Dispensaries scramble to adjust to unanticipated CBD ban

The Montana Department of Revenue and cannabis industry stakeholders alike were surprised to recently discover that HB 701, the state’s legalization framework bill, prohibits license holders from growing or selling hemp, and by extension, from producing the popular compound cannabidiol, or CBD, which is typically derived from hemp. The ban additionally prohibits license holders from selling any other brand’s CBD wares.

“Frankly, I feel like we stumbled upon it. It wasn’t on our radar at all,” said Kristan Barbour, administrator of the Department of Revenue’s Cannabis Control Division.

CBD products by legal definition contain no more than 0.3% THC, the psychoactive compound found in cannabis plants, and are sold in many forms including edibles, tinctures, vape cartridges, topicals and as smokable plant material. CBD has become popular for what consumers consider its innocuous calming and soothing effects. The products are available to anyone over the age of 18 and no medical marijuana card is required for purchase.

The ban goes into effect Jan. 1, 2022, the same day recreational cannabis sales begin in Montana. Current dispensaries must liquidate their CBD inventory by that date.

The ban has angered and confused many dispensary owners. Some are strategizing potential workarounds to continue selling the products, while others are making plans to drop CBD completely. The ban poses an additional challenge to customers who will no longer be able to purchase CBD products from the businesses that are most familiar with the compound, its effects, and product testing regimens

“It’s one of the ridiculous things that slipped through the cracks of HB 701,” said Pepper Petersen, president and CEO of the industry association Montana Cannabis Guild. “I think it’s absurd.”

Though the intent of the provision, per the bill language, is to “preserve and protect Montana’s well-established hemp industry by drawing a clear distinction” between the marijuana and hemp industries, some critics see codification of that distinction as a loss.

“I’ll be candid. I’ve spoken to folks in the hemp industry. They’re frustrated as well,” said DOR’s Kristan Barbour. “Montana hemp farmers are growing quality hemp and having it … sold in a medicinal environment. This was a hit and a surprise to them.”

It’s unclear who championed the ban. Rep. Mike Hopkins, R-Missoula, the sponsor of HB 701, did not respond to multiple requests for comment.

Since the ban applies only to retail cannabis license holders, it will likely push consumers toward CBD sold at gas stations and other retailers that sell unregulated CBD products, many of which are mislabeled and contaminated.

In 2019, for example, the Denver-based testing laboratory Ellipse Analytics analyzed more than 250 popular CBD products and discovered that 70% contained harmful quantities of heavy metals or pesticides, or presented inaccurate information about the amount of CBD, and even THC, they contained. (The CBD industry is nonetheless growing rapidly, despite a lack of testing requirements. A recent report from Graphical Research estimated that the North American market will surpass $60 billion by 2027.)

“If there were any concerns at all about the safety, efficacy or dosage of CBD, you might want people that actually know a little bit about it to be the ones selling it,” said Jay Bostrom, co-owner of Dancing Goat Gardens dispensary, which has locations in Missoula, Seeley Lake and Havre.

Tessa Rose, a Missoula-based herbalist who collaborates with dispensaries to craft CBD-rich products through her brand The Hemp Witch, is more explicit.

“It’s idiotic. It’s denying consumers access to safe consumption,” she said.

In an attempt to circumvent the ban, some dispensaries are launching separate businesses under a different address, either within or adjacent to their existing stores.

Emmie Purcell, co-owner of Greenhouse Farmacy in Missoula, for instance, is converting an auxiliary structure on her store’s property into a CBD emporium. “It’s a positive opportunity [to also sell] knick knacks and gifts,” she explained.

But some dispensaries that rent their retail space are skeptical their landlords will let them take the necessary steps to establish separate business addresses, which may require building a wall to separate the two entities.

“Are you going to put tape down on the floor and say, that’s a CBD store?” Bostrom asked.

Other shops don’t mind letting CBD fall by the wayside. “I’m not concerned. I’m a cannabis provider, not a CBD producer,” said Marc Lax, CEO of Spark1, which has four retail locations around the state. “My focus is on medical marijuana and recreational cannabis, not CBD.”

Barbour, at the Department of Revenue, is open to finding solutions.

“Our intention is to work with industry, and we need to recognize that many of these businesses have created a substantial line of CBD products,” she said. “The Cannabis Control Division isn’t trying to solve the issue, merely to suggest other opportunities for the public to access CBD products from a reputable source due to the changes enacted by HB 701.”

She also noted that stakeholders will also have an opportunity to advocate for changes in the next legislative cycle.