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AN UPDATE ON HEMP RESEARCH AND BUSINESS OPPORTUNITIES FOR COLLEGES AND UNIVERSITIES




February 26, 2019


Recent changes to the legal status of hemp have created new market opportunities for hemp-derived products, such as CBD. CBD, the abbreviation for cannabidiol, is a naturally occurring compound found in the flowers of the plant cannabis sativa. CBD, which is not psychoactive, is now being infused into countless ingestible and topical products, many of which make health claims that lack a firm scientific footing. In addition to CBD, hemp seeds are a popular dietary product and hemp fibers from renewable, fast growing hemp can be used to make a range of products including textiles, biofuels, paper, bioplastics and construction materials.

Colleges and universities are now regularly being approached with a variety of research and development opportunities involving hemp and CBD products. However, the legal status of hemp remains complex and institutions of higher learning should proceed cautiously and deliberately or risk violating state or federal law.

Hemp and Marijuana

CBD and hemp products are derived from the same plant, Cannabis sativa L., as the marijuana that is smoked and consumed for its psychoactive effect. Generally, “hemp” refers to a variety of the Cannabis sativa L. plant that is bred to be low in THC, the chemical that gives marijuana those psychoactive qualities. The legal definition of “hemp” is Cannabis sativa L. with a THC content of less than 0.3% by dry weight.

Historically, the cannabis plant itself and any products derived from the plant, regardless of THC content, were classified as “Marihuana” under the U.S. Controlled Substances Act. Marihuana is a Schedule I drug. Schedule I drugs are the most dangerous narcotics in the eyes of the federal government and include heroin and LSD. Accordingly, until recently, it has been a violation of federal criminal law to possess, cultivate, process, sell, and, with some limited exceptions, research both marijuana and hemp.

The Evolving Legal Status of Hemp

Hemp’s legal status began to change a few years ago, with the passage of the 2014 Farm Bill (the federal government’s bi-annual agricultural funding legislation), which allowed states to create “pilot programs” in which hemp cultivation could be legalized by states for research purposes only. Many states have legalized hemp cultivation, but not all of them did so in a manner that complied with the 2014 Farm Bill provisions. Some of these state-level hemp legalization laws had essentially the same status as state marijuana legalization laws: they removed state law barriers to hemp cultivation, but not in a way that solved the federal illegality of hemp.

In December of 2018, the President signed the 2018 Farm Bill, which provides for much broader legalization of hemp. Most notably, the 2018 Farm Bill removes hemp (defined based on the 0.3% THC level) and hemp-derived products from the definition of Marihuana under the Controlled Substances Act. However, it also provides that hemp cultivation, processing and sales must take place pursuant to either state hemp cultivation regulations that are approved by the U.S. Department of Agriculture (USDA), or pursuant to USDA regulations that are still forthcoming. 

There is a popular misconception that the 2018 Farm Bill fully legalized hemp without the need for any more legal or regulatory compliance. In reality, the 2018 Farm Bill is still being implemented. A few states and tribal governments have already submitted regulatory frameworks to the USDA, but the USDA has not approved any of these plans to date, or even issued guidance about how the approval process will work.

The 2018 Farm Bill left the 2014 Farm Bill pilot program provisions in place for a period of time, which means that institutions of higher education in some states may legally conduct hemp research pursuant to a pilot program before the state’s plan is approved or federal regulations are issued under the 2018 Farm Bill. But again, not every state hemp legalization law meets the federal requirements, and research institutions could be at risk of losing their federal funding if they operate out of compliance with federal law. Conversely, research institutions that check the appropriate regulatory boxes may be able to access federal funding to support their research in this emerging area early on.

It is also important to keep in mind that while the 2018 Farm Bill clarifies the status of hemp under the U.S. Controlled Substances Act, there are other federal laws that are applicable to hemp and in particular to CBD. The U.S. Food, Drug and Cosmetic Act allows the U.S. Food and Drug Administration (FDA) the ability to regulate the introduction of drugs into the marketplace and to regulate adulterated or misbranded food products. The FDA has already asserted its view that it has jurisdiction over CBD infused products, and that these products will be subject to a variety of complex FDA laws and rules.

So Now What?

Confused? We completely understand. While the legal rules that govern hemp and CBD generally seem to be moving in the direction of greater clarity and predictability, at the present moment they remain complicated. Operating outside the context of what is authorized by the 2014 Farm Bill, the 2018 Farm Bill, state hemp laws and FDA laws and regulations expose a college or university to civil and even criminal liabilities under certain circumstances.

It is very possible for colleges and universities to engage in hemp and CBD related research and partnerships in a lawful (and potentially lucrative) manner at the present moment, but doing so requires a careful analysis of the laws of the jurisdiction in which the institution is located, and thoughtful structuring of relationships with third party partners. In fact, getting this right now may provide a college or university with beneficial first-mover advantages in the field.

  • The Drummond Woodsum Regulated Substances and Higher Education practices have been working with colleges and universities to understand this complicated area of the law, and can offer the following services for institutions of higher education interested in exploring research, curricular or commercial opportunities in the growing hemp industry:
  • Assist in navigating complex state and federal laws to determine if and how the college or university can cultivate hemp or procure hemp derived products for research;
  • Provide a comprehensive analysis of the laws that would dictate the parameters of the institution’s hemp research program;
  • Develop institutional policies for hemp research that ensure compliance with applicable laws and regulations;
  • Identify grant funding opportunities for hemp research;
  • Assist in drafting grant applications and proposals;
  • Draft a Request for Proposals (RFP) for third parties interested in partnering with a college or university; and
  • Vet private sector partners to ensure that they operate in compliance with state and federal laws relating to hemp/CBD.

In the meantime, Drummond Woodsum will continue to monitor the development of the laws and regulations that govern college and university participation in the hemp and CBD industries and will keep our clients apprised as the framework evolves.








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