Montana Officials Strike Rule That Would Have Barred Cannabis Licensees From Selling Hemp

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The Montana Department of Revenue (DOR) has eliminated a rule in the state’s cannabis regulations that would have prohibited licensed medical and adult-use cannabis operators from selling hemp and hemp-derived products.

As originally written, House Bill 701, which implements the state’s voter-approved adult-use cannabis program, included a provision that prohibited licensees in the medical and adult-use markets from selling hemp and hemp-derived products, including CBD products. The original law also barred licensees from selling other brands’ CBD products, meaning those products would likely have been sold at gas stations and other non-specialty retailers in the state.

RELATED: Montana’s Adult-Use Cannabis Law Prohibits Licensees from Growing and Selling Hemp

The state held a public hearing Nov. 16 on the first rules package of H.B. 701 and the public comment period on the regulations remains open until Nov. 29.

In addition, representatives from DOR’s Cannabis Control Division (CCD) met with the Economic Interim Affairs Committee Nov. 17 to seek clarity on the rules pertaining to hemp and CBD products.

Czelsi Gómez, a public information officer for DOR, told Cannabis Business Times and Hemp Grower before the meeting that it would “likely result in changes to the dispensary ban” that would have prohibited Montana’s licensed medical and adult-use cannabis retailers from selling hemp products.

An Unintended Consequence

Kate Cholewa, a lobbyist for the Montana Cannabis Industry Association (MTCIA), told Cannabis Business Times and Hemp Grower before the Nov. 17 Economic Interim Affairs Committee hearing that the ban on cannabis licensees from growing and selling hemp and CBD products was a “pretty serious unintended consequence” of H.B. 701 that should be updated in the rules package.

“We’re hoping that can get addressed,” she said. “We will see what we can do and see if the Legislature, the Oversight Committee, can take a look at this and determine if this is what they intended, which would be a policy that not just hurts dispensaries, it hurts the customers that have come to count on those products. It also hurts our local hemp farms, as well. So, let’s not hurt all these different parties for something that was unintended.”

The ballot measure that Montana voters approved in the 2020 election to legalize adult-use cannabis included language prohibiting licensed dispensaries from selling alcohol or tobacco, Cholewa said, and when lawmakers re-wrote the initiative into H.B. 701, the provision transformed into one that prohibits cannabis retailers from selling alcohol or hemp.

“So, tobacco’s in, hemp’s out,” Cholewa said. “But there’s a lot of damage here to a lot of people if this is simply some sort of drafting oversight.”

RELATED: Montana Legalizes Adult-Use Cannabis

If hemp and CBD products were sold outside Montana’s licensed medical and adult-use cannabis markets, Cholewa said supply chains would be disrupted and many customers who have come to rely on certain retailers having certain products would be forced to shop elsewhere.

“People have had contracts with people—they regularly move product,” she said. “Certainly, a very natural market for local hemp farmers is a state marijuana market. People will go to [licensed cannabis businesses] looking for those products. The idea that they can’t find them there but can go across the street to the gas station and get a product that may not be local—there’s an absurdity to it, really.”

Changing Course

DOR has ultimately decided to remove the provision barring licensed cannabis dispensaries from selling hemp and CBD products after receiving industry pushback on the rule, according to the Montana Free Press.

The department will also strike a rule that prohibited anyone with a minor criminal conviction—including cannabis-related charges—from receiving a permit to work in the industry, the news outlet reported.

DOR Director Brendan Beatty said during the Nov. 17 Economic Affairs Interim Committee hearing that both rules “strayed from the intent” of H.B. 701, according to the Montana Free Press.

“It’s been made very clear by the Legislature and members of the public that the department’s interpretation in those two places didn’t jive with the Legislature’s,” Beatty said during the hearing.

The Economic Affairs Interim Committee is scheduled to meet again next month to finalize the rules necessary to implement Montana’s adult-use cannabis program, the Montana Free Press reported.

DOR anticipates filing the adoption notice for the rules Dec. 14, Gómez said, and the notice will publish on Dec. 23. Once formally adopted, the final rules will go into effect Jan. 1, 2022, when Montana launches its first adult-use cannabis sales.


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