New Rule For Federal Loan Program Adds Restrictions For Companies That Work With Marijuana Businesses

A new rule published on Monday by a federal agency imposes additional restrictions on companies that provide services to marijuana businesses, establishing that participants in a particular government loan guarantee program are prohibited from receiving income from cannabis operations.

The rule from the Rural Utilities Service, part of the U.S. Department of Agriculture (USDA), makes a number of changes to definitions and other provisions relating to a guaranteed loan program known as OneRD. Regarding cannabis, it bars lenders from working with an entity “if it derives income from illegal drugs, drug paraphernalia, or any other illegal product or activity as defined under Federal statute.”

“A borrower that intends to lease space or enter into a power purchase agreement with a marijuana dispensary is not eligible,” the rule published in the Federal Register says, “given our borrower would be receiving income from the marijuana operation which is a violation of Federal laws as marijuana is a controlled substance under Federal law and subject to Federal prosecution under the Controlled Substances Act (21 U.S.C. 812).”

Officials will accept public comment on the proposal through October 30.

While the USDA rule is another reminder of the complications around the state–federal conflict on marijuana laws, the agency has been working to bolster the hemp industry since the legalization of that crop through the 2018 Farm Bill, including by appointing a number of industry stakeholders to a federal trade advisory committee that’s meant to support efforts to promote U.S.-grown cannabis around the world.

In August, for example, USDA and the U.S. Trade Representative (USTR) announced that Dylan Summers, vice president of government affairs for the CBD company Lazarus Naturals, was being appointed to the Agricultural Technical Advisory Committee (ATAC) for Trade in Tobacco, Cotton, Peanuts and Hemp.

In recognition of hemp’s growing role in the agriculture sector, USDA and USTR formally renamed the ATAC to include last year to include the name of the crop. Previously, the first hemp appointees served on what was then called the ATAC for Trade in Tobacco, Cotton and Peanuts.

The latest appointment came about a month after USDA awarded $745,000 to the National Industrial Hemp Council (NIHC) to support efforts to promote the industry internationally in emerging markets across the world. In 2020, USDA awarded NIHC $200,000 as part of a different grant program.

The new grant round is being distributed during a precarious time for the hemp industry. While a USDA report found that the market started to rebound in 2023 after suffering significant losses the prior year, it’s now facing uncertainties as congressional lawmakers on the House side advance bills that would effectively ban most consumable hemp-based cannabinoid products—a major sector of the cannabis economy.

The Congressional Research Service (CRS) said in a report in June that hemp provisions included in one spending bill that’s moved through committee could also “create confusion” for the industry due to a lack of clarity around the type of allowable products.

Meanwhile, the latest Farm Bill 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 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.

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.

Photo courtesy of Philip Steffan.

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