Is Self-Regulation Essential to Effective Legislation?

The cannabis industry is characterized by regulatory uncertainty and volatility. State-by-state variation, frequent updates to the rules of the road, and an ongoing “will they or won’t they” federal stance have made it clear that this is not an industry for the risk-averse or the timid.

Add to that a relative newcomer on the scene, delta-8 THC. Over the past two years, federal courts have wrestled with the legal status of hemp-derived THC products.

The legalization of hemp derivatives and extracts in the 2018 Farm Bill, combined with the capacity to derive delta-8 THC in psychoactively potent amounts, has created a gray zone.

Companies are allowed to manufacture and sell products that mimic the effect of a cannabis high without all the legal and regulatory hurdles that accompany cannabis.

How you feel about this depends on where you sit. If you’re in the hemp or CBD space, it’s a good thing. You have a legal product to sell that is attractive to consumers.

If you’re in the regulated cannabis space, this is a problem.

You have incurred immense costs navigating a highly regulated industry and you’re watching competitors zip by you, grabbing market share with a fraction of the headaches.

There’s a large, common problem on the horizon, however: state regulatory policy. To understand it requires taking off the industry hat and putting on the regulator’s hat.

Most industry analyses are written from the perspective of the businesses and the investors. How does this rule affect the bottom line? What’s the impact on attractiveness to investors?

How do we adjust the business plan to the current environment?

Effective planning calls for thinking like regulators and considering the problems they are solving.

What’s the regulatory capacity to oversee the CBD space? Are we funded for it? Do we have the staff to do it well? Are the political players who matter (as opposed to opinion polls) pro-cannabis or anti-cannabis?

Regulators’ analysis of those questions will shape the policies that impact your business.  

Effective planning calls for thinking like regulators and considering the problems they are solving.

State regulators are in a bind. Will they follow the 13 states that have already banned delta-8, like New York and Washington?

Will they stay hands-off like most of the South and Midwest? Will they hedge, like California and Arizona? 

On the one hand, there’s a burgeoning industry promising economic development. On the other, there’s little guidance from the federal government on the safety or effectiveness of delta-8 products.

Should regulators promote the business opportunities or focus on consumer protection? Whatever approach they take, they’ll face criticism and pushback.

Add to that the potential to throw the cannabis baby out with the hemp bathwater.

Understanding the regulator’s dilemma points to the industry solution: robust self-regulation.

There’s nothing regulators appreciate more than being presented with answers to their problems instead of criticism of their responses.

Vetted, coherent standards from respected industry associations like NACB can help regulators help the industry.

Instead of waiting to see if the next move by state government helps or hurts your business planning, why not prompt them to make decisions aligned with your plan?

This takes organization and a willingness to invest in proactive policy engagement. But in the end, that investment is short money compared to discovering that your product line is illegal or irrelevant.


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