California Governor’s Plan To Restrict Hemp-Derived Cannabinoids Appears To Be Dead For The Year

A California plan to usher in sweeping changes to the state’s marijuana and hemp markets appears dead for the session after a Senate committee did not call the bill for a vote Thursday ahead of an end-of-week deadline.

Under a recently proposed amendment from Gov. Gavin Newsom (D), the measure would have folded hemp-derived cannabinoid products into the state’s regulated marijuana system and opened the door to out-of-state hemp producers to sell products into California’s cannabis market. It’s an attempt to rein in largely unregulated hemp-derived cannabinoid products and smokable hemp flower now widely available at places like gas stations and convenience stores.

Earlier this week, the Senate Appropriations Committee took public comment on the measure’s fiscal impacts and agreed to put it on Thursday’s suspense calendar—a list of bills the committee considered for up-or-down votes before a deadline on Friday.

But at Thursday’s suspense hearing, committee chair Sen. Anna Caballero (D) did not call AB 2223 for a vote, meaning it will be held under submission. The move effectively kills the measure for the year unless it’s somehow revived ahead of Friday’s deadline.

Under the 44-page amendment from Newsom, which had not yet been formally introduced, hemp products with THC or other intoxicating cannabinoids would need to be sold through state-licensed cannabis dispensaries.

So called “pure CBD” products would not be subject to that rule—instead designated as “non-intoxicating hemp” products—but those products could not contain any detectible amount of THC or any other intoxicating cannabinoid. That’s a more stringent limit than the 0.3 percent THC limit that defines hemp products at the federal level.

Synthetic cannabinoids would also be banned under Newsom’s amendment, as would “the retail sale of hemp flower in any form.”

Critics of the proposal—including licensed marijuana growers in California, some in the hemp industry and medical patients who use hemp-derived CBD—had raised an array of concerns about how the governor’s changes would impact both hemp and marijuana markets.

Representatives for licensed marijuana cultivators, for example, said they’d be forced to compete against out-of-state hemp companies that would be permitted to sell hemp into California’s cannabis system without having to comply with costly state regulations.

Parents of children who use CBD for medical reasons, meanwhile, argued that regulating hemp-derived cannabinoids more like marijuana would block access to products they use to manage seizure disorders and other conditions.

Origins Council, which says it represents about 800 small and independent cannabis businesses in rural counties throughout the state, was one of the lead advocacy groups pushing back on the bill.

Last month Origins sent a letter opposing the measure to Newsom and the bill’s sponsor, Assemblymember Cecilia Aguiar-Curry (D), asserting the changes would “fundamentally reshape California’s cannabis market by removing the requirement that high-THC products sold in the cannabis supply chain are sourced from licensed cannabis cultivators.”

Ross Gordon, policy chair for Origins Council, told Marijuana Moment in an email on Thursday that he feels it’s also too late in the legislative session for lawmakers to take up such significant changes.

Friday is the last day for fiscal committees to advance legislation, while the final day to amend bills on chamber floors is August 23. Lawmakers are set to adjourn at the end of the month.

“If this bill had taken a narrower approach and focused solely on reining in the intoxicating hemp market, I don’t think it would have been held today,” said Gordon, who is also policy director of the Humboldt County Growers Alliance. “From our perspective, it was just too late in the session to push forward amendments with this much complexity and impact.”

Newsom’s office did not immediately respond to a request for comment on Thursday. In response to a request last week, however, the governor directed questions to the state’s Department of Cannabis Control (DCC).

“The administration continues to work with the legislature to close loopholes and increase enforcement to address the sale and distribution of illegal hemp products,” David Hafner, the department’s media relations manager, said in a statement at the time. “Mislabeled and misleading products do not belong in the marketplace—especially when they put our kids’ health and safety at risk.”

Ahead of Thursday’s suspense hearing, the U.S. Hemp Roundtable, a trade group, sent an email to supporters saying that the group has already spent years working with Newsom and Aguiar-Curry to address the state’s lack of enforcement around so-called “bad actors” in the hemp industry that “sought to infiltrate the marketplace with products that were poorly manufactured and illegally targeted children.”

“Unfortunately,” wrote General Counsel Jonathan Miller, AB 2223 “took a big step backward.”

Arguing the plan would ban the retail sale of “nearly every hemp product” by bringing them under the purview of state cannabis regulators, the group also complained that the measure was being rushed through the legislature.

“With barely two weeks left before the Legislature adjourns for the year, they have not even publicly released their massive rewrite and reconfiguration of hemp and CBD laws,” the Hemp Roundtable said, adding: “The lack of transparency is no coincidence. These efforts have represented an unholy alliance between regulators and the companies they regulate – the largest marijuana companies who seek to destroy the new hemp industry as a way to capture market share by forcing all hemp products to be sold exclusively in their own dispensaries.”

In the legacy production region of Mendocino County, the Board of Supervisors had come out against the governor’s changes to AB 2223, writing in a letter to Aguiar-Curry: “It is unfair to small, legacy, and legal cannabis cultivators to include naturally occurring THC and comparable cannabinoids extracted from hemp into legal cannabis products until cannabis and hemp cultivation are regulated equally as agriculture. More needs to be done to resolve this issue.”

Supervisors added that the proposal “aims to create market parity between hemp and cannabis products while maintaining significant regulatory disparities between hemp and cannabis agriculture.”

“This lack of parity is expected to have a significant negative impact on small, licensed cannabis cultivators,” wrote Board Chair Maureen Mulheren, “further disadvantaging them in the market against hemp-derived producers who face significantly lighter regulatory burdens.”

Amber Senter, executive director of the group Supernova Women, which focuses on empowering people of color in the cannabis industry said at a recent webinar the proposal amounts to “the biggest change to our regulatory system since Prop. 64,” the ballot measure that legalized adult-use marijuana in California.

Senter added the governor’s plan would begin opening the door to interstate commerce without building in crucial equity components.

“If we are going to be setting up interstate commerce, we should do it the right way versus the rushed way,” she said. “We should lend an opportunity for small businesses as well as equity businesses to be able to sell directly to the consumer at least hemp products.”

Somewhat similar discussions about how to regulate hemp derivatives are playing out at the federal level, as congressional lawmakers consider legislative provisions to impose a general ban on hemp-derived cannabinoids such as delta-8 THC.

Rep. Mary Miller’s (R-IL) amendment to the 2024 Farm Bill, for example, was approved by a House committee in May and would remove cannabinoids that are “synthesized or manufactured outside of the plant” from the federal definition of legal hemp. The change is backed by prohibitionists as well as some marijuana companies, who’ve described the restriction as a fix to a “loophole” that was created under the 2018 Farm Bill that federally legalized hemp and its derivatives.

Anti-drug groups, law enforcement and some health organizations have called on Congress to embrace the ban, arguing that “trying to regulate semi-synthetic cannabinoids will not work.”

In addition to Miller’s amendment in the 2025 Farm Bill, the House Appropriations Committee last month approved a separate spending bill that contains a similar provision to prohibit cannabinoid products such as delta-8 THC and CBD containing any “quantifiable” amount of THC.

How to address hemp-derived cannabinoids has caused some fractures within the cannabis community, and in some cases marijuana businesses have found themselves on the same side as prohibitionists in pushing a derivatives ban.

In a letter to congressional leaders ahead of Miller’s amendment, the U.S. Cannabis Council (USCC) proposed specific language they wanted to see included that would place hemp-derived cannabinoids containing any amount of THC under the definition of federally illegal marijuana.

While they’ve focused on the need to address public safety concerns related to unregulated “intoxicating” cannabinoid products such as delta-8 THC, some hemp industry advocates say the effect of the proposed language could be a ban on virtually all non-intoxicating CBD products as well, as most on the market contain at least trace levels of THC, consistent with the Farm Bill definition of hemp that allows for up to 0.3 percent THC by dry weight.

Meanwhile, the legislation that advanced through the House Agriculture Committee in May also contains provisions that would reduce regulatory barriers for certain hemp farmers and scale-back a ban on industry participation by people with prior drug felony convictions.

Specifically, it would make it so the U.S. Department of Agriculture (USDA), states and tribal entities could choose to eliminate a policy that prevents people with felony drug convictions in the past 10 years from being licensed to produce industrial hemp.

However, advocates had hoped to see more expansive language, such as what was described in Senate Democrats’ recent summary of their forthcoming Farm Bill draft. Under that plan, there would be a mandate to eliminate the ban, rather than simply authorizing it, and it would cover all hemp producers, not just those growing it for non-extraction purposes.

The Senate Agriculture Committee has not yet released the draft text of their bill, so it remains to be seen if the summary description matches what will ultimately be released. Bipartisan House lawmakers filed standalone legislation last year that would broadly lift the felony ban for would-be hemp producers.

Lawmakers and stakeholders have also been eyeing a number of other proposals that could be incorporated into the Farm Bill—and which could come up as proposed amendments as the proposal moves through the legislative process—including measures to free up hemp businesses to legally market products like CBD as dietary supplements or in the food supply.

The hemp market started to rebound in 2023 after suffering significant losses the prior year, according to an annual industry report from the U.S. Department of Agriculture (USDA) that was released in April.

The data is the result of a survey that USDA mailed to thousands of hemp farmers across the U.S. in January. The first version of the department’s hemp report was released in early 2022, setting a “benchmark” to compare to as the industry matures.

Bipartisan lawmakers and industry stakeholders have sharply criticized FDA for declining to enact regulations for hemp-derived CBD, which they say is largely responsible for the economic stagnation.

To that end, FDA Commissioner Robert Califf testified before the House Oversight and Accountability Committee earlier this year, where he faced questions about the agency’s position that it needed additional congressional authorization to regulate the non-intoxicating cannabinoid.

USDA is also reportedly revoking hemp licenses for farmers who are simultaneously growing marijuana under state-approved programs, underscoring yet another policy conflict stemming from the ongoing federal prohibition of some forms of the cannabis plant.

For the time being, the hemp industry continues to face unique regulatory hurdles that stakeholders blame for the crop’s value plummeting in the short years since its legalization. Despite the economic conditions, however, a recent report found that the hemp market in 2022 was larger than all state marijuana markets, and it roughly equaled sales for craft beer nationally.

Meanwhile, internally at USDA, food safety workers are being encouraged to exercise caution and avoid cannabis products, including federally legal CBD, as the agency observes an “uptick” in positive THC tests amid “confusion” as more states enact legalization.

Read the full version of the amendment from Newsom’s office below: 

Photo courtesy of Brendan Cleak.