State Adopts New Restrictive Policy on CBD Sales That Is, at Least in Effect, Quite Similar to the Old Policy

The Maine Department of Agriculture has begun its next phase restricting sales of CBD in the state. Readers will recall that, over the summer, the State took the position that CBD sold in Maine had to be derived from hemp grown in Maine. The reality, of course, is that only a small portion of CBD sold in Maine has its origins in Maine and that policy expired in September.

Now, the State is handing out notifications to retailers and others in the CBD business that ingestible CBD products sold at retail in Maine must be produced in Maine. Here is a copy of that notification received by one retailer in the state:

This sounds different in substance than the State’s policy over the summer. Now, CBD sold in Maine doesn’t have to be derived in Maine. But the reality is that this policy will have largely the same effects since a huge portion of the CBD that is imported into Maine has already been incorporated into food products and is shelf-ready.

Trying to understand the State’s motivations for this latest policy shift, it appears to be related to the federal ban on CBD sold in edible products. The nuance of the State’s position isn’t entirely clear, but as we hear more we will post it here.

Do the Proposed USDA Hemp Rules Threaten Our CBD Industry?

We’re hearing concerns from some farmers and CBD manufacturers that the proposed USDA hemp rules, released earlier this week, could make it much more difficult to provide high-quality CBD products in the U.S. The concern, as I can best articulate it since I’m not a farmer, is that full-spectrum CBD is largely available in plants that have a longer growth cycle, but these plants may also have THC levels above 0.3 percent by virtue of being in the ground for longer. Under current regulations, some farmers and producers have found ways to reduce the THC content following harvest, which allows them to sell full-spectrum CBD products with compliant THC levels. The new USDA regulations, though, require that the crop be tested for THC content 15 days prior to harvest. Any crops with an excess of THC will need to be discarded. This eliminates the possibility of growing for longer and eliminating excess THC after the fact.

I can’t speak personally to whether this perceived threat is real or overblown, but its one interesting example of the many consequences (intended or otherwise) the new federal regime will have on the industry.

One other, related, strain: Though hemp must have THC levels below 0.3 percent, these new rules create a couple of safe harbors. First, they recognize that testing labs have margins of error, and so if your crop tests at 0.34 percent THC, but the lab results have a 0.05 percent margin of error, then the crop is legal and you’re good to go. Second, if your crop is above 0.3 percent but below 0.5 percent THC, you can’t sell it, but you also won’t be prosecuted. These rules basically recognize the inherent uncertainty involved with growing hemp.

USDA Hemp Rules Nearly Finalized

We haven’t seen a draft of the rules yet, but the latest news is that the White House has signed off on the proposed rules and they’ll be released any week now. Once the rules are released, a public comment period will begin. The USDA is still claiming that final rules will take effect before the end of 2019. 

The Maine Department of Agriculture, Conservation and Forestry (which houses our hemp program) is likely to respond by drafting and proposing new rules of its own. These rules will likely parallel the federal rules including any THC potency testing guidelines, quality control standards, and broader cannabinoid testing requirements. 

Maine will also seek USDA approval of a state regulatory plan governing hemp. Once this approval is obtained, Maine hemp will finally be legal.

California Regulators Issue Cannabis Banking Guidance That’s Actually Useful

On October 2, 2019, the California Department of Business Oversight issued some really helpful guidance aimed at California banks and credit unions that are currently or are planning to bank marijuana-related businesses (MRBs). The guidance document consists of an extensive questionnaire that is used by California state bank examiners when they audit a bank or credit union’s MRB compliance program. The guidance document is intended to help California financial institutions comply with Bank Secrecy Act and FinCEN guidance on cannabis banking. Although some of the guidance in the questionnaire is California-law specific, much of it is broadly applicable to any financial institution in any state that has legalized medical or recreational cannabis. We are encouraging all of our financial institution clients who have or are working on MRB compliance programs to take a look!

House Passes the SAFE Banking Act

On September 25, 2019, the Democrat-controlled U.S. House of Representatives passed the SAFE Banking Act by a vote of 321 in favor and 103 opposed. As we’ve previously posted, the Act would prohibit federal bank regulators from penalizing financial institutions that provide services to state-legal cannabis businesses and will result in greater access to financial services for the cannabis industry. Given the 91 Republicans who voted in favor, it appears that cannabis banking reform may be poised to become a bipartisan issue, although only time will tell.

The Act will now move on to the Republican-controlled Senate, where commentators agree that passage is far less certain. Historically, Senate Majority Leader Mitch McConnell has publicly opposed cannabis even while supporting the legalization of hemp. In any event, even if ultimately adopted, the protections granted to financial institutions under the SAFE Banking Act will only apply to state-law compliant cannabis customers, so it will continue to be vitally important for financial institutions to adopt robust marijuana-related business compliance policies and procedures and engage in continuous monitoring of cannabis customer compliance with relevant state laws.

Maine Legislature to Address Vaping Devices and THC

As readers may have seen, a list of the bills that the Maine Legislature may be discussing this winter has been released. I’m going to focus on the bills related to vaping for this post, since there are a lot of them. These bills are obviously a response to a string of vaping-related illnesses and deaths around the country in recent months, including several in Maine. It’s been reported that many of the victims were using vape pens, etc., loaded with THC rather than nicotine and, although it is not clear that contaminated THC rather than thickeners or other additives are causing these illnesses, the Maine Legislature has responded to these reports. These are some relevant bills offered by our legislators:

LR: 2763
Sponsor: Representative Cooper of Yarmouth
Title: An Act To Prohibit the Sale of Vaping Devices and Similar Electronic Smoking Devices 

LR: 2765
Sponsor: Senator Millett of Cumberland
Title: An Act To Enact Restrictions on Electronic Smoking Devices 

LR: 2837
Sponsor: Representative Hutchins of Penobscot
Title: An Act To Prohibit the Addition of Tetrahydrocannabinol and of Cannabidiol to Liquids Used in Vaping Devices 

LR: 2969
Sponsor: Senator Dow of Lincoln
Title: An Act To Ban Persons under 21 Years of Age from Purchasing, Possessing or Using Vaping Products 

LR: 2682
Sponsor: Representative Cooper of Yarmouth
Title: Resolve, Directing the Department of Health and Human Services To Study the Average Potency of Medical Marijuana and Illegal Marijuana, the Adverse Health Effects of Marijuana Use and the Adverse Physical Effect of Using Vaping Devices To Inhale Marijuana

Lots of Different Rules Governing Maine’s Marijuana Programs Are Going to Become Official Soon – But When?

We are waiting on final and effective versions of several different sets of rules governing Maine’s marijuana programs. I’ll start with the Rules for the Certification of Marijuana Testing Facilities, since the public hearing for these rules was just yesterday. The hearing was sparsely attended and public comments were not particularly noteworthy. Readers probably know that the Emergency Rules for the Certification of Marijuana Testing Facilities already took effect in September. This is allowed during rulemaking under Maine’s administrative procedures act in certain situations, and so rulemaking continues anyway. Final written comments are due October 10. At that point, we can expect about a month until final testing rules are released since the Office of Marijuana Policy (OMP) will need to work with the Office of the Attorney General to sort through and incorporate any comments.

We are, of course, also still waiting with baited breath for the final adult use rules to be released. These will incorporate, at a minimum, the changes required by the legislature last June. The legislature required some fairly broad changes to the residency requirements in these draft rules, and we are waiting to see how OMP reacts and what the final rules look like accordingly. These adult use rules, the OMP has stated, will be released within the next 60 days.

Don’t forget that the rules governing Maine’s medical marijuana program are outdated. The current rules were enacted before the legislature significantly revised the program in 2018. So expect OMP to also tackle a rewrite of these rules sometime, perhaps this winter.