California Hemp Retailers Tell Lawmakers That Governor-Backed Restrictions Bill Would Close Businesses And Shrink State Revenue

California hemp product retailers told a legislative committee on Monday that a governor-backed plan to restrict hemp-derived cannabinoids and hemp flower would shutter businesses across the state, lead to a loss of jobs and decrease revenue for state and local governments.

The pushback comes as various groups—including marijuana growers and medical patients who say they rely on hemp-derived CBD—raise concerns about the bill, AB 2223, and a package of amendments from Gov. Gavin Newsom’s (D) office. Critics say the plan would fundamentally reshape the state’s cannabis industry and could cause chaos by attempting to fold hemp products into the state’s marijuana supply chain.

Monday’s hearing of the Senate Appropriations Committee centered on the fiscal implications of the legislation, not whether or not it’s good policy—something Chairwoman Anna Caballero (D) reminded speakers of on a handful of occasions during the morning.

“I don’t need to hear the ‘good bill’ stuff, because we’re not here on policy,” she said at one point. “We’re here on the money.”

That comment came after representatives of the U.S. Hemp Roundtable and the hemp retailer Sunmed—who both testified in opposition—said that the underlying proposal to more tightly regulate hemp-derived cannabinoids is acceptable to them, but certain elements of the plan raise concerns.

“Most of the bill is perfectly fine,” said Rand Martin, who spoke for the U.S. Hemp Roundtable, an industry group for hemp and CBD businesses. “It’s a good bill, but we need to make sure that the good actors in California are not being harmed while we try to get rid of the bad actors.”

“Many businesses that are currently following the rules that we set forth three years ago will be put out of business” if the bill becomes law, Martin said, “because they’ll no longer be allowed to manufacture the products that are selling to consumers now. That will mean a substantial loss of sales tax revenue, employee tax revenue and other local taxes.”

Sunmed’s manager of regulatory affairs, Patrick Shatzer, told the panel that AB 2223 “jeopardizes $250 million in sales tax revenue and over 41,000 jobs.” Since 2021, he added, Sunmed stores alone generated approximately $410,000 for the state.

“This bill is a good bill, but the line of intoxication that it draws on THC is so low that it doesn’t allow normal, general wellness to survive,” he said.

Other speakers, most of whom were owners or operators of hemp product stores in the state, said the proposal would close their stores, force them to lay off employees and leave consumers with fewer options.

Lawmakers at Monday’s panel hearing did not discuss the proposed legislation or Newsom’s amendments, nor did sponsor Assemblymember Cecilia Aguiar-Curry (D) speak on behalf of the bill. The committee nevertheless without objection scheduled the measure for a suspense hearing on Thursday at which lawmakers will decide what bills move forward to the floor ahead of a legislative deadline at the end of this week.

With the 44-page proposed “technical assistance” amendment from Newsom’s office, the bill would bring both the hemp and marijuana supply chains under control of the California’s Department of Cannabis Control (DCC)—an effort at reining in a largely unregulated intoxicating cannabinoids industry that’s exploded across the country in recent years.

Under the changes, hemp products with THC or other intoxicating cannabinoids would need to be sold through licensed 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.

Notably, Newsom’s amendment would also allow hemp producers—including out-of-state producers—to sell hemp to licensed California businesses to be incorporated into the cannabis supply chain.

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

Critics—the hemp industry, including licensed marijuana growers in California, and medical patients who use hemp-derived CBD—have voiced an array of worries about how AB 2223 and the governor’s amendments would impact hemp and marijuana markets. Licensed marijuana cultivators have said it would force them to suddenly compete against out-of-state hemp companies, which 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, argue that regulating hemp-derived cannabinoids more like marijuana would block access to products they use to manage seizure disorders and other conditions.

A group of parents is planning a rally at the Capitol on Tuesday. Among them is Paige Figi, the executive director of the advocacy group Coalition for Access Now and the mother of Charlotte Figi, who became a crucial figure in the CBD movement after the family successfully treated Charlotte’s Dravet syndrome, a rare form of epilepsy, with CBD oil. Charlotte died in 2020 of health issues reportedly related to COVID-19, but her story is broadly credited as launching the mainstream movement to allow access to CBD.

Newsom’s office last week referred Marijuana Moment’s questions about the governor’s proposal to the 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. “Mislabeled and misleading products do not belong in the marketplace—especially when they put our kids’ health and safety at risk.”

Critics have also complained that Newsom’s proposed changes were made public less than a month before the legislature is set to adjourn, on August 31.

Ross Gordon, a member of the advocacy group Origins Council, called the proposed changes “tremendously impactful” in an email to Marijuana Moment and urged “at the minimum, a full and public legislative vetting process” of the bill. He said the current timeline leaves “little opportunity for review by the public or legislative committees.”

Origins Council, which says it represents about 800 small and independent cannabis businesses in rural counties throughout the state, last month sent a letter opposing the measure to Newsom and the bill’s sponsor, Aguiar-Curry, saying 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.”

Origins was one of a handful of advocacy groups who spoke against the proposal in a webinar this week. At that event, Gordon said California regulators have acknowledged that “implementing this proposal is going to require a huge expenditure of resources.”

In the legacy production region of Mendocino County, the Board of Supervisors has 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 webinar last week that 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.”

August 16 is the last day for fiscal committees to advance legislation this session. The final day to amend bills on chamber floors is August 23.

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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: 

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