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Conflict between Minnesota’s hemp and marijuana industries is intensifying three months into the state’s legalization of recreational marijuana, raising questions about whether the two can coexist.
Minnesota is poised to serve as a national testing ground for whether hemp and marijuana can succeed simultaneously, because it is the first state to launch a recreational marijuana market after a hemp industry was already established. In other states, lawmakers legalized marijuana first.
Some hemp entrepreneurs of color say the recreational marijuana industry is less accessible for people like them because of federal laws, and tensions have flared recently over conversations about regulating hemp products that contain THC.
Several entrepreneurs of color told Sahan Journal they got into the hemp business locally after the U.S. Congress legalized hemp for industrial use in 2018. Unlike marijuana, no federal prohibition exists for hemp, making it much easier for entrepreneurs and growers to transport and sell hemp products across state lines.
While recreational marijuana is legal in 23 states, the federal government classifies it as an illegal drug, limiting sales within each state.
“I don’t have any desire to be in marijuana space,” said Todd Harris, CEO of Plift, a St. Paul-based company that creates and sells hemp-infused products. “Hemp is built for the world we live in today. I can freight my product from one state to another. I can sell it online. There are all of these other benefits that create a more scalable business for me and for people like me.”
A recent push among cannabis regulators across the country to tighten federal regulations on hemp-derived THC products is also causing concern among some local hemp entrepreneurs, who believe it’s an assault on their industry. THC is the psychoactive ingredient in hemp and marijuana that causes intoxication.
Hemp is a type of cannabis plant that generally produces far less THC than its marijuana relative. Marijuana, on the other hand, isn’t limited to how much THC it can produce. However, scientists learned how to use the hemp plant to synthetically extract high amounts of THC through innovations in the laboratory.
Minnesota’s 2022 law legalized the sale of hemp-derived THC products that contain no more than five milligrams of THC per edible. Most marijuana edibles contain twice as much THC.
Some hemp entrepreneurs envision a future market in Minnesota that favors hemp-derived products for low dose THC edibles and beverages alongside more potent marijuana-derived edibles and beverages.
“It’s no different than a beer manufacturer and a spirits manufacturer,” Harris said of how the two industries could coexist.
Marijuana regulators call for federal oversight of hemp-derived products
Minnesota’s path to marijuana legalization is unique. State lawmakers first legalized low dose THC products in 2022, as long as they were derived from hemp and not marijuana. A booming hemp industry followed, and then the Legislature legalized marijuana earlier this year.
Minnesota plans to roll out a tiered licensing system for marijuana entrepreneurs, charging different fees based on whether they produce and sell just hemp, just marijuana, or both. Hemp licenses are cheaper than marijuana licenses because hemp products are less potent.
“This is really the most innovative and unique law since Colorado first legalized,” said Leili Fatehi, campaign manager for the MN is Ready coalition that successfully pushed for marijuana legalization at the state Legislature.
Harris and other local hemp entrepreneurs say they’re anxious about a letter the Cannabis Regulators Association, a national group of marijuana regulators across the country, sent to Congress in September calling for new federal regulations on hemp-derived THC products.
Chris Tholkes, who directs Minnesota’s medical marijuana program, signed off on the letter. Governor Tim Walz is still in the process of selecting the state’s first director of the Office of Cannabis Management, a new agency that will regulate recreational marijuana and hemp products in Minnesota.
The marijuana regulators’ letter asks federal lawmakers to formally define all hemp products with THC that are intended for human consumption as “hemp-derived cannabinoid products.” Harris and another local hemp entrepreneur worry that the move could be the first step towards marijuana regulators pushing out hemp in favor of marijuana products.
The letter also notes that Congress did not intend to include “intoxicating cannabinoid products” when it legalized industrial hemp in the 2018 Farm Bill. Hemp is also grown and used for clothes, paper, rope, and “hempcrete” used in home construction, among other products.
The letter then calls on Congress to create and fund a federal regulator “with a background in public health and consumer protection” to regulate all hemp-derived cannabinoid products across the country.
It implores Congress to take the issue up in its next farm bill, which will be finalized in the coming months. The federal farm bill is updated every five years, and expired last month.
The letter’s call for a new definition of hemp-derived cannabinoid products has Harris and Steven Brown, CEO of St. Paul-based Nothing But Hemp, concerned about the future of Minnesota’s hemp industry. Both believe the change will lead Congress to make all hemp-derived cannabinoid products illegal on a federal level, allowing the marijuana industry to swallow their market.
“They are separating cannabinoids outside of hemp,” Brown said. “Which means that the only thing that would be legal to produce out of hemp the way that it’s written would only be fiber and grains.”
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But the marijuana regulators behind the letter to Congress maintain that they aren’t trying to destroy the hemp industry, but rather, introduce consumer protection to it.
Tholkes told Sahan Journal in a written statement that regulators like herself encounter “untested intoxicating products derived from hemp on store shelves every day.”
“While medical and adult-use marijuana regulatory programs throughout the United States have requirements that reduce these risks, intoxicating hemp-derived products often exploit legal loopholes and are not subjected to the same scrutiny,” Tholkes said. “Considering the existing gaps in regulation and the resulting lack of consumer protections, it’s important to be part of the conversation surrounding potential regulatory approaches.”
It would be “negligent” for marijuana regulators “not to speak up” on the hemp issue, added Gillian Schauer, executive director of the Cannabis Regulators Association, which is based in Portland, Oregon.
“As regulators, we are focused on protecting consumers and the public,” Schauer said in a statement. “States have shown regulation can happen through a number of different policy approaches, but federal minimum standards are needed to address areas that cannot be fully addressed by current state laws, including online marketplaces and interstate commerce.”
Both Harris and Brown say they spend considerable amounts of money to ensure their products are safe and effective. They also say they support legal marijuana. Harris’ company specializes in selling THC-infused soft drinks; Brown’s company sells beverages, edibles, and tinctures.
“We test our products the same way a marijuana company would,” Harris said.
Conflicting laws limit marijuana market
Contradictory local and federal laws about marijuana make it a hard business to succeed in, Harris said. On the federal level, marijuana is illegal, which limits access to capital for entrepreneurs who are looking to enter the market. For example, most banks will not approve commercial loans for marijuana entrepreneurs because it’s a federally illegal product.
States with legal marijuana often require that all plants are grown and produced within state boundaries.
This is costly for entrepreneurs, Harris said, adding that entrepreneurs of color often don’t have as much access to capital as white entrepreneurs to start and maintain businesses.
“As a Black man who comes from a community where alcohol is readily available, part of our mission is to create cannabis products that are super accessible, and in order to do that, you have to keep the price in line so anyone can afford them,” Harris said.
None of these restrictions currently apply to hemp. Federal regulations that could phase out the hemp industry would impact entrepreneurs of color the most, Harris said.
Not all hemp entrepreneurs are upset about the marijuana regulators’ letter. Shawn Weber, who runs the Morgan, Minnesota-based CBD and hemp company, Crested River, said regulations on the federal level would “make our lives easier.”
Angela Dawson, a hemp farmer in Sandstone, Minnesota, said she isn’t impressed with the marijuana legalization bill’s equity measures. Credit: S. Whiting
“The only reason this is being recommended is because of the bad players in the industry,” Weber said. “People are taking advantage of the ambiguities in the law and taking advantage of the science of cannabis. When people exploit loopholes, things need to get buttoned up.”
Weber acknowledged that some people in the hemp industry may lose some of their profits as recreational marijuana businesses grow under the new law. Minnesota officials have said they expect the state’s first dispensaries to be up and running in 2025; the White Earth and Red Lake Tribal Nations are already operating their dispensaries.
Weber added that he strongly supported Minnesota’s initial legalization of THC hemp edibles in 2022, even though the law banned vape products. Before then, Crested River sold an estimated $500,000 a year in hemp-derived vape products, he said.
“There’s a right way and a wrong way to start up a new industry,” Weber said. “The right way is to disassociate yourself with your bottom line.”
Weber also helped push for the legalization of recreational marijuana earlier this year with the coalition group, MN Is Ready. He plans to apply for a state license to sell both marijuana and hemp items.
So does Angela Dawson, a hemp farmer in central Minnesota who runs 40 Acre Co-op.
Dawson said she has previously lost income because of changes in Minnesota’s laws governing marijuana and hemp. For example, in late 2021, a Minnesota Court of Appeals decision effectively made all vape oil, tincture, and edibles containing THC illegal, even if they were derived from hemp. The state Legislature’s legalization of THC edibles the following year nullified most of the Court of Appeals ruling, which was later overturned by the Minnesota Supreme Court.
At that time, Dawson was growing enough hemp to fill five hoop houses, which are similar to greenhouses. She ended up selling less than half of that year’s harvest after the appeals court ruling.
“I lost a lot of money because of that,” Dawson said. “I had to let go of all of my employees and I basically ate ramen noodles and had to get on food stamps for one month to make it through that period.”
At least one part of the Cannabis Regulators Association’s letter to Congress worries Dawson.
The federal legalization of hemp effectively legalized all marijuana seeds. But the letter asks lawmakers to establish clear definitions between marijuana and hemp seeds.
Dawson said this is worrisome because hemp farmers need to experiment with all kinds of seeds to figure out how to successfully grow hemp on their soil. Labeling some types of seeds as marijuana and others as hemp could reduce entrepreneurs’ ability to farm, she said, because marijuana seeds would be illegal to grow.
“It always makes me nervous when policymakers or corporations try to restrict our access to seeds,” Dawson said. “That’s not a good sign.”
Instead, she said hemp farmers should be exempted from any type of federal seed restrictions.
“They have to allow Minnesota farmers to at least figure out what works here before they start restricting what seeds we can have access to,” Dawson said.