It’s Time To Level The Playing Field Between Marijuana And Hemp Products With A Single Cannabis Retailer License Type (Op-Ed)

“If the tax and regulatory structure for state-licensed marijuana weren’t so restrictive, a market for hemp-derived products might never have emerged.”

By Geoffrey Lawrence, Reason Foundation

In an October 15 Marijuana Moment op-ed, my colleague Michelle Minton argued that states’ regulatory approach to intoxicating cannabinoid products should be similar regardless of whether the source material of those products comes from state-licensed marijuana or federally legal hemp.

In an October 27 response, Michael Bronstein of the American Trade Association for Cannabis and Hemp (ATACH) argued that Reason Foundation “fails to provide a solution” to what he views as a problem of unregulated hemp-derived products, many of which are chemically modified analogues of natural cannabinoids.

My colleague’s original op-ed referenced a detailed, 80-page proposal for a cohesive approach to regulating hemp-derived products, which we co-authored. In that proposal, we delineate hemp-derived products that have intoxicating properties from non-intoxicating products and propose alternative regulatory paths. We recommend that minors should be restricted from purchasing intoxicating products and that manufacturers of these products should be required to register with state authorities and include accurate and detailed testing results on their product labels.

We also point out that these products largely exist because the compliance and tax costs confronting state-licensed marijuana products make those products uncompetitive on a price basis with competing offerings, including both illicit marijuana and intoxicating hemp-derived products.

Further confounding this problem, consumer access to legal marijuana is highly restricted. Even in states that offer a commercial marijuana market, statewide caps on retail licensure or provisions that allow local governments to ban these retailers make it difficult to purchase marijuana legally.

In California—the world’s largest commercial marijuana market—nearly half of residents live more than 60 miles the closest legal retailer. By contrast, competing products derived from federally legal hemp are sold in gas stations, grocery stores or even over the internet and can be shipped across state lines.

If the tax and regulatory structure for state-licensed marijuana weren’t so restrictive, a market for hemp-derived products might never have emerged.

Mr. Bronstein argues that consumers want natural marijuana and it should be legalized. While his cursory reading of our position might have convinced him that was a point of conflict, in fact we couldn’t agree more.

But we also recognize that the total market for hemp-derived products has quickly grown larger than for state-licensed marijuana because its regulatory structure offers key advantages that allows consumers easier access at lower cost.

Our recommendations aim to balance the playing field by subjecting intoxicating hemp-derived products to reasonable standards for product safety and age restrictions while simultaneously reducing the regulatory thicket confronting state-licensed marijuana products.

We propose that states issue a single cannabis retailer license, allowing any retailer who can demonstrate competence in age-gating products to sell both hemp-derived and state-licensed marijuana products. Retailers would also need to acquire a cannabis excise tax certificate and collect a uniform tax on all intoxicating cannabis products at rates far lower than what many states currently charge.

We understand Mr. Bronstein’s assertion that the chemically modified extracts used in hemp products to give users a high contain THC analogues that are not highly prevalent in natural cannabis.

However, as our review of federal court rulings and agency pronouncements makes clear, the prevailing jurisprudence is that cannabinoids are not deemed “synthetic” if they result from the conversion of a natural cannabinoid like CBD that was extracted from federally legal hemp. The Ninth Circuit held that “the source of the product—not the method of manufacture—is the dispositive factor for determining whether a product is synthetic.” By contrast, wholly synthetic cannabimimetic agents like “spice” are both dangerous and illegal.

We openly acknowledge the modified cannabinoids marketed as hemp products are poorly understood, but so are many cannabinoids that are naturally prevalent in the cannabis plant. At this time, there’s scant evidence that THC isomers like delta-8 are more dangerous than the mainstream delta-9 variant.

It’s often difficult to distill a complex and detailed policy proposal into a few words, but we believe Mr. Bronstein and his association would find broad agreement with Reason Foundation’s position upon closer study.

Geoffrey Lawrence is research director at Reason Foundation.

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