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Additional Information On California’s CBD Ruling

The US Hemp Roundtable, the hemp industry’s leading national advocacy organization, is profoundly disappointed that the California Senate leadership refused to allow a vote on AB 2028 (Aguiar-Curry, Wicks and Wilk), which would have legalized the use of hemp CBD in all products, to advance before the end of the 2019-20 legislative session.

As a result, California will not benefit from tens of millions of new tax dollars or thousands of new jobs that AB 2028 would have delivered. California continues to lag behind 21 other states, including Florida, Texas, Virginia and Ohio, that have already enacted hemp CBD laws and are drawing business away from California.

AB 2028 represented the product of intense negotiations between the Roundtable, its allies in the California hemp farming and business industries, and Governor Gavin Newsom, an effort that legislative leaders had urged proponents to undertake. The measure received broad bipartisan support as evidenced by its passage in an earlier bill with unanimous votes by the Assembly, as well as the Senate Health and Business and Professions Committees.

“We have been told by staff to Senate President Pro Tem Toni Atkins that there simply was not enough time to consider the amendments to the bill in the waning days of session,” said Jonathan Miller, the Roundtable’s general counsel. “Assuming that is the case, we are optimistic that a reintroduction of AB 2028 at the earliest possible date, with any necessary technical fixes, will ultimately be supported by both houses of the Legislature and signed by Governor Newsom.”

As a result of the COVID-19 pandemic, the California economy is profoundly distressed. Tax revenues have been hard hit, jobs have disappeared and the ability of the state to rebuild itself in a timely fashion is uncertain. The hemp industry, especially its hemp CBD market, represents a major source of new state and local revenues that can be realized quickly.

National market analyses (Brightfield Group and Fortune Business Insights, among others) project that the hemp CBD food and beverage industry alone will generate more than $2 billion annually by 2023. If enacted, AB 2028 would have pegged California’s share of that market at approximately $300 million in the first full year of operation.

AB 2028 would have achieved several critical milestones:

Allow hemp CBD to be used in food, beverages and dietary supplements, as well as cosmetics and other topicals. Ensure consumer safety, including label standards that provide essential information to consumers. Require CBD consumer product testing that mirrors comprehensive testing requirements for cannabis. Apply existing requirements of the Sherman Food, Drug and Cosmetics Act to all hemp CBD consumer products.

Miller added, “We are grateful to the bill’s authors for their unwavering leadership on this important issue and to the Governor for working with us to craft an effective path forward for an industry that has been nothing less than meteoric in other parts of the country. We are confident that California policymakers will embrace this policy before the hemp farming and the CBD industry become nothing more than an afterthought in the California economy.”

Full Interview with Hemp Roundtable Member Jonathan Miller

When will the legislative session reopen to continue this?

The Legislature reconvenes for an organizing session in December. A bill could be introduced on that day but they recess again until January 4; no action could be taken until after that date. There is speculation about the Governor calling a special session in the fall; the governor has said he is open to it. However, it is very uncertain that he will do so. If he does call a special session, a bill could be introduced as long as it was consistent with the purpose of the special session/.

Will there be any additional changes to the bill you would like to add in that time?

There may be some fine-tuning and technical clean up that we can seek to accomplish. We are open to discussing other changes, although we are realistic about the interest of the Administration in terms of further substantive changes.

There’s already a large market for these products, if California doesn’t step up and enact appropriate legislation, will it drive CBD products to the black market also? Causing the same problems they’ve had with marijuana all these years?

There is no larger prospective market than California, especially for CBD food and beverage. The promise of the CBD market nationally is only fulfilled if California is part of that market. We don’t anticipate a black market like the one that continues to exist for marijuana for two primary reasons: 1) there was a robust black and grey market for marijuana for years before it became fully legal; there has never been one for hemp CBD, and 2) unlike marijuana that was largely a smokable product on the black market, hemp CBD is mostly a manufactured product like food and beverage, which is harder to create in a black market. Even if a bill is not enacted, there will still be topical hemp CBD products legal to be manufactured and sold in California.

If the language in the bill doesn’t change, what exactly does that mean for CBD business owners?

Business owners who are currently based and operating in California will continue to be at risk of enforcement actions by the state and counties. They will be faced with an existential question as to their continued viability in California and may relocate their business, its tax generation and its jobs to another state. Businesses that are based out of California and have a presence in California or are interested in expanding to California may choose to pull out of California, shrink their presence in California or refocus their energies on one of the 21 states that have legalized hemp CBD.

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