A Roadmap for Interstate Commerce

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Photo: ALEX_UGALEK / Shutterstock

Leading up to the 2020 election, optimism about the prospects for significant federal reform was rising in the cannabis industry. After all, politicians on both sides of the aisle were more open than ever to meeting with lobbyists about banking reform, releasing the unjustly incarcerated, federal taxation, and all the other potential benefits and ramifications of federal legalization. Unfortunately, the tides mostly have swung in the opposite direction since then. The former buzz about legalization has become more like a faint murmur.

Arguably, interstate commerce could be among the biggest changes to be wrought by federal legalization. Not only would allowing the movement of products across state lines enable companies to compete on a level playing field from coast to coast, but such a system also could lower production costs and commoditize raw materials, helping companies compete better with a thriving illicit market.

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For a similar example of interstate commerce in action, look no farther than the robust market for so-called “intoxicating hemp derivatives” (IHDs) like delta-8 and hemp-derived delta-9.

When the 2018 farm bill legalized hemp, the CBD sector exploded, followed closely by the discovery that, with a little chemical wizardry, minor cannabinoids naturally present in hemp plants could be transformed into presumably legal products that mimic the effects of the THC in federally illegal cannabis. A resurgence in agricultural industries in southern states ensued. Today, the market for hemp-derived cannabinoids generates billions in revenue annually, creating a huge new source of tax revenue for both states and the feds.

The regulations, technology platforms, and other infrastructure that have enabled hemp companies to ship their products across state lines—and the massive economic impact of hemp on sectors including agriculture, distribution, and retail—provide hints about how a federally legal cannabis marketplace might look.

In its 2023 National Cannabinoid Report, Whitney Economics concluded the employment impact of the hemp industry in the United States was $13.2 billion. The report also indicated the total addressable market for IHDs globally was $28.4 billion, with a range from $21.3 billion to $35.8 billion. On the consumer side, a 2023 report about the hemp industry published by the Brightfield Group revealed IHD consumers have risen to nearly 10 percent of the U.S. population.

So if consumers in nearly every state already are able to buy hemp-based products, including intoxicating products that produce effects virtually identical to those produced by cannabis, how long will it be before politicians realize we already have interstate cannabis commerce?

Kevin Hart founded Green Check Verified, where he serves as chief executive officer. Green Check developed a regulatory compliance software platform that facilitates and verifies financial transactions. The company began working with cannabis clients in October 2019. The platform now boasts 162 different financial institutions and 9,000 businesses and processes more than $800 million in deposits each month.

“We’ve had conversations with [hemp-related companies] about who can sell to whom and how everything works,” said Hart. “We’ve also had conversations with large-scale beer and alcohol distributors, and they say, ‘We want to enter the space, but our current bank says no, we’re not comfortable with this.’ And these are businesses bringing in $100 million to $200 million a year that want to enter the space. That’s interstate commerce automatically, because it’s not all going to be packaged and built in the same areas.”

Hart doesn’t believe politicians are seriously considering descheduling cannabis.

“If you’re going to deschedule it, you’re implicitly saying interstate and international commerce is going to come into play,” he said. “So if they’re not talking about what that actually means, then they’re not serious about the conversation.”

When the feds finally do deschedule or fully legalize cannabis, Hart said, “Interstate commerce and international commerce are going to fall into line very, very quickly, because they have to be part of those conversations.”

So, while most everyone in the biz is tired of waiting and hoping for politicians to do something impactful, the hemp industry already is laying the groundwork and building the infrastructure for interstate commerce. When cannabis companies finally are allowed to do business across state lines, plugging them into the infrastructure hemp and alcohol companies already use may not be complicated at all.

Of course, when (or if) legalization will become a reality is anyone’s guess. But history has shown “anything can happen” in an election year, right?

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