Mitch McConnell’s Farm Bill Could Blow Up the CBD Market

Mom is going to be buying CBD at Walgreens if this bill passes.

CBD is already big business in America with hundreds of millions of dollars in sales every year. But the market for pot’s second most famous compound might soon skyrocket thanks to a somewhat unlikely ally: Kentucky Senator Mitch McConnell.
The powerful Republican from Kentucky included provisions in this year’s Farm Bill that would fully legalize industrial hemp. That bill is now a top priority for Congress to pass before the end of the year, and if it becomes law we might see CBD on the shelves of every drug store in America.

“Once CBD is fully legalized, we expect that market to absolutely explode, with sales hitting $22 billion by 2022, which is higher than the US Cannabis industry,” said Bethany Gomez, the director of research for the cannabis research firm Brightfield Group. “That growth will absolutely be a result of legalization.”

CBD, a non-psychoactive and medicinal compound in pot that can be used to treat a wide range of conditions, currently occupies a legal gray area in America. Legal sources of CBD exist, but those sources require significant hurdles and the federal government rarely enforces laws against illegally sourced CBD. That has created a system where there’s a lot of illegally sourced CBD being sold on retail shelves. This gray area has hampered CBD’s growth by stopping big retail players like CVS and Walgreens from selling the drug. Most CBD is sold either online or in small independent health stores.

McConnell’s bill would likely change that. This year’s proposed Farm Bill removes industrial hemp, the most common source of CBD, from the Controlled Substance Act. Industrial hemp is any cannabis plant that contains less than 0.3 percent THC. By making industrial hemp fully legal, McConnell’s bill would make it easier for farmers to grow CBD-rich cannabis and less risky for big retailers like CVS to know that what they are buying is federally legal.

Brandon Beatty, the founder & CEO of the CBD brand Bluebird Botanicals, said the bill would allow large retailers to stock CBD products. Right now CBD products are largely relegated to independent natural health stores.

“Many watching the industry guess that the day the 2018 Farm Bill gets signed will be the day that some of the biggest players in the industry put in their orders to get CBD-rich hemp extracts on their shelves.”

Gomez said getting retail chains involved in CBD would blow the industry up.

“Year-on-year growth even prior to legalization hit 80% in 2018, with the year expected to close at $591 million. This is a strong year-on-year growth, but considering that all of the chained retailers and large Healthcare and Consumer Packaged Goods companies are kept out of the industry, this is tiny,” Gomez said in an e-mail.

McConnell’s hemp legalization is an expansion of what Congress did in their last Farm Bill in 2014. In that law, Congress made it legal to grow CBD-rich industrial hemp if a farmer received a research permit from either a state government or a university. Seth Goldberg, a partner and the head of the cannabis practice at the Philadelphia law firm Duane Morris, said 2018’s version would make it so farmers would no longer need those special permits.
“McConnell’s bill would remove industrial hemp from the CSA [Controlled Substance Act], which is a change to industrial hemp research program in the 2014 Farm Bill. Under that program industrial hemp and uses of it were restricted to state-regulated, university-affiliated agricultural research programs,” Goldberg said in an e-mail.

These state research programs have become more common since 2014 with dozens of states adopting them, but they are often expensive and full of cumbersome regulations. The Washington State Department of Agriculture created an Industrial Hemp program but many farmers never got involved thanks to expensive permits and invasive regulations. McConnell’s bill would remove any requirement to comply with those programs.

Beatty from Bluebird Botanicals said the Farm Bill would also expand banking access for CBD companies and allow farmers to buy crop insurance for the CBD-rich hemp crops. Beatty said these extra protections would grow the market even further.

“In just five years, the markets developed rapidly into over a thousand companies and a number of large companies. The further protections of the 2018 Farm Bill will open the floodgates to the many who didn’t have the courage to get into the industry earlier but see a market booming,” Beatty said in an e-mail.

Goldberg, who is watching the Farm Bill for a trade group of West Coast pot businesses called the Western Regional Cannabis Business Alliance, said the hemp legalization measures appear to have support from both Republicans and Democrats.

“The bill seems to have bipartisan support and there is no indication that it will not be included in the 2018 Farm Bill when it passes,” Goldberg said via e-mail.

The biggest problem with the Farm Bill might be a controversial Republican proposal to add new work requirements for food stamps. The federal government’s food stamp program forms the bulk of the Farm Bill’s spending.

Goldberg said the bill might not pass before the end of the year, during the so-called “lame-duck” session.

“There appears to be an effort to pass the 2018 Farm Bill during the lame-duck session. In all events, it does not seem like McConnel’s bill is the cause of the delay and it will be included in the bill whether passed in 2018 or early 2019.”

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