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Cannabis Companies Get Ready for Interstate Commerce Thanks to 2018 Farm Bill

J is a business journalist and culture writer published in WIRED Innovation Insights, Investing, GuruFocus, CNN, & Technology, among others.


Where it began

In 2014, President Obama signed a bill that allowed research and limited use of industrial hemp. The United States Department of Agriculture, in conversation with the Drug Enforcement Agency and Food and Drug Administration, point-blank said industrial hemp includes cannabis sativa derivatives such as seeds, fiber or leaves which has tetrahydrocannabinol 0.3 percent or less in the dry weight stage.

The legislature invited individuals, states, and institutions to participate in industrial hemp research. It even gave funding with the National Institute of Food and Agriculture (NIFA). However, hemp did not get removed from the Controlled Substance List as an illegal drug, so the companies bore all the risk from crop failure, disease or law enforcement.

Leading up to the 2018 Farm Bill

By 2017, 38 states plus Puerto Rico had legislation or considered legislation for industrial hemp. Things morphed into licenses, certifications, registrations, record keeping, and documentation. At the same time, an array of entrepreneurs or established enterprises entered the field with technology, processes, and ideas developing for the time for mass distribution of cannabis to the public through a retailer rather than a medical dispensary.

When the time came for 2018 Farm Bill, it did not establish the industry per se but instead tweaked the 2014 Farm Bill. The most significant development was the removal of hemp from the Controlled Substance list. This gave farmers the ability to obtain insurance for hemp crops which means it can be grown widely even outside of universities and state-mandated programs and across state lines.

For companies like PotNetwork, it meant less risk to invest in seeds and growing practices for its growing hemp enterprises. Its Diamond CBD subsidiary concentrated on hemp-derived cannabidiol (CBD) with less worry.

The 2018 Farm Bill also expanded the ability of states to create their regulation structures while allowing access to federal farm program items without penalty.

Cannabis business on interstate commerce

For a cannabis company like PotNetwork Holdings, Inc. (OTCMKTS:POTN) which has been around since 2004, it's about combining compliance and innovation. It has seen legislation about cannabis full spectrum and knows well what can and cannot be done, unlike the many of the more recent startups. PotNetwork has consistently informed the cannabis industry and the public of trends, legislation and future prospects. In this decade, changes in the Farm Bill has allowed some wriggle room and possibilities for PotNetwork.

As a leading cannabis business, PotNetwork Holdings occupies several states and has interests in Scandinavia for its hemp enterprises. In December, it announced a significant shift to interstate commerce in anticipation of the 2018 Farm Bill 2018 implementation, which was previously difficult under the old legislation. Still, all hemp and hemp derived products must become labeled clearly and accurately.

The government has now narrowed the definitions for hemp, cannabis and marijuana. Crossing those definition lines in labeling or advertising will face court cases and law enforcement. As seen in February 2019, the FDA warned businesses in New York and banned CBD-infused edibles from established business due to non-compliance to the legal standards.

GRAS gives permission

Unsubstantiated health claims will get notices by the FDA, whether it's about hemp, marijuana or cannabis. That is why the purity and concentration of hemp substances matter.

As with anything, claims as a health product must become substantiated with studies or go through an FDA process. Cannabis companies will have to find the line where the government considers it information nutritional or a medical health claim. They may need to have a team of medical professionals such as nutritionists as part of the company certifying the products as healthy human food.

In line with this, FDA issued a GRAS (generally regarded as safe) Notice in December 2018 to Canadian company Fresh Hemp Foods Ltd. The notice states that hulled hemp seeds, hemp seed oil or hemp seed protein powder are not in violation of any law or regulation. It further explained once declared on the ingredient list, the hemp seed-derived ingredient can be added to protein, oil, carbohydrates and beverages.

Investors need to look carefully at how a company labels and advertises its products. Being socially responsible in the marijuana, cannabis or hemp industry will involve making those distinctions in advertising and labeling.

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