Posts tagged ‘THC’

Hemp Regulations Bring Banking Issues to the Forefront

On October 29th, the USDA issued interim final rules providing a framework for the legal protection and distribution of hemp in states that choose to legalize it. The long awaited regulations bring about a new stage in what promises to be a phonetic period for compliance innovation as financial institutions begin to provide banking services for products related to marijuana.

What exactly is being legalized?

Up until recently, the distinction between hemp and marijuana did not matter. Both were classified as Schedule I drugs under the Controlled Substances Act. In the 2018 Farm Bill, Congress declassified hemp and allowed it to be produced in states choosing to legalize it. The key difference between hemp and cannabis sativa is the level of THC contained in the leaves of these closely related plants. A THC level in excess of .03 is considered marijuana, while anything below that is considered hemp.

Last week’s regulations provide the framework that states like New York need to start developing the industry consistent with the federal guidelines. Many of us who have followed the issue closely have been surprised that the USDA did not move more quickly to promulgate the proposed regulations. The USDA got the message because it took the unusual step of issuing interim proposed final regulations. This means that there is now a legal framework for states to begin submitting their hemp regulation plans, even as the USDA accepts comments on these proposed regulations. Remember, we are dealing with a crop, and farmers need time to plan in advance of the growing season.

We should also expect a flood of additional guidance from banking regulators now that the USDA has taken this important step. The NCUA issued this initial guidance in August 2019, in which it promised to “issue additional guidance” once the USDA’s regulations are finalized. NCUA should start issuing that additional guidance even though it can still be modified.

On the state level, New York has advocated for financial institutions to provide financing for hemp farming since 2014. The next step is for the state to issue a proposed plan to the USDA. One issue which I am researching and will update you on in a future blog is whether the state has to pass legislation legalizing hemp production beyond the 2014 pilot program.

For those of you who might be interested in providing banking services for hemp producers and hemp related businesses, now is the time to finalize your compliance plans. These plans will be more difficult to implement on an ongoing basis than they will be to put down on paper. For example, since the distinction between hemp and marijuana comes down to the THC level, it is absolutely crucial that any business you are dealing with have appropriate procedures in place to monitor its plants and dispose of marijuana.

Finally, even if you have no desire to get involved with this business, it will impact your credit union. I expect your typical community farmers market to become a hotbed of local producers using hemp as a key ingredient in their products. When these local businesses come to open an account, what procedures are you going to have in place to ensure that their products are legal? These and other questions promise to make this a subject of legal and compliance debate for years to come.

November 5, 2019 at 9:13 am 4 comments


Authored By:

Henry Meier, Esq., Senior Vice President, General Counsel, New York Credit Union Association.

The views Henry expresses are Henry’s alone and do not necessarily reflect the views of the Association. In addition, although Henry strives to give his readers useful and accurate information on a broad range of subjects, many of which involve legal disputes, his views are not a substitute for legal advise from retained counsel.

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