Cannabis Compliance Update: These are the state changes to watch and be aware of from the last month. Hey, I’m Morgan Davis, a cannabis attorney based in Raleigh, North Carolina. Let’s talk about how to keep your business protected and thriving. One of the biggest needs in the cannabis industry is compliance. It’s keeping up with all the different changes that are happening on a state-by-state basis, which for most companies is really tough. Unless you’ve got a compliance team of, you know, like 30 people, it’s just really, really a bear to handle.

Moving forward, once a month, I’m going to provide you with a monthly update of all the biggest regulatory changes, agency actions, and pending legislation that you need to be aware of as a cannabis company operating in the hemp space around the United States.

South Carolina: A Sudden Regulatory Shift

Let’s start with South Carolina. This is a strange and nonsensical move by the South Carolina Department of Health and Environmental Control. They issued a letter that basically killed the entire hemp industry in South Carolina overnight. A little background on South Carolina: So, South Carolina’s been in kind of a gray space for a while. They passed a bill legalizing hemp, much like the farm bill. But then there was some guidance from the attorney general about synthetic cannabinoids back in 2019. That was when Delta-8 first came on the scene, and there was a question as to whether or not any of the intoxicating H products were allowed. Then everything was quiet for a while.

That attorney general guidance is still out there, but the market itself continued to grow and has grown much like in the state of North Carolina and many states around the country without really any enforcement or regulation. A little bit of regulation started at the end of last summer, where we started seeing some stores raided, but there didn’t seem to be any rhyme or reason to what was being pulled or what was being confiscated.

Three weeks ago, the Department of Health and Environmental Control issued a letter that basically said we have adopted the FDA’s position and basically, anything with Delta-8, Delta-9, or Delta-10 in it is not allowed. Pure anything with pure isolate CBD is not allowed. Anything that’s made otherwise from hemp must be a full-spectrum or broad-spectrum product or made from hemp flower, hemp seeds, hemp oil, and the labels cannot identify the Delta-9 or THC content or CBD content because that would mean that it’s an illegal product.

This is a really stupid idea. Here’s why: What you’re going to have is a bunch of companies who relabel their products as full-spectrum products that are essentially Delta-9 or CBD or Delta-8 or any number of other products, and they’re going to have a plethora of different stuff in there, and they’re going to be intoxicating, and no customer will know nor will they understand how many milligrams they’re ingesting.

And so, unless the South Carolina Department of Health and Environmental Control has, you know, like an entire force of officers who are going to go out and go to every smoke shop and every vape shop and every wellness store and every convenience store around the state of South Carolina, which they don’t, by the way, to confiscate every product that could possibly contain these intoxicating H derivatives, you’re going to end up with a bunch of stuff out there that’s improperly labeled and basically leaves the customer going, “Well, I don’t know what I’m taking, and I don’t know how much is in it, but this will be fun.”

It’s a horrible idea, but nonetheless, that’s the current law in South Carolina. So, good luck. If you’ve got products there, I would pull them out and stay out of South Carolina until they fix this issue. But if you’re going to continue to stay there, you’re probably going to need to relabel and repackage.

California: Regulating Synthetic Cannabinoids

Moving on to California. So, in the next couple of states, you’re going to see a theme. We’re back at the legislature trying to regulate synthetically derived cannabinoids. Most of this legislation is aimed at your Delta-8, Delta-10, HHC, THCV, THCP, and all the other acronyms out there of derivatives that are created through chemical synthesis, obviously, the most popular being Delta-8.

California has proposed and is trying to push through a law that would basically take synthetically derived cannabinoids out of the definition of hemp and place them back into the definition of controlled substances. So, anything that is any product that contains a synthetically derived cannabinoid is no longer legal under the hemp law. How they’re defining it is a substance that is derived from a chemical reaction that changes the molecular structure of any substance separated or extracted from the plant cannabis.

This excludes, and this is important in California, they are excluding decarboxylation from a naturally occurring cannabinoid acid. What this means is if you’ve got something that goes through the normal process like CBD is made through a chemical process, other minor cannabinoids are made through a chemical process as long as it’s just decarboxylation from the naturally occurring plant material or plant acid, then you’re fine.

But if it’s anything that goes beyond that, meaning you’ve got to use a bunch of solvents, this is what they’re going after. You’ve got to use a bunch of solvents, you’ve got to use a bunch of other stuff to make it, then it’s not hemp. This will do a great deal to clean up the market in California, a lot, if it’s enforced. If it passes and it’s enforced, it will most likely become very much a Delta-9, THCA, CBD sort of back to the natural plant state.

Nebraska: Strengthening Anti-Synthetic Cannabinoid Laws

Nebraska is trying to do something similar, though they’re going way beyond that. They are, again, adopting an anti-synthetic cannabinoid legislation. It hasn’t passed yet, but they’re pushing it through right now. It’s under Legislative Bill 999. So, Nebraska LB 999 would do a couple of things. One thing is it will take the, it will get rid of Nebraska’s agricultural program for hemp and be adopted under the USDA.

So, the USDA will now regulate hemp cultivation in the state of Nebraska. Additionally, for end products, so hemp products derived from hemp will not be legal if they contain synthetic material. Nebraska does not go nearly as far as California to be specific as to what synthetic material means, so it’s a much broader, if it’s adopted in the way it is now, it’s a much broader definition and will potentially make many more products illegal, including potentially some CBD full-spectrum products that probably were not the original intent of this but would potentially be captured in the legislation. A lot of that will ultimately depend on how Nebraska enforces that.

Florida: Overhauling Hemp Regulations

Florida: This is the biggest one that everybody’s watching right now. New legislation has been proposed in Florida. It’s passed the Senate, and it’s sitting in the House. They have three more weeks until the beginning of March to pass this. If it passes, if it does, then come July 1, I’m sorry, October 1 of 2024, Florida’s hemp market will change drastically.

One, they will adopt a, they’ve already adopted a total Delta 9 THC standard. But that total Delta 9 THC standard will exempt synthetically derived cannabinoids. Specifically, it calls out Delta 8, Delta 10, HHC, THCP, and THCV. But there is a catch-all that says anything that is a synthetic cannabinoid is not exempted from the Controlled Substances Act.

Additionally, they’re going to put milligram caps on all products. 2 Mig per serving, 10 Mig per container. This would be a massive change for the State of Florida, which is like the fourth-largest product market in the country. So, lots of people concerned about what’s about to happen in Florida. Stay tuned, we’ll see next time.

South Dakota: Strengthening Stance Against Synthetic Cannabinoids

South Dakota: South Dakota is adopting again an anti-synthetic cannabinoid stance in new legislation House Bill 1125. Except there couching it as any chemically derived cannabinoid. So, kind of like Nebraska except even worse. The definition that they’re adopting, similar to California but goes a little bit further. A chemical substance created by a chemical reaction that changes the molecular structure of any chemical substance derived from the cannabis plant. If it’s adopted the way it currently sits, it would basically get rid of everything, all derivatives.

So, could again, again it will depend on how it’s enforced. But you can see here there’s a growing trend of everybody wants to get rid of what has been deemed the junk. All these random acronyms that have been created through chemical processes and are seen throughout the industry in lots of products and moving more towards back towards sticking with what is naturally occurring. It’s a good theme to understand as you’re moving into the year and figuring out if you need to pivot your current line or where you want to sell that.

This is a growing trend, and if it continues as the legislative sessions get underway, then you could be looking at a much smaller map for the types of products that you currently find everywhere.

Wyoming: A Controversial Approach to Psychoactive Substances

Wyoming: Wyoming has Senate File 32, hemp limitations on psychoactive substances. They go by far farther than any other state in limiting synthetic cannabinoids. They’re actually going to try and outlaw all psychoactive substances. So, their definition of a synthetic substance means any synthetic THC, synthetic cannabinoid, or any other drug or psychoactive substance.

The problem with the way that Wyoming is doing this is that everything is psychoactive. CBD is psychoactive. It’s psychoactive just means it’s having an effect on your brain, right? What they need to do is do what California did and other states have done, Missouri, which we’re going to talk about in a second, which is specify that it’s intoxicating or impairing.

That’s really what they’re going after here. But they’ve whether by design or by just pure ignorance they’ve gone way too far and are going to end up killing their entire hemp industry. There’s been heavy debate over the bill in Wyoming. So, we’ll see whether or not it passes.

But it would be a huge step back for the state of Wyoming. Oh, also they would be moving from a Delta 9 standard to a total THC standard.

Missouri: Integrating Hemp into the Regulated Cannabis Market

Missouri: Finally, we’re going to talk about Missouri. So, Missouri has SP 984, the Intoxicating Cannabinoid Control Act. Missouri is interesting because it’s doing something that we saw happen a lot in the Northeast last year with Vermont and New Hampshire and Maryland and Connecticut where they adopted their hemp market and pulled it into the regulated cannabis market.

Missouri has as of 2022 a regulated adult use market, and they’ve had a medical cannabis market for a while. So, they are basically saying if it is a synthetic or if it’s an intoxicating hemp product. So, they go as far, not as far, but close to as far as Wyoming goes. We’re basically saying if it doesn’t matter if it’s synthetic, it doesn’t matter if it’s naturally occurring, if it’s intoxicating, then it belongs in the regulated adult use market and will have to comply with all of the adult use cannabis requirements.

Which means testing standards and seed to sale tracking and manufacturing standards, lots of licensing, lots of money, it’s expensive, it’s a big pivot for anybody who’s currently in the hemp space in Missouri. Most of your small and medium-sized businesses in that space won’t be able to make that pivot without a lot of mergers and moving in partnerships with larger cannabis companies just because of the weight of their requirements when it comes to being in the regulated cannabis market.

There’s been heavy debate in the house over this bill, so it doesn’t look likely that it’ll pass in its current form. Of course, it could, it’s an election year, who knows what’s going to happen. But it does look likely it’s going to pass in some form or another. There’s been a lot of discussion about over 200 cases of children last year showing up in hospitals and being reported to poison control that it was due to their exposure to intoxicating hemp products.

Of course, that’s total, we don’t have any further evidence of that other than what’s been presented on the floor. But as you can imagine, that’s extremely influential on lawmakers. The idea of children being so poisoned by these products essentially that they end up in the hospital. That’s your update for this month. Stay tuned, and we’ll see you next month for more.