ACT Resources Cannabis News – December 2019
The holiday season and year’s end are upon us, so it’s the perfect time to take a look back at the past year in the cannabis industry. There have been ups and downs, but overall it was a year of growth and development for the industry. Cannabis saw hard fought victories, particularly on the legislative front at the federal level. However, issues like the emergence of electronic vaping associated lung illness (EVAPI) caused the flight of investor dollars from some key sectors in the industry. As 2020 fast approaches, could legislative victories pave the way for an industry expansion that offsets the turbulence brought on by new challenges? Only time will tell, but at ACT Resources, we’re endlessly confident about the direction of the cannabis, hemp, and CBD industries.
U.S. Food and Drug Administration (FDA) Holds Hearings on CBD Regulations
On May 31, the U.S. FDA hosted a public hearing regardding CBD products, which saw explosive growth following the legalization of industrial hemp that occurred with the signing of the 2018 Farm Bill in December 2018. The hearing was intended to receive public comment on the agency’s development of rules regarding CBD products, which would likely cover everything from labeling to CBD-infused edibles.
While the session lasted more than 10 hours and included testimony from more than 100 participants, the FDA has yet to release clearly defined rules regarding CBD products. The agency has, however, made clear what it deems unacceptable through a series of warning letters to CBD brands and retailers. Marketing a CBD product based on alleged health benefits, for example, remains a major violation of FDA policy under the Food, Drug, and Cosmetic Act. Moreover, the agency has signaled suspicion toward the sale of CBD-infused foods and beverages, suggesting that these products are illegal under federal policy because CBD is a primary ingredient in an FDA-approved pharmaceutical product called Epidolex, which is designed to treat seizures.
The FDA has repeatedly stressed the need for a science-based approach to developing CBD regulations and continues to collect data and feedback from key industry stakeholders. As the end of the year approaches, 2020 is likely the year we will see more concrete rules from the agency.
U.S. Department of Agriculture (USDA) Releases Interim Industrial Hemp Regulations
While the FDA continues to deliberate on CBD regulations, the USDA released guidelines on the cultivation, processing, and distribution of industrial hemp and industrial hemp-derived products in October 2019. The regulations were an important part of the newly legalized industrial hemp industry, paving the way for better access to banking services and clear guidance on what is permitted within the industry. The rules are intended to provide clarity for the industry during the 2020 cultivation season.
Under the 2018 Farm Bill, which legalized industrial hemp federally, states were instructed to develop their own sets of rules and regulations. The USDA rules allow states to defer to federal guidelines rather than start from scratch. Indeed, a major theme of the regulations is providing a standardized set of guidelines by which the industry can abide, even when state direction is unclear or conspicuously absent. For reference, here is a complete version of the USDA’s interim regulations on industrial hemp.
U.S. House of Representatives Passes Secure and Fair Enforcement (SAFE) Banking Act
One of the most followed pieces of cannabis-related legislation in 2019 has been the SAFE Banking Act, which would extend federal protection to financial institutions working with state-compliant legal cannabis businesses. Maintaining access to basic banking services has been challenging for many cannabis businesses, as banks are concerned they could be hit with money laundering charges and possibly lose their FDIC status if the federal government chose to intervene. The SAFE Banking Act would primarily serve as a guarantee that banks are free to engage with the cannabis industry so long as their clients remain in full compliance with their state’s laws and regulations.
The SAFE Banking Act won a huge victory in the House of Representatives in September 2019. It passed the chamber by a vote of 321 to 103 and became the first cannabis-related legislation to progress so far in the legislature. Despite that victory, the SAFE Banking Act has not received a hearing in the U.S. Senate and it is unclear when or even if it will be brought to the floor for a vote in that chamber. With luck, 2020 could be the year the cannabis industry gains full, unbridled access to the banking services that every other industry relies on for financial support.
House Judiciary Committee Passes the Marijuana Opportunity Reinvestment and Expungement (MORE) Act
Yet another exciting legislative development occurred in November 2019, when the House Judiciary Committee passed the MORE Act by a vote of 24 to 10. The MORE Act is arguably the boldest cannabis-related bill in the legislature to date; it would remove cannabis from the Controlled Substances Act, descheduling it completely and effectively decriminalizing it. It would also reassess standing cannabis-related convictions and provide reinvestment programs for communities disproportionately targeted by prohibition-era policies. It would also establish a 5% federal tax on cannabis and cannabis products.
It is unclear whether the MORE Act will be brought to the House floor for a vote, and analysts remain skeptical that it could pass in the Senate. However, the simple fact that a bill that would deschedule cannabis has been reported out of committee in the House is historic in itself. While 2019 has seen the most pro-cannabis Congress in modern U.S. history, 2020 could hold even better things. Here’s hoping that is indeed the case!
Whether you’re already operating in the cannabis industry or just thinking about starting out, it’s an exciting and historic time in the life of our nation. More states than ever are home to legal medical and adult-use programs, and more still are poised to adopt legalization measures of their own. The movement in Washington D.C. on cannabis-related legislation bodes well for a future federal descheduling of cannabis under the Controlled Substances Act. While challenges remain, the cannabis industry is well positioned for a successful future. Capitalizing on that success means having a financial team in your corner to help ensure your business’s accounting practices are beyond reproach. ACT Resources has the experience and knowledge required to help any cannabis business thrive. So, if you’re in need of accountants who know quality service, don’t wait – ACT today!