Ask Our Experts 08/30/2018

Q: What will happen in the market with the new federal legalization of industrial hemp?

First, it is important to clarify the question. There is no “new federal legalization” of industrial hemp per se, but rather measures to broaden industrial hemp’s accessibility to interested states and federal agencies.

It is currently legal to grow industrial hemp under Section 7606 of the 2014 Farm Bill. Yet, that regulation limits federal legalization of industrial hemp to pilot projects under the jurisdiction of institutions of higher learning and state departments of agriculture.

The important piece of legislation to watch this fall is the 2018 Farm Bill, in which Senator Majority Leader Mitch McConnell (R-Ky.) has included language to expand the pilot projects as identified in Section 7606. Essentially, the new bill would make full access to hemp legal at the federal level (i.e., without the restrictions under Section 7606) by removing hemp from the Controlled Substances Act, thereby allowing participating states to be the primary regulators of their respective hemp production operations.

Thus, the relevant language in the 2018 Farm Bill Is poised to directly achieve the following:

• Full legalization of hemp with its removal from the list of drugs prohibited by the Controlled Substances Act (CSA). That would remove much of the confusion and regulatory red tape which exists between farmers, producers and state agencies.
• Empowering states to become the primary regulators of hemp, providing that they develop viable plans to properly monitor its production. If states are either unable or unwilling to create their own respective regulatory plans, the USDA will provide the necessary oversight.
• Allowing researchers to apply for competitive federal grants from USDA.
• Explicitly making hemp eligible for crop insurance.
• Banning convicted felons from holding hemp licenses.

Broadly speaking, while the hemp industry at large considers the first four objectives as very favorable, the last has gained attention as a point of hot debate. Many in the industry cry foul over civil liberties (deeming that a ban on those previously convicted amounts to double jeopardy and repeat punishment after time served), while certain legislators conversely cite a need to make sure those convicted of a felony are not direct participants in the U.S. hemp industry.

All in all, the 2018 Farm Bill is expected to dramatically expand the market and bring hemp back to American farms. It will increase cultivation acreage, effectively bring more hemp products to the market, and meanwhile increase jobs and while stimulating innovation in the industry. By leveling the playing field for industrial hemp as a commodity among other cash crops (think corn, wheat, or soybeans) eligible for farming insurance and federal grants, it will be poised to become America’s next great agricultural product.