California Passes SB 1409 Industrial Hemp Bill – What Does It Mean?

By Michael Chernis, Chernis Law Group

On Sunday, September 30, Gov. Brown signed Senate Bill 1409 into law, finally creating a pathway for legal industrial hemp farming in California that will comply with section 7606 of the 2014 Farm Bill (codified at 7 U.S.C. § 5940). While existing California law permitted industrial hemp farming, the activity was, at least practically speaking, limited to established agricultural research institutions or those who could pair up with those institutions to grow hemp for “research.” Additionally, for anyone who wasn’t an established agricultural institution, testing standards were impossibly rigid (only DEA-registered labs could test crops for THC content), seed cultivars (breeds) were limited to those certified before January 1, 2013, and hemp could be farmed only for fiber and oil-seed crop, meaning that CBD extraction was not expressly contemplated. Most importantly, California’s existing hemp law was not compliant with the federal industrial hemp farming requirements created by section 7606 of the 2014 Farm Bill.

SB 1409 amends various sections of the California Food and Agriculture Code (FAC) to change all of this and the definition of industrial hemp under the Health and Safety Code (HSC). Among the changes, S.B. 1409 does the following:

• Authorizes the California Department of Food and Agriculture to create a pilot program and regulations that are compliant with section 7606 of the 2014 Farm Bill (FAC § 81007). This means that farmers will have a pathway to register with their county agricultural commission as soon as the CDFA creates the pilot program.

• Redefines industrial hemp to remove the fiber and oilseed crop limitation (HSC § 11018.5(a).

• Expands the purpose of industrial hemp farming beyond planting for densely planted fiber or oilseed crop (FAC § 81006(a)(1)).

• Allows the Department of Food and Agriculture to determine which types of laboratories may test industrial hemp for compliance with THC requirements (FAC § 81006(d)(5)).

• Eliminates the cutoff date for certification of seed cultivars so that any certified seed may be planted, regardless of when it was certified (FAC § 81002(b)).

• Creates a yearly registration requirement for famers who are not established research institutions to register with the local county agricultural commissioner (FAC § 81003).

• Authorizes clonal propagation of industrial hemp (FAC § 81002(a)).

• Allows ornamental cultivation of industrial hemp (FAC § 81006(b)).

A big takeaway from California’s new hemp farming bill is that extraction of CBD from industrial hemp flowers will now be permitted under California law. This is important in light of the recent statement from the California Department of Public Health stating that hemp-derived CBD and certain other hemp materials in food products was banned. Stay tuned on how the Department of Public Health reacts to SB 1409, as it will undoubtedly cause it to revisit their policy.

If you are interested in industrial hemp farming or extraction activities, please contact Chernis Law Group to discuss further.

Posted in News

Yes, that CBD Product in Whole Foods is (Still) Illegal

By Michael Jensen, Chernis Law Group

On September 21, the “CBD West” trade show descended on Anaheim. Given the city’s historic identification with Disneyland and all things fantasy, the CBD industry could not have selected a better forum to display and sell their products. Along with the mainstreaming of cannabis, hemp-derived cannabidiol, more commonly known as “CBD,” is becoming a staple of health food stores, online retailers, and many other commercial outlets in across the country that one would not mistake for a dispensary. The CBD market is projected to grow exponentially greater than cannabis. While walking the expo floor I viewed (and sampled) a panoply of products infused with CBD, including tinctures, skin patches, drink powders, candies, chocolates, salves, massage oil, cooking oil, and lotions.

CBD is the new rage in the alternative treatment of various health conditions. It is increasing associated with treating serious illnesses, and alleviating ordinary symptoms of illnesses, without creating the high or psychoactive effect of its cannabinoid sister THC. And unlike THC products, which will practically always violate the Federal Controlled Substances Act there is a colorable argument as to why CBD products derived from Industrial Hemp and grown in accordance with the 2014 Farm Bill do not violate the CSA.

But here’s the thing: CBD products, even when derived from Industrial Hemp, are still considered illegal under the Food, Drug & Cosmetic Act (FDCA). This is because CBD is considered an unapproved drug that is currently the subject of clinical investigations. Consequently, CBD cannot be marketed as a drug or dietary supplement and cannot be used as a food additive, since it is considered an adulterant when added to a food product.

Simply put, there is no way to sell any CBD product that is in compliance with the FDCA. Over the past few years, the FDA issued numerous letters to manufacturers of CBD products that market them as either drugs or dietary supplements to treat any number of health conditions. Fortunately, this has been the extent of federal enforcement actions.

Adding to the uncertainty, the California Department of Public Health issued a statement in July 2018 that expressly prohibits adding CBD to food products. This despite the CDPH licensing and regulating manufacturers of cannabis food products that include THC and CBD. And yet, at CBD West, and across the State of California, CBD both food and other products are widely sold.

Between the FDA, DEA, and state agencies in California, the legal landscape is confusing to say the least. The bad news is that, strictly speaking, all products containing CBD are illegal under federal law, and food products containing CBD are also illegal under California law. The good news is that federal and state enforcement has been very limited thus far, making the risk of criminal exposure minimal. Nonetheless manufacturers should tread cautiously in this marketplace and consult with legal counsel whenever marketing and selling products that contain CBD.

Posted in News

Michael Chernis quoted on about CBD Legality

CBD Doesn’t Get You High, But Could Someday Eclipse the Entire Pot Industry

By Annie Gaus,

The future of cannabis may not be about getting high.

Pot is a multi-billion dollar industry — where it’s legal, anyway — but some advocates believe that the future of cannabis is actually a non-euphoric derivative that delivers health benefits without getting you high.

This past weekend, scores of entrepreneurs, researchers and health advocates congregated in Anaheim, Calif. for CBD Expo West, a conference devoted to showcasing the booming business of CBD, shorthand for Cannabidiol. In California, where adult use of marijuana is permitted, CBD has been showing up in a fast-growing array of products, from vaporizers and oils to skin balms and gummy bears. And you don’t need to duck into a licensed dispensary to buy it; you can often find CBD at your local corner store.

According to the Brightfield Group, sales of CBD are estimated to reach $22 billion by 2022. And after speaking with exhibitors at CBD Expo, it’s easy to see why: They’re passionate advocates of its potential to soothe pain, anxiety and inflammation without need for pharmaceuticals — and without the high of THC, which not everyone wants.

Read more at:

Posted in News

Cannabis Farmer Gets over $1 Million Insurance Payout

By Kelsey Brugger @Santa Barbara Independent

One Carpinteria farmer won an insurance payout well in excess of $1 million after ashes from the Thomas Fire destroyed thousands of his plants. What was unusual was that the plants were marijuana.

As cannabis cultivators come out of the shadows, pot businesses are starting to operate like any other business — they have lawyers, accountants, bankers, and, more recently, insurance brokers.

Most of the Northern California cannabis farms scorched by last fall’s wildfires did not have insurance. They were forced to suffer huge losses. But now insurance brokers in Santa Barbara County are starting to tap into the once-illicit industry.

“A lot of this wasn’t insurable,” said Matt Porter, a vice president at Brown & Brown Insurance, one of the largest firms in the world, with offices in Goleta. But in the last several months Porter and his colleagues have won over area cannabis operators. They now have about 20 clients in Carpinteria and Lompoc, he said. They are expected to get up to $8 million in insurance claim payments for their Carpinteria clients.

While the recreational cannabis industry is legal in California, marijuana is a Schedule 1 drug under federal law. And an air of secrecy still exists. The market is still pulling itself up from underground. Porter joked he cannot cold-call cannabis farmers and say: “I want to sell you insurance. Tell me more about your marijuana operation.”

Just months before the Thomas Fire broke out, Porter had written the crop insurance policy for the Carpinteria cannabis grower. The policy included precise language —“change in atmospheric conditions” — that triggered the $1 million payout. The insurance carrier is based in London, England.

During the fire, the tiny white ash particles that suffocated the Santa Barbara area crept into the greenhouses, which have retractable roofs, Porter explained. When they sent a random sample of the plants to a lab for testing they came back with high levels of asbestos, lead, arsenic, and magnesium.

In the end, the farmers were able to get about market price for the damaged product. Market value of cannabis ranges from $1,000-$1,600 per pound and higher.

Crop insurance in general is a hard sell. It can be pricy, and farmers are known to run their business as cheaply as possible. In the 50 times he has presented crop insurance, only about 10 percent of growers decided to buy it, Porter said.

Now that cannabis businesses are legitimate under state law, they require insurance for workers compensation, buildings, and liability. “It’s not the Wild West,” he said.

For the crop insurance, the Carpinteria farmers paid $30,000 in premiums with a $25,000 deductible.

Because the payout was so huge the carrier has decided to no longer cover cannabis farmers. Porter said he is in talks with other carriers in Europe to fill the gap.


Posted in News, Noteworthy Cases

Sessions says US prosecutors won’t take on small-time marijuana cases

By Sadie Gurman
Associated Press

March 10, 2018

WASHINGTON — Federal prosecutors won’t take on small-time marijuana cases, despite the Justice Department’s decision to lift an Obama-era policy that discouraged US authorities from cracking down on the trade in states where the drug is legal, Attorney General Jeff Sessions said Saturday.

Federal law enforcement lacks the resources to take on ‘‘routine cases’’ and will continue to focus on drug gangs and larger conspiracies, Sessions said.

The comments come after the Trump administration in January threw the burgeoning marijuana legalization movement into uncertainty by reversing the largely hands-off approach that prevailed during the Obama administration, saying federal prosecutors should instead handle marijuana cases however they see fit.

Read more ›

Posted in News

Jeff Sessions’ marijuana move will backfire

(CNN)Jeff Sessions announced Thursday that he is rescinding the Cole memo, which reflected the Department of Justice’s relatively passive policy under the Obama administration since August 2013 on enforcement of federal cannabis laws.

If Sessions intended to quell the enthusiasm of California’s cannabis business enthusiasts and government officials, he once again fell short.
Michael Chernis

Michael Chernis
Unlike announcements from the DOJ in past years threatening to ramp up federal enforcement of the cannabis laws, this announcement was met with little more than a yawn by cannabis businesses.
The harshest reaction came from local and state government officials — in California and in other states — who insisted that they were disappointed, concerned, and surprised by Sessions’ move.
Now, unlike in prior years, government officials in California and elsewhere are totally aligned with cannabis businesses in resisting the federal government’s threats.
Posted in Articles, Commentary, News

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