Financial institutions getting into the (hemp) weeds?01.15.19
As we previously blogged, President Trump has signed the Agriculture Improvement Act of 2018 (commonly called the “Farm Bill”) into law.
Among other provisions, the Farm Bill legalizes hemp by defining it as an agricultural commodity under federal law. This definition removes the parts of the cannabis plant that make up hemp from scheduling under the Controlled Substances Act of 1970 (under which marijuana remains illegal) and effectively allows hemp to be treated like any other agricultural product. As a result of the law, hemp farmers can now legally import and export hemp throughout the United States, and participate in U.S. Department of Agriculture programs, such as low-cost crop insurance.
It should be noted, however, that due to the recent enactment of the Farm Bill (and contrary to many media reports), little to no rulemaking has been done by federal government agencies in relation to now-fully legal hemp businesses.
The only guidance released so far has been from the Food and Drug Administration relating to the hemp by-product CBD oil, which contains clear warnings that “the FDA requires a cannabis product (hemp-derived or otherwise) that is marketed with a claim of therapeutic benefit, or with any other disease claim, to be approved by the FDA for its intended use before it may be introduced into interstate commerce.” In addition, "it’s unlawful … to introduce food containing added CBD or THC into interstate commerce, or to market CBD or THC products as, or in, dietary supplements, regardless of whether the substances are hemp-derive.”
Thus, there has been no guidance from federal or state banking regulators (including FinCen, which issued a memo relating to banking hemp’s sister plant, marijuana, in February 2014). Further, the Farm Bill does not prohibit or materially change state-level regulations relating to hemp (so long as such regulations comply with federal law, including the Farm Bill), although the bill does limit the level of punishment that can be imposed upon hemp producers by state regulators. To date, Tennessee (nor any other state) has not yet updated its statute in this area, which does not contain any specific references to banking or financial institutions.
That said, while the passage of the Farm Bill did not create a federal, blanket approval for the banking of all hemp-focused companies or really even change the state of the law for the banking of hemp-focused companies in Tennessee, we anticipate significant movement on the legislative front on both the federal and states levels, especially with regard to banking regulation specific to the hemp industry.