California Assembly Bill 45 Draws Both Praise & Ire From Various Stakeholders

California Assembly Bill 45 was fully approved by the state’s Legislature late last week but as it heads toward Governor Gavin Newsom’s desk for his signature, impending legal woes against the bill are burgeoning. 

AB 45 is set to shake up a number of hemp and CBD-related laws in the Golden State, which is thus shaking up some opposition from hemp farmers and activists. On the positive side for hemp farmers and CBD manufacturers, the bill will provide a legal pathway for hemp-derived CBD to be infused in food and beverages for sale, something that has previously been banned in CA. But on the negative side, there is now a temporary ban on the sale of “inhalable” or smokable hemp products within the state, including the popular and lucrative CBD-rich hemp flower enjoyed by innumerable recreational and medical consumers. 

The latter of those two provisions will likely mean an uptick in marijuana-derived CBD products hitting the market, which could, according to an estimate in MJBiz, potentially generate as much as $1 billion in new sales. But that ban on smokable hemp products in California (their sale will still apparently be allowed out of state), which is said to last until a new tax for such merchandise is agreed upon, will most likely be a major hindrance to hemp farmers’ livelihood for quite some time. While AB 45’s primary supporter, Assembly Member Cecilia Aguiar-Curry, has made it clear that she plans to run a tax bill next year, sources apparently agree that it will likely take years to establish the new taxation legislature, not mere months. This could very well mean the end for innumerable hemp farmers in CA. 

Josh Schneider, president of the California Hemp Farmers Guild, was paraphrased in MJBiz saying that lawmakers “sacrificed” small hemp farmers in favor of larger CBD manufacturers. “We have already started working on [a lawsuit to halt AB 45’s implementation,]” said Schneider, adding that, “We don’t know all the ramifications of this bill, but there are at least as many really bad things that will be caused by it as good things.” While the earlier version of the bill would have implemented a complete ban on smokable hemp products, a provision introduced on the behest of the Newsom administration, hemp farmers did see a small win in having that changed to a temporary ban. 

According to Jerred Kiloh, president of the United Cannabis Business Association, AB 45’s implementation will also likely mean a crackdown on unlicensed CBD retailers, meaning there could be an uptick in high-CBD marijuana sales. Apparently, that could mean more than $1 billion in sales shifting back to the legal market, all because of the ban on smokable hemp. “I think $1 billion will be pushed back into the cannabis market, because that’s the only legal place you’ll be able to find those,” said Kiloh, referring to high-CBD cannabis flower. But even so, the ban on smokable hemp products is liable to push California hemp farmers out of business. “You have all these companies that have spent millions and millions of dollars on genetics and processing and all the greenhouse build-out, they’re out of business. They’re going to have to do something else,” said Chris Boucher, CEO of Farmtiva, a Laguna Beach, CA hemp seed breeder. Boucher also echoed Schneider’s sentiments that a lawsuit from hemp farmers to halt AB 45 is “all but certain.”

Another key factor about that bill that has some interested parties concerned is the lack of clarification pertaining to the testing standards and requirements of smokable hemp products. The Humboldt County Growers Alliance (HCGA), which represents small cannabis farmers in Northern California, is another opponent of the bill that has taken particular issue with that concern. “We want to make sure in subsequent legislative sessions that it’s very clear that a smokable-hemp product … is tested to the same standards as cannabis,” said HCGA Director Ross Gordon. “Right now, the way the bill is worded, that is not the case at all,” he continued. 

What’s Next?

Moving forward, the California health department will need to establish emergency regulations in order to implement the bill over the coming months. The Department of Cannabis Control will need to prepare a report by next July that outlines how the newly legal hemp products (such as CBD-infused foods) will be incorporated into California’s strictly regimented marijuana supply chain. But even with all of the impending changes, the Department of Food and Agriculture will retain its current oversight of hemp’s grain and fiber products. 

Additionally, the state’s Legislature will need to handle the possible new tax regulation for smokable hemp products. According to Amy Jenkins, the chief lobbyist for the California Cannabis Industry Association (CCIA), that’s a job that could very likely prove politically difficult because of the broad Republican opposition to new taxes in the state. Packaging the measure along with at least some reduction in marijuana taxes, however, could make this operation more doable in the next year. “We could somehow use this to introduce a bill that’s broader tax reform, and I think there would be more support in the Legislature,” said Jenkins. She also noted that Assembly Member Aguiar-Curry has already committed to the CCIA and other stakeholders that she will introduce legislation as soon as next year regarding the smokable hemp taxation and integrating the newly legal products into the existing marijuana market.