Hemp farmers and CBD businesses adjust to a shifting legal landscape

When Melissa Clark, owner of Hemp Magik, opened the doors to her Woodfin storefront on the morning of Feb. 14, she was hit with quite a shock: A search warrant from the Woodfin Police Department was sitting on her counter. Listed in it were four felony charges.

“I was shaking,” says Clark. “I’ve never been in any legal trouble, and it was just terrifying.”

Open for a little over a year, Hemp Magik manufactures and sells cannabidiol, or CBD, tinctures and topicals. When the police responded to a security alarm at the storefront on the night of Feb. 13, they found unprocessed hemp plants on the counter, which they identified as marijuana and ultimately issued the charges.

Although the charges have since been dropped, and the case is now closed, “the problem here is in the way marijuana is identified by law enforcement,” says Clark. “There’s a visual inspection, smell and a field test. Unfortunately, hemp flower is going to fail all three tests.”

It’s true: CBD hemp flower looks and smells almost exactly like its psychoactive cousin, marijuana. “Hemp fails the field tests because they can detect THC within 1/1000th of a percent,” says Clark. CBD hemp flowers usually contain at least some trace amounts of tetrahydrocannabinol, or THC, the psychoactive ingredient in marijuana, she explains. Thus, these tests will run positive nearly every time.

“There’s still just a lot of educating that needs to be done, for both law enforcement and the general public,” she adds.

Sgt. Josh Hill from the Asheville Police Department confirms that field tests can detect THC in these trace amounts but says it’s rare that an officer will actually even use a field test kit. “Most people that have been in law enforcement even for a short time knows the smell of marijuana,” Hill says. “I don’t believe it smells like marijuana, but I’m not very familiar with hemp.” 

2018 Farm Bill

Although CBD and other hemp-derived products have been increasingly available throughout North Carolina in recent years, the December 2018 Farm Bill put the market on overdrive. Essentially legalizing the commercial production of hemp, the bill has received a mixed response from some local hemp-focused businesses, a sector where misinformation abounds and confusion seems all but inevitable.

N.C. Rep. Brian Turner, who toured Hemp Magik in January, is a supporter of the local hemp industry. He views this all as a period of adjustment. “I think what we’re seeing, especially with regards to the incident at Hemp Magik, are growing pains of an industry in its infancy,” Turner says. “We need to make sure that we are adequately educating local law enforcement and the rest of the community. We have generations of assumptions and misinformation to undo.”

“There’s some good and some bad in the 2018 Farm Bill,” says local hemp farmer and dispensary owner Jeff Tacy. Tacy co-founded Franny’s Farm in Leicester a little over six years ago with his wife, Franny, and they were among the first North Carolina farmers to begin growing industrial hemp. They also manufacture and sell a variety of CBD products at their Franny’s Farmacy dispensary locations in North Asheville and Hendersonville (a third opens this month in Johnson City, Tenn.). 

One of the best things about the most recent Farm Bill, says Jeff Tacy, is that it provided more clarity to the 2014 Farm Bill, which allowed some states to start pilot hemp-growing programs. Only 11 states signed on, including North Carolina.

“The problem with that particular legislation is that it was very vague,” Tacy says. “It also left hemp in the same legal category as marijuana, as a schedule 1 controlled substance.” One of the key aspects of the 2018 bill is that it removed hemp and hemp-derived products from that category.

As both a small-business owner and grower in this burgeoning industry, Tacy had initially hoped the bill would get pushed back until at least the first or second quarter of 2019. “Because of the Farm Bill, we’re seeing this massive influx of product hitting the market,” he says, noting that market dominators like Amazon and Walmart “wouldn’t have dared to have gotten into the industry when we did, because there were too many obstacles.” 

And now that hemp has gained a bit of a legal foothold, a lot more farmers are going to want in on the game, he notes. “What that’s going to mean is that we’re going to have a larger surplus of flower and plant material,” he says, adding that this might reduce how much hemp Franny’s Farm will grow this year.

At this point, Tacy hasn’t noticed any shift in commodity pricing. And the surplus product is good news for small businesses like Tacy’s dispensaries. However, as larger farms growing more acreage of hemp enter the playing field, that could change. “Within a few years, it could, in fact, have a negative impact on the commodity cost side,” he points out.

The 2018 Farm Bill, while removing many of the regulatory barriers for hemp growers and CBD producers, leaves the final products on the market largely unregulated at this point by the U.S. Food and Drug Administration. “Companies are able to put any product out there, with any label and with any claim on it,” says Tacy. “We’re seeing all these products out there, and nobody knows what’s in them, nobody knows where they came from. Some don’t seem to have any CBD in them at all.”

Clark echoes some of the same concerns over the gap between the bill’s language and the FDA’s official stance on the products. “Consumers need to protect themselves,” she says. “Cannabis is the bioaccumulator of the plant world. Any toxins or heavy metals in the soil are getting absorbed into the plant.”

She stresses that consumers should make sure that any businesses they purchase CBD from has a clean Certificate of Analysis ensuring the product is safe. “The C of A’s really are everything in this industry,” Clark says.

Asheville lawyer Rod Kight, who focuses his practice on hemp and cannabis commerce law, sees a possible bright side to this vague regulatory period. Though it can be confusing for both business owners and consumers alike, he says, this legal gray area might allow small local CBD and hemp-oriented businesses to better position themselves on the market before larger companies enter the playing field. “Smaller businesses can test things out, get creative and make really interesting products,” he says. “The larger companies are usually more black and white and are watched more thoroughly by the FDA.”

Cracking down

In February, state regulators began sending warning letters to CBD businesses clarifying some of the language in the 2018 Farm Bill. Specifically, the letter reiterates that adding CBD to food or beverages is still illegal, as is making unapproved health claims about the product. North Carolina’s state-level crackdown joins those of other state governments across the country as they make an effort to catch up with the now booming marketplace.

Tacy, for one, is focused on the bigger picture. “My advice for everybody in the industry is just don’t panic,” says Tacy. “Those of us that have been in the industry for years, we knew this was coming. Right now, there’s just some talk,” he says. “Let’s just see how it plays out and, you know, we’ll just have to adjust accordingly.”

The current legal atmosphere around CBD and hemp is still in an adjustment period, but Tacy and others are staying positive. “The regulatory environment in general has been really friendly. And, after getting out and talking with law enforcement and getting out in the community, they realize what we’re doing is completely legal,” he says. “At the end of the day, this industry is really all about education.”

Like Tacy, Clark’s eye is on the long-term potential of this industry, but also on the general effectiveness of medicinal cannabis. “My motivation is to go up to pharmaceutical,” she says. “This plant is healing on all new levels; it’s really amazing what can be done” says Clark. “I really want to help people that are truly suffering.”