Pursuant to the ongoing coverage of the so-called Cream Puff War (between hemp and marijuana sector interests), this article is intended to serve as a bit of an unofficial case study and to shed light on the fact that public policy favors a unified approach to the cannabis industry; even if we stumble into it.
As we think about the recent events in the North Carolina Senate, we are reminded of the line from the movie American Hustle where Amy Adams says: “[y]ou’re nothing to me until you’re everything.” In the film she’s explaining the fact that her fellow con-artist, played by Christian Bale, doesn’t matter unless and until he’s absolutely necessary.
To understand this parallel, and by way of brief background, recent legislative activity at the state-level in North Carolina (House Bill 563) began as a bill to impose substantial industry-killing restrictions on intoxicating hemp products, and suddenly numerous marijuana interests began to insert themselves into this debate. As a result, the North Carolina legislature revived its previous ‘dead’ efforts to authorize medical marijuana sales and consumption within the Tar Heel state.
In a year flooded with messaging about intoxicating hemp products marketed to minors, pleadings to ‘close the [alleged hemp] loophole,’ and a spate of legislation aimed at either restricting (or eliminating) the availability of hemp and hemp-derived products in the marketplace or forcing hemp products into state licensed dispensaries (read: state-backed monopolies), large, multi-state marijuana companies and their lobbyists finally found something useful to do with hemp- use well-written, purposeful, and responsible regulations as a vehicle to push their agenda.
North Carolina House Bill 563 (HB563) was filed on April 4, 2023, and after several revisions, passed unanimously out of the House last year on September 21, 2023. The title of H563 after passing out of the House was:
“An Act To Regulate The Sale And Distribution Of Products Containing A Hemp-Derived Cannabinoid And To Establish A Regulatory Framework For The Commercialization Of Kratom.”
By the time the Senate Judiciary Committee finished with H563 and added substitute provisions on June 13, 2024, it was titled:
“An Act to Regulate the Sale and Distribution of Hemp-Derived Consumable Products, To Ban Those Products from School Grounds, to Place Tianeptine, Xylazine, and Kratom on the Controlled Substance Schedules, to Create the Offense of Criminal Possession and Unlawful Sale of Embalming Fluid and to Make for Other Technical Revisions, and to Create New Criminal Offenses for Exposing a Child to a Controlled Substance.”
By mid-June (2024) in Raleigh (NC), HB563 did far more than regulate hemp-derived consumable products and kratom. In moves that hardly anyone could argue with, the first Senate revision placed extremely dangerous substances like Tianeptine and Xylazine on the state’s list of controlled substances and made it a criminal offense to expose a child to such controlled substances. A more controversial decision was to place kratom on the state’s controlled substances schedules. And finally, the bill made the possession and unlawful sale of embalming fluid a criminal offense.
Everything added by the Senate Judiciary Committee on June 13 (2024), was reasonable, and certainly germane to a bill that sought to address consumer safety concerns via appropriate regulations. As a result, it was of little shock to industry participants, lobbyists, legislators, and bill sponsors that this revised version passed unanimously out of the Senate Judiciary Committee.
HB 563’s next stop in the Senate was in the Senate Finance Committee on June 18, 2024, and this stop in Committee added a 10.5% excise tax on hemp-derived consumable products. While certain critics of this were taken aback by such a high number, this additional tax (these products were already subject to federal, state, local tax laws) provided a reasonable way for the state to generate revenue.
At this point in time, it is worth mentioning that shortly before HB563’s stop at the Senate Judiciary Committee, several new lobbyists formally registered on the bill and started making the Senate rounds in Raleigh’s legislative complex. As alluded to above, these lobbyists came from various companies that hemp industry participants knew by name, many of whom operate marijuana businesses in multiple states, and some of which are actively dumping money into legalizing marijuana for recreational use in other southern states.
The head scratcher of this is why would they be registering to lobby on a bill that strictly regulates hemp and hemp-derived products? While not unheard of to formally register on a bill and actively lobby against it, it seemed as if a different agenda was afoot.
Back in January, 2023, Senate Bill 3 (SB3), otherwise known as the North Carolina Compassionate Care Act, sought to bring medical marijuana to qualifying patients in the Tar Heel State. Despite being well-intended, SB3 failed to go anywhere in the 2023 legislative session, and it made no progress in the 2024 session, until recently.
So, is there (now) a connection between HB 563 and SB3? You bet there is.
Referred back to the Senate Judiciary Committee for a second time, on June 19, 2024, HB563 received another amendment.
The NEW title of H563 after this hearing read:
“An Act To Regulate The Sale And Distribution Of Hemp-Derived Consumable Products, To Impose An Excise Tax On Those Products, To Ban Those Products From School Grounds, To Place Tianeptine, Xylazine, And Kratom On The Controlled Substance Schedules, To Create The Offense Of Criminal Possession And Unlawful Sale Of Embalming Fluid And To Make Other Technical Revisions, To Create New Criminal Offenses For Exposing A Child To A Controlled Substance To Enact The North Carolina Compassionate Care Act, And To Require Certain Education About Opioids.” (Emphasis added).
All of a sudden, a bill that provided reasonable regulations for hemp and hemp-derived products in North Carolina became the (only) useful vehicle for getting medical marijuana passed within the state; not to mention throwing a lifeline to the well-capitalized companies transacting in this Schedule I controlled substance.
On June 24th (2024), HB 563 passed its third reading on the floor of the Senate with a vote of 36 in favor, 10 opposed. It now heads back to the North Carolina House, where a “concurrence vote” must be taken. Due to the fact that both the House and Senate must agree on legislation that is to be passed, and since HB563 started in the House, it must agree to the myriad of changes that this bill has seen. It remains to be seen whether the House will concur on this version, or whether HB563 will be sent to a conference between House and Senate members to decide its fate.
Despite the foggy future of HB563, one thing remains clear- the public policy/public relations message that hemp is unregulated has failed. By point of fact, regulated hemp is EXACTLY what gave medical marijuana a chance in North Carolina. Apparently, the marijuana sector lobbyists figured “if you can’t beat ‘em, join ‘em.” And while we don’t think regulated hemp will be getting a ‘thank you’ card from multi-state marijuana operators any time soon, we sense a budding alliance (pun intended).
Cannabis industry veteran attorney, Philip Snow, Esq., contributed to this report.