Important Information for Any Businesses Selling Hemp Products

Hemp-derived CBD and other hemp products have become ubiquitous, appearing in convenience stores, gas stations, and supermarkets throughout Michigan, as well as in many licensed provisioning centers and marihuana retailers. However, many of these businesses may be unknowingly violating state law and could be in danger of enforcement actions by the Cannabis Regulatory Agency (the “CRA”) or law enforcement.

Under Michigan’s Industrial Hemp Research and Development Act, 2014 PA 547, MCL 286.841 et seq., with certain, limited exceptions, it is unlawful for any business to “process, handle, broker, or market” hemp in Michigan without first obtaining a processor-handler license from the CRA. MCL 286.847(1). Moreover, those terms are broadly defined by statute, with, for example, the term “market” defined to include activities that “promote or sell industrial hemp or an industrial hemp commodity or product.” MCL 286.842(l).

Oversight of licensed hemp processor-handlers was transferred to the CRA by Executive Reorganization Order 2022-1 in February 2022. Yet, despite the pervasiveness of CBD and other hemp products in most licensed marihuana stores across the state, there has been little guidance to retail licensees that a processor-handler license was required to sell such products, leaving many unaware that they are currently in violation of the Industrial Hemp Research and Development Act. However, at an administrative disciplinary hearing last week, the CRA asserted unequivocally that retail licensees should not have any hemp products on their premises without such a license.

More importantly, the CRA also asserted that businesses selling hemp-derived products may also be held responsible for violations if those products are acquired outside of the regulated system and subsequently test “hot,” i.e., above the 0.3% threshold for THC concentration. The CRA argued at the hearing that businesses cannot simply rely upon assertions made by manufacturers about whether a product is “hemp,” and should have independent testing done on such products in order to ensure that they are below the relevant THC threshold. If a business fails to do so, the CRA’s stance seems to be “buyer beware,” with licensees potentially facing penalties for selling untested, improperly labeled, and improperly obtained products if the “hemp,” in fact, turns out to be “marihuana” containing a THC concentration higher than 0.3%.

Based upon discussions with a number of licensees, we have discovered that very few have obtained a hemp processor-handler license, despite having long stocked hemp products in their stores. To date, we are unaware of any previous enforcement actions related to this issue, but we do believe that the CRA’s arguments in the recent disciplinary hearing demonstrate that there is a potential for future enforcement against licensees and other businesses who possess and sell hemp-derived CBD and other hemp products.

If you are currently selling hemp-derived CBD or other hemp products in your retail establishment, you should be aware of these developments and how the CRA’s potential enforcement of the Industrial Hemp Research and Development Act may impact your business. To that end, we recommend businesses consider ceasing sales of all hemp products until they apply for, and receive, a hemp processor-handler license through the CRA. The application can be found here.

If you need help with the application process or have any questions related to this issue, please reach out to us for assistance.

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