijuana industry in 2015 to buy land outside Nash- ville,Tennessee, and start growing hemp for CBD. “I started seeing people selling grams of CBD and other cannabinoids for $250 a gram. You’re like, ‘Oh, my god, that’s about six times what marijuana is going for,’” Jarboe said. “CBD isn’t that expensive anymore, of course, but it’s still pretty high.” Hemp’s lower regulatory burden sealed the deal for Jarboe. He recalls his disbe- lief when querying Tennessee agriculture authorities about the rules for making CBD. “I asked, ‘Is it all right if I grow it for CBD?’And they were like, ‘As long it doesn’t go over 0.3% (THC), we don’t care.’ It was so different than the marijuana system,” he remembered. Legal Challenges CBD may have fans everywhere, but the legal landscape for the product isn’t as clear as CBD entrepreneurs might hope. ON THE CAP¬TAL¬Z¬NG CBD SURGE Pulak Sharma of Kazmira evaluates products at the lab in Watkins, Colorado. Photo by Matthew Staver 62 • Marijuana Business Magazine • September 2018