California's cannabis and hemp industries are buzzing with concern after Governor Gavin Newsom introduced emergency regulations that could severely limit hemp-based products.
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These temporary rules, which may stay in place until March 2025, have stirred up a lot of uncertainty, leaving many to wonder how they will affect both sectors. And it’s not just California – there’s potential for a nationwide ripple effect as other states may follow suit.
Seth Yakatan, co-founder of Katan Associates and a seasoned professional in cannabis finance, weighed in on the possible outcomes during an interview before his appearance at the Benzinga Cannabis Capital Conference. He, like many in the industry, has some strong opinions on the matter.
Confusion Around Hemp Restrictions
Yakatan didn’t hold back when expressing his confusion over the new regulations, particularly concerning certain types of products. "The recent announcement by Governor Newsom is perplexing. Why this action has been enacted and why it eliminates things like low-dose beverages makes no sense," he said.
The ban, if it stays in place, could hit hemp businesses hard, especially those that have found success selling hemp-infused drinks and other products. Yakatan is especially concerned for companies that focus on alternative cannabinoids. "This does not bode well for those in the ALT-Niod beverage business with products in CA," he pointed out. These businesses may face tough times ahead as the state restricts their market.
A Boost for Regulated Cannabis?
On the flip side, Yakatan noted that the regulated cannabis market in California might actually benefit from the hemp restrictions. With fewer hemp options available, consumers could turn to dispensaries, where similar products are legally sold. "I can only see this helping the regulated cannabis market, as consumers will now (for six months at least) have to go to a regulated (or trap) dispensary to procure product," Yakatan explained.
But the bigger issue could be the patchwork of regulations that might develop as each state creates its own hemp laws. Yakatan foresees a challenging road ahead. "It appears that each state is going to legislate this issue on its own and as it sees fit. Get ready for a nationwide game of Whack-A-Mole as this continues," he said, highlighting the potential for a fragmented legal landscape.
Watching and Waiting
As these emergency rules take effect, many in the cannabis space are keeping a close eye on California to see how things unfold. The state’s decisions could set a precedent for others, shaping the future of hemp and cannabis regulations across the U.S. No doubt, this topic will be front and center at the upcoming Benzinga Cannabis Capital Conference, where industry insiders will discuss how these shifts in regulation are reshaping the market.
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