California cannabis business orgs raise red flags over proposed hemp supply chain integration

A pair of cannabis trade organizations in California that represent hundreds of small businesses held a press conference on Thursday to sound the alarm over a proposed amendment that they said is an “existential threat” to much of the legal marijuana supply chain in the state.

A trio of representatives from the Origins Council and Supernova Women, which speak for small marijuana farmers and social equity companies, respectively, broke down a 44-page proposal that has been circulating in political circles in Sacramento since June as an amendment to Assembly Bill 2223, which was originally intended as new rules for hemp businesses. It’s also reportedly backed by Gov. Gavin Newsom.

The bill began as a new attempt to crack down on intoxicating hemp products that were legalized nationally in 2018 by the federal Farm Bill. That industry has been producing competitors for state-legal marijuana companies increasingly across the country.

But now, with the newly authored amendment set to be introduced in coming days, much of the state-licensed marijuana sector could be poised to lose out, the trade organizations said, because the bill would exacerbate an uneven playing field between hemp and cannabis, with most advantages weighted towards hemp operators.

“The challenge that we would face should this move forward, in terms of competition with both in-state and out-of-state hemp producers, is significant, in terms of market share,” said Genine Coleman, the executive director of Origins Council. “It’s an existential crisis for us. As producers, we’re already facing an existential crisis as it is, with the regulated supply chain and market dynamics being what they are.”

Coleman, along with Supernova Women co-founder Amber Senter and Humboldt County Growers Alliance Policy Director Ross Gordon, said that the amendment emerged from Newsom’s office, ostensibly as part of an urgent need to do something about the intoxicating hemp goods proliferating in regular retail outlets like gas stations and convenience stores, as opposed to the highly regulated dispensaries where legal marijuana is sold.

But in an apparent rush to act, the Newsom administration is supporting a policy that they say would:

• Require intoxicating hemp goods to be overseen by the same regulatory agency as marijuana, the state Department of Cannabis Control, potentially overloading the office.
• Open up regulated interstate cannabis commerce, but only for hemp products and not for state-legal marijuana goods, setting a new legal precedent that marijuana farmers fear they’ll be left out of.
• Give interstate import and export exclusivity to cannabis distributors, artificially creating some winners in the cannabis trade while disadvantaging others.

Newsom’s press office did not respond to a request for comment Friday about the supposed amendment.

Coleman, Senter and Gordon said that the original version of AB 2223 – which is still in a legislative committee – has only a few weeks to be amended and passed before the state legislature adjourns at the end of August. That means either the wholesale overhaul will become a reality very quickly, or it’ll get pushed out altogether until next year by lawmakers.

Senter predicted, however, that if the amendment is approved and the bill ultimately signed into law, the inequities between large and small operators that already exist in in the industry would be exacerbated. Particularly, the three all said, because some multistate operators – such as Curaleaf – are jumping into the intoxicating hemp goods sector and likely would want to capitalize on a market the size of California.

“This is not something that I see small cannabis businesses being able to capitalize on, small brands, Black and brown folks, women-owned companies, all of that,” Senter said, arguing that smaller companies typically don’t have the money to easily start up a brand new hemp-based product line. “I just don’t think that many of them who are already in cannabis are going to be picking up the ball to run in the hemp category.”