The November 8 election marked a historic point in United States’ history, and while many were focused on the presidential race, nine state ballot initiatives were conducted in the cannabis space. Five state ballots, including California, Nevada, Arizona, Maine, and Massachusetts, contained propositions to legalize the recreational sale of marijuana. Voters in California, Nevada, Maine, and Massachusetts approved recreational marijuana within their states with Arizona falling short by approximately 41,000 votes. Seed is focused on the industrial hemp sector of cannabis and two ballot measures, in California and Massachusetts, changed the way that industrial hemp is regulated. As a result of both measures passing, the application of the 2014 Farm Bill has been widened with hemp cultivation now legal in both states. As of today, 33 states now allow for the cultivation of industrial hemp.
While California already possess a large and well established medical marijuana industry, proposition 64, which received a vote of over 56% in favor of the initiative opened the door for recreational marijuana. Significantly for Seed, Section 9 of proposition 64 has paved the way for industrial hemp cultivation within the state. To date the legal status of industrial hemp in California has been hazy at best. It has technically been legal since 2013 with Senate Bill 566 establishing a regulatory system for licensing cultivation of the crop but requires federal authorization before it can begin to move forward. With no federal authorization, the bill has been effectively vetoed. However, this appears to be changing as proposition 64 establishes the mechanisms for the cultivation and regulation of industrial hemp.
The Proposition leant heavily on the 2014 Farm Bill Act. Section 3 of the proposition stated that the purpose of the act is to “allow industrial hemp to be grown as an agricultural product, and for agricultural or academic research, and regulated separately from the strains of cannabis with higher delta-9 tetrahydrocannabinol concentrations”, the mechanism for which is further described in Section 9. One line within the proposition that adds a bit of uncertainty is § 81006(a)(1), which states that “industrial hemp shall be grown only as a densely planted fiber or oilseed crop, or both.” This line may exclude hemp that is cultivated specifically for cannabidiol (CBD) and legal specialists will surely opine on the matter in the coming weeks.
California growers, like Colorado, have extensive experience handling cannabis and know how to best use the climate and geography to their advantage. This may give California a significant advantage in its first year of industrial hemp cultivation as many growers know what to expect and have experience handling the crop. While California growers have substantial knowledge on how to cultivate cannabis for its organic compounds, most notably THC, they my struggle with growing the crop for fiber and seed, as this requires a denser crop with unique needs and a different skill set. Additionally, California may need to time to established varieties that are well suited for its climate.
There is an increasing demand for organic hemp products, most notably CBD. California currently possess the country’s highest amount of organic acres at well over 600,000 and could be poised to take advantage of this surging organic demand.
Like California, Massachusetts also included language on industrial hemp within Question 4, which legalized recreational marijuana. The passage of the proposition established a “Cannabis Control Commission” and gives this commission the right to “regulate the cultivation, processing, distribution, and sale of hemp…”
As cannabis legislature within the United States shifts, the status of industrial hemp changes along with it. More and more states are beginning to grow industrial hemp and with California’s recent legislative changes, industrial hemp seems ready to make large leaps in the coming years. Seed is ramping up to providing the trading infrastructure and risk mitigation tools to serve this burgeoning industry.