The State Reform Act Might End Up Decriminalizing Cannabis on a Federal Level a Month After California Bill Boosts CBD Market

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The following post was written and/or published as a collaboration between Benzinga’s in-house sponsored content team and a financial partner of Benzinga.

The cannabis industry is keeping busy in 2021. 

U.S. Rep. Nancy Mace (R-S.C.) introduced the States Reform Act (SRA) on Nov. 15. The act aims to remove cannabis from the Controlled Substances Act (CSA), under which it remains a Schedule I drug. Provided this bill passes, cannabis will become legal under federal law but will remain under the authority of states to regulate or prohibit its use. This development shortens cannabis’s journey to normalcy and places it in a similar regulatory bracket as alcohol — if the act passes. 

To add to the excitement, the SRA has arrived just a month after a new California bill, which legalized the sale of over-the-counter, hemp-derived cannabinoid (CBD) products.

The legalization of CBD in California should excite nearly every CBD advocate in the country. California’s economy reels in a total of $3 trillion annually. If it were a sovereign nation, California’s gross domestic product (GDP) would rank 5th in the world. The new California bill now places transparent regulatory requirements for CBD products in California, allowing retailers and wholesalers to confidently market their products and consumers to have more trust in what they’re buying.

While some may argue that the new bill only provides structure to CBD producers and retailers, Canopy Growth Corp. CGC provides an interesting refutation. While Canopy has operated mostly in the cannabis space, its 2 brands First & Free and Martha Stewart CBD are CBD-focused. The new legislation places Canopy in a position to capitalize on products that were neglected in California, and it does not enjoy this benefit alone.

High Tide Inc. HITI, Village Farms International Inc. VFF, and Jushi Holdings Inc. JUSH are all cannabis operators that offer CBD products and are now strategically positioned to make use of California’s legislation and bolstering economy. 

For other operators, the benefits of this new legislation are more direct.

Grove Inc. GRVI, for example, is a company involved in organic CBD production and the future of wellness. From lotions and pet products to vitamins and gummies, the company claims to have distributed its CBD products in more than 46 countries. With California’s recent legislation, a $3 trillion economy has suddenly opened up its doors, providing a substantially large and regulated target market.

The legislation is arguably quite important. While the 2018 Farm Bill legalized hemp products with a tetrahydrocannabinol (THC) level below 0.3%, the lack of regulatory infrastructure propelled a number of faux-CBD productions and general misinformation onto the market. Even now, some retail stores are littered with CBD products that have traces of metals and pesticides, and others have labels that claim to cure COVID-19, and even some that have no traces of CBD at all.

The new California bill introduces a regulatory infrastructure that ensures consumers are getting safe and quality products. Of course, this means more work for producers, retailers, and wholesalers who now have to maintain standards, but this is just the sort of practice that cannabis operators have had to endure. It seems only fair that CBD operators must now follow suit.

Perhaps most interestingly, this legislation paves the way for the legalization of smoked CBD in California, a highly attractive prospect to consumers, retailers, and wholesalers alike. With  Grove already heavily involved in the CBD space, the cannabis market is a natural progression for the Company, both domestically and internationally. Such a move would uniquely position the company as a US based cannabis play.

Grove would be able to take its already proven and successful CBD model and apply it to the cannabis market. In addition, the recent launch of its Upexi brand aggregation business positions the company to benefit from the equally large trend towards acquiring promising Amazon AMZN businesses, where many CBD and other wellness products are already sold.

The Blur of Cannabis and Hemp Laws: What’s Next?

A lack of clarity and consistency is infused within cannabis and hemp laws across the country.

On a federal scale, hemp and hemp-based products with THC levels below 0.3% are legal, but acceptable methods of ingestion vary from state to state. Smoking is a legal ingestion method in Ohio, for example, whereas CBD-infused products like creams and beverages are the way to go in California.

Interestingly, recreational cannabis, a substance that has far more of the high-inducing chemical THC than hemp, can be smoked legally in California, while smoking hemp remains illegal. In Texas, any use of cannabis is considered illegal. As one can see, contradictory laws and regulations trickle down the cannabis and CBD trails as they maneuver throughout the country, leaving both audiences impatient and confused.

The passing of the new California bill and the proposed States Reform Act provides an indication that legislation may be heading in the right direction for many of the companies in the industry.

The preceding post was written and/or published as a collaboration between Benzinga’s in-house sponsored content team and a financial partner of Benzinga. Although the piece is not and should not be construed as editorial content, the sponsored content team works to ensure that any and all information contained within is true and accurate to the best of their knowledge and research. This content is for informational purposes only and not intended to be investing advice.