California Bill AB-45

When 2018 rolled around, then-U.S. president Donald Trump signed the Agriculture Improvement Act of 2018, colloquially known as the “Farm Bill,” into law; this allowed the federal hemp regulatory system to facilitate and market hemp products. Since then, there has been much debate and uncertainty around what products are entirely legal and what products are not. Laws can change state-by-state, but a few products that come into question are smokable hemp and hemp-infused foods and beverages.

With all this uncertainty, many businesses and manufacturers have left money on the table. For example, since the beginning of the COVID-19 mass quarantines in 2020 and 2021, consumers flocked to the cannabis markets, which were deemed “essential businesses,” and brought the products back home to the tune of $17.5 billion in 2020 alone. However, this revenue wasn’t evenly distributed across the market, and inequities in legislation left large chunks of the cannabusiness sphere out ultimately.

Thankfully, we are starting to get more clarification little by little. On October 7, 2021, California Governor Gavin Newsom, one of the country’s most progressive governors, signed Assembly Bill 45. AB-45 states that hemp-infused food and drink is legal to sell at restaurants without fear of the state government whisking the products away.

How big is the hemp market in California?

This new law is a massive deal for those in the cannabis and hemp restaurant, and café business as California registered $730 million in CBD sales in 2019, two and half times more than any other state. Imagine how much capital is still untouched for hemp-centric businesses!

As COVID-19 numbers lessen and mask mandates are issued, Californians are coming out of their homes searching for a new product. It was the perfect time for Newsom to sign Assembly Bill 45 into law. A state addendum to the 2018 Farm Bill, this recent California-specific ruling sets in place a comprehensive regulatory framework for the state’s hemp manufacturing and sales processes.

Passing AB-45 ensures that Californian hemp-derived products, like hemp-infused food and drink, will be coming to market and being sold straight to consumers. It also built on previous Assembly Bill 2028 in that pet safety became a more significant portion of this bill. Had Assembly Bill 2028 been passed, it would have given an estimated $300 million in the first full year; it’s anticipated that the same happens now that hemp-infusion can legally become commonplace in restaurants and cafes.

What do I need to know to sell hemp-infused food and drinks?

California-grown hemp will be independently tested for serving size, correct labeling, testing regulations, and proper sourcing processes. This third-party sorting protocol weeds out the illicit activity, which California has been run rampant by recently.

Based on this bill, to produce safe products, all hemp manufacturers must now register with the California Department of Public Health and remain in good standing with the GMPs. Along with manufacturers, any facility that produces, packages, labels, or holds hemp-infused food, beverage, cosmetics, or raw hemp materials must be on record for a Certificate of Analysis issued by the California Department of Public Health’s Food and Drug branch.

More specifically, though, the hemp is now required to have its extracts tested to ensure THC levels don’t exceed 0.3 percent, have all labels reflect accurate testing results and ingredients, show no health-related claims are being made on the packaging, and demonstrate that all products have been grown in a state or country with an “established industrial hemp program.” These regulations go into effect for food, beverages, dietary supplements, cosmetics, pet food, and all inhalable infused with hemp.

This incredibly forward-thinking bill also raises the ban on smokable hemp, but there’s a caveat. The previous legislation prohibiting small hemp farms from selling their cash crop hurt Californian hemp farmers, but AB-45 technically legalized smokable hemp. The only issue standing between these farmers and excessive demand for their crops is that a tax on inhalable products needs to go into effect before smokable hemp earns legality. Until that tax is enacted, smokable hemp in California is still illegal to manufacture and sell; it’s perfectly legal to manufacture and sell out of state as long as the production isn’t be aimed at California consumers. This part of AB-45 has garnered fierce opposition for its ambiguous wording.

Current Retail Hemp Landscape

It’s not shocking to walk through a Whole Foods or co-op in California and see products claiming to include hemp or hemp derivatives, but now, California will verify each of these CBD products with specific ingredients, dosage sizes, and manufacturing information. Before this development on the guidelines of “hemp-infused” products, manufacturers were not obligated to show exactly how much THC was in each serving, nor where the cannabis was being sourced. AB-45 creates a sense of solidarity with all hemp products on the California market, as consumers will now be able to trace what they’re putting into their bodies and the bodies of their pets back to the growers and manufacturing processes.

Business owners who currently offer hemp-infused drinks and food also need to be aware that AB-45 cracks down on the products sold at each establishment. Each product needs to be easily traceable back through the distribution chain, and as a business owner, that’s up to you. Now that cannabis and hemp products are being increasingly regulated, those selling the products should know where each product comes from and what it took to infuse the food or drink with hemp. As the hemp industry strives toward transparency, understanding the supply chain will become increasingly crucial for distribution channels.

Cannabis cafes can now function knowing that the products they create, or sell are moderated and deemed safe and compliant for consumers. Restaurants and cafes are now legally allowed to sell hemp and CBD drinks in their establishments. California joins Colorado, Maine, and New York to sell CBD in food and beverages.

New York restaurants were running into issues when the Department of Health embargoed specific hemp-infused products to such a degree that restauranteurs discontinued CBD beverage and food options altogether. California’s AB-45 created the workaround; restaurant and café owners in California no longer must watch what they’re distributing to customers. It’s all free from seizures and embargoes by the state government, thanks to AB-45.

Even though it’s officially a law, Californians should expect amendments to AB-45 later down the line, as the cannabis and hemp landscapes continue to shift.