Subscribe to Entrepreneur for $5

California Is Wrong About Hemp, And It's Costing The State Millions

Questionable guidance from government agencies has chilled a potentially huge revenue source.

Opinions expressed by Entrepreneur contributors are their own.

Since the passage of the Farm Bill in 2018, hemp-derived CBD has opened doors to countless opportunities for businesses, farmers, and consumers alike. But as states across the country continue to capitalize on the tremendous economic growth that the emerging crop offers, California remains at a competitive disadvantage during a time when economic relief is needed more than ever.

Harlan Schwartz | Getty Images

What's going on? California’s challenge stems from public guidance issued by the California Department of Public Health a few years ago. The agency argued that the retail sale of CBD as a dietary supplement or food additive was illegal. While the hemp industry disagrees with that interpretation, the damage has been done. The unfortunate guidance has chilled commerce and has even led to local enforcement actions taken against state hemp retailers and manufacturers.

Some hemp advocates have tried to turn the tide. Last year, State Assemblywoman Cecilia Aguiar-Curry introduced legislation that would have clarified the legality of the retail sale of CBD derived from hemp in food, beverages, and dietary supplements. Although it was passed unanimously by the California Assembly, as well as through two Senate committees, the bill died by the end of the session. Hemp supporters are lobbying again for this passage in the coming weeks, but under very different and more concerning circumstances. 

Related: Four Years After Legalization, California Has Had Unexpected (and Often Disappointing) Results

A lost opportunity

America is facing enormous economic challenges due to the pandemic. As states like California begin to slowly climb out of this historical economic downturn, local governments are looking for new sources of revenue to replenish budgets and provide jobs to millions of Californians who are out of work. The hemp industry has the ability to dramatically assist the state during an economic recovery, but without regulatory clarity, this opportunity is not available. 

Regulatory uncertainty has caused confusion among consumers, and it has stalled growth in hemp products across the board. Moreover, it has kept California on the sideline of a burgeoning industry, ultimately giving a foothold, and potential lock, of the booming market to the growing number of states —such as Ohio, Texas, and Florida. Those states have passed legislation that explicitly sanctions the retail sale of hemp-derived CBD. 

This regulatory gray area has greatly stifled significant hemp market opportunities for local farmers and businesses, including added jobs, large economic stimulus, and, most importantly, ensuring the people of California are served by strong health and safety standards on hemp products. As a result, many businesses and farmers who are poised to manufacture and sell hemp CBD products in California are taking their operations to states that with more opportunities. This means California will continue to lose jobs and revenue if we don’t act fast to provide regulatory clarification. 

Related: American Hemp Farmers May Prosper During The Pandemic

3 arguments for regulated hemp market


1. It's a new industry.

Unlike many established industries that will take years to rebuild, the hemp industry is at the starting gate and ready to take off immediately once regulations are in place. Existing industries will continue to struggle with returning workers to jobs, but the hemp industry has the ability to offer brand new jobs immediately in agriculture, manufacturing, distribution, retail, testing, and other fields that serve the hemp supply chain. 

2. It's a cash crop.

Recent studies have predicted that easy access to CBD products at traditional retail outlets will drive a surge in CBD sales and project growth from approximately $1.2 billion in 2019 to $10.3 billion by 2024. In the state of California, projections have shown a total $119 million in revenue in the first year of a law allowing hemp CBD in food and beverages as well as topicals - this represents a fourfold increase over the current year. 

3. It's the safest option.

While California delays establishing a clear framework around the legality of all hemp CBD products, including food, beverages and dietary supplements, unregulated CBD products in the marketplace are raising safety concerns. Without this bill, there are no clear standards or consumer-protection measures in place to regulate the market, leaving the people of California with limited access to safe hemp and CBD products. The new law would provide strong consumer protections, requiring truth and labeling, independent testing, and the imposition of good manufacturing practices.

California cannot afford to leave money on the table and must not allow other states to capitalize on the immense potential the state could be taking advantage of within the hemp-derived CBD industry. The time for action is now. We encourage you to reach out to the Governor and your legislators to ensure passage of this critical legislation this summer. You can access the following easy-to-use portal to send emails to your elected officials, and help us get this past the finish line: