Farm Bill

Hemp Harassment: Leading Online Retailer Thrive Market Forced to Cease Sales of All Hemp and CBD Products in Banking Backlash

Photo: Pexels

Photo: Pexels

Originally appeared in the Let’s Talk Hemp Blog & Newsletter
By Steven Hoffman

In a seeming backlash to the burgeoning hemp economy, hemp and CBD retailers, industry associations and other hemp-centric businesses are being denied or threatened with denial of banking, credit card processing and other key business services, including a national newswire service that announced this past month it will no longer accept press releases from hemp companies, and is, in fact, deleting all existing and previously issued press releases related to hemp and CBD from its online archives. It is a disturbing trend in an industry that was made legal across the U.S. as a result of the 2018 Farm Bill and is projected to grow to $26.6 billion by 2025.

It has forced such retailers as leading online natural products grocer Thrive Market to cease sales of all hemp and CBD products, a best-selling category over the past 18 months on its nationally recognized ecommerce site. The member-based online retailer boasts more than 500,000 members. “In early June, we received a notice from our merchant processor demanding that we cease the sale of all hemp and CBD products on Thrive Market. We unfortunately have no choice but to comply, and we’ll begin removing our assortment as early as Thursday, June 20,” wrote Thrive Market’s cofounder and CEO Nick Green in his blog on June 17. As of this writing, clicking on that assortment link takes you to a blank product page on Thrive Market’s website.

Meanwhile, the U.S. Hemp Authority, a not-for-profit trade group developing certification standards for the industry, lost payment processing services in June after being dropped by its vendor, Stripe, based in San Francisco, reported Hemp Today on June 20. According a report in CNN Business, Stripe said it dropped the U.S. Hemp Authority’s account because of liability concerns, despite the fact that the trade organization is not a seller of any hemp products. “We’re being told we’re high risk. We’re actually trying to minimize human risk,” Hemp Authority president Marielle Weintraub told CNN.

Abrupt Notice
Since a leading credit card processor, Elavon, a subsidiary of U.S. Bank, abruptly notified its hemp and CBD clients in March 2019 that it had recategorized hemp and CBD merchants as a “prohibited business type” and was backing out within 45 days of handling payment processing for such companies, a number of hemp businesses have been scrambling to establish secure and durable payment processing relationships. According to one estimate by Philippa Burgess, cofounder of MMJ FinSol, a Denver-based financial services solutions company for hemp, cannabis and other “high-risk” businesses, Elavon’s policy changes affected up to 40,000 CBD companies.

Another merchant processor, Fortress Payment Technologies, in May 2019 notified all its ecommerce customers selling CBD products that they would no longer be able to process Visa credit card payments through the bank. Some sellers received less than eight hours’ notice of these changes, reported Folium Biosciences, a vertically integrated hemp-derived phytocannabinoid producer based in Colorado Springs. The company recently launched a CBD/hemp friendly financial services platform for its customers to help remove the financial hurdles faced by the CBD industry, it said.

Kyle Rapoza, cofounder of Vermont-based Mansfield Provisions, which distributes CBD products online and through brick and mortar retail partnerships, lost credit card processing services for his company in late May 2019, when Elavon stopped doing business with the hemp industry. He explained to Ganjapreneur Magazine that, in the wake of Elavon’s action, many of the industry operators he knows and does business with are moving back to high risk (and high fee) accounts. Rapoza has since been able to access more traditional business accounts through a state credit union, Ganjapreneur reported.

Biggest Challenge Facing the Hemp Industry
It’s a “difficult time” for the industry as it related to financial services, which he called “the biggest challenge in the industry right now,” Jonathan Miller, general counsel for Kentucky-based industry association Hemp Roundtable, told Ganjapreneur. “The law, we believe, is clear that since the [2018 Farm Bill], hemp and CBD are no longer controlled substances. There should be no concern whatsoever that there would be violations of federal law to engage in commerce. …Unfortunately, there is a lot of misinformation – it’s banks, it’s credit card companies, it’s merchant services that have been refusing to do business with these hemp and CBD companies.”

Because banks have been so hesitant to serve hemp and CBD businesses despite the legalization of hemp in the Farm Bill, U.S. Senators Mitch McConnell (R-KY) and Ron Wyden (R-OR) – chief proponents of legalizing hemp – in April 2019 sent individualized letters to four federal banking and financial regulatory institutions, imploring them to prevent banking discrimination of the hemp industry, reported Cannalaw Blog.

In addition, when pressed by U.S. Senator Jon Tester (D-MT) at a hearing in June 2019, Marijuana Moment reported that Federal Reserve board member Michelle Bowman pledged to inform banks that they can service hemp businesses. When Tester asked specifically how the Fed is advising institutions when it comes to hemp, Bowman responded, “We have not told them that they cannot bank them.” Tester countered that while he and Bowman might be on the same page, it is possible that banks were hearing a different message—hence why hemp businesses have said that they’re still experiencing difficulties accessing credit. Tester said clarification is especially important at this stage because of fallout from trade wars with China and Mexico, as hemp represents a potentially lucrative crop for American farmers. “I would agree with you. We would not discourage banks from banking these types of customers,” Bowman said. “We’ll try to clarify that. Hemp is not an illegal crop.”

What, No Press Releases?
While certain merchant banks seek to stifle hemp industry growth through the denial of critical financial services, another service provider in the media newswire business seeks to silence its voice.

One leading hemp industry media and event production company, Colorado Hemp Company, based in Loveland, CO – producer of the NoCo Hemp Expo, Southern Hemp Expo, and the Let’s Talk Hemp weekly newsletter and podcast – was recently informed by its newswire service, ReleaseWire, that it will not post or distribute any new press releases that mention hemp, and in addition, it was deleting all existing and previous press releases mentioning hemp that Colorado Hemp Company had posted in the past. In a policy update issued on May 8, 2019, ReleaseWire, one of the nation’s leading online national newswire services, issued the following statement, after which it began informing hemp-centric businesses that not only were they not accepting new press releases for distribution, they were deleting all existing press releases and archives related to cannabis, hemp or CBD:

“ReleaseWire was recently contacted by our credit card processor and informed that they have a policy in place that restricts merchants, including ReleaseWire, from linking to, or providing information about, marijuana, cannabis, CBD, hemp and related products. As such, we have been instructed by our credit card processor that we must not only stop taking press release submissions on these topics, but we must remove any existing press releases and related content from our site. They have provided us with a small window of time to complete this process or risk losing the ability to process credit cards.”

Meanwhile, other newswire services including Cision, owner of PR Newswire and PRWeb, continue to accept and publish hemp, CBD and cannabis related press releases on behalf of clients.

Hemp Friendly Payment Processors
So which payment processors are willing to serve hemp and CBD companies? One such processor, Adept Payments, says on its website that it helps high risk businesses, including vape, CBD, adult, casinos and more.

While financial services group, Edward Jones, has no official policy about outreach to the hemp industry, a broker in Bend, OR, contacted Hemp Industry Daily to say he was offering a “full spectrum of banking, investment, insurance and financial planning services to hemp farmers.” Officially, Edward Jones is “looking at the provision in the Farm Bill that addresses hemp growing,” John Boul, manager of global media relations for the St. Louis-based Edward Jones told Hemp Industry Daily in April 2019.So which payment processors are willing to serve hemp and CBD companies? One such processor, Adept Payments, says on its website that it helps high risk businesses, including vape, CBD, adult, casinos and more.

Square, a leading online payment processor, recently soft-launched credit card processing for CBD companies, but the program is still in beta testing phase and is by invitation only. Former credit card processing professional and current blogger Phillip Parker, who describes his site, CardPaymentOptions.com, as a credit card processing watchdog group, posted a guide to the Best Merchant Accounts for Hemp Products in June 2019. Also, Merchant Maverick, a self-described comparison website that reviews and rates credit card processors, mobile payment services and other small business software, published a guide to the Best CBD Oil Merchant Account Providers in April 2019.

For CBD sellers on Shopify and other major ecommerce platforms, a recently launched processor, Organic Payment Gateways, advertises that its mission is to help people in the CBD business process payments online, and that its payment gateways work smoothly with Shopify, WooCommerce and others. Leap Payments, Instabill and other services promote that they are dedicated to ensuring CBD businesses “can accept debit and credit card payments just like any other business can.”

So, for now, you won’t find any hemp or CBD products at Thrive Market, however, the ecommerce retailer says it won’t give up without a fight. “We believe that ethical and sustainable hemp is another cause worth fighting for, so rest assured that we will be working behind the scenes in the coming weeks to get hemp products back on Thrive Market,” Nick Green wrote in his blog. “In fact, we’re already in conversations with a new processing partner to try to make that happen.”

Hemp Market Takes Off at Expo West

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For Presence Marketing Newsletter, April 2019
By Steven Hoffman

Anyone attending Natural Products Expo West, the world’s largest natural products trade show, held this past March, couldn’t help but notice that 2019 has emerged as “The Year of Hemp” in the natural and organic products market.

Indeed, the legalization of industrial hemp under the 2018 Farm Bill has been a boon for independent natural foods retailers, said Loren Israelsen, president of the United Natural Products Alliance. “For smaller stores, this category has been a lifeline for them as they battle to maintain foot traffic in the stores as online sales continue to grow.”  

Larger stores, too, are eyeing the hemp market: Boulder-based Lucky’s Market has taken the lead in hemp and CBD product sales in its stores nationwide, with full shelf sets in the natural living department. Ohio-based Mustard Seed Market’s supplement sales are being driven by its commitment to CBD products, says Nutrition Director Abraham Nabors. Whole Foods Market’s trend spotters identified hemp as a “top 10 food trend for 2019,” and recently, Whole Foods CEO John Mackey indicated the possibility of Whole Foods selling cannabis products should they become legal in the future.

According to Hemp Business Journal’s new report, The Global State of Hemp: 2019 Industry Outlook, U.S. sales of hemp products – from full-spectrum hemp extract and CBD products to hemp foods, textiles, building materials, bioplastics and more – estimated at $1 billion in 2018, are projected to grow 27% annually to reach $2.6 billion by 2022. Global hemp retail sales totaled $3.7 billion in 2018 and are projected to grow to $5.7 billion by 2020.

The passage of the Agriculture Improvement Act of 2018, commonly known as the Farm Bill, in late December was nothing less than historic, legalizing for the first time in more than 80 years the commercial cultivation and sale of industrial hemp. “Most importantly, noted journalist Chris Chafin in Rolling Stone, “it removes hemp and any hemp derivative from the Controlled Substances Act, legally separating it from marijuana and putting its supervision under the Department of Agriculture. In the most basic sense, these plants serve three primary uses: fiber (paper and cloth), seeds (for hemp oil and food), and cannabinoid oils. It’s this last category that’s the most profitable and has the biggest potential for growth. The [Farm Bill] defines hemp as any part or derivative of cannabis with a THC level below 0.3 percent on a dry-weight basis,” Chafin reported.

Hemp Steals the Show at Expo West
Interest in the category was so strong at 2019 Natural Products Expo West that a full-day Hemp & CBD Summit held at the show spilled out beyond a 500-person ballroom into two other rooms where a similar-sized audience watched by live video feed. Also, during a panel discussion hosted by Presence Marketing and NCG at Expo West for over 150 retailers, CBD and hemp supply chain (e.g., ensuring that the full spectrum hemp extract products you carry are sourced from certified organic producers, etc.) dominated the discussion.

Full spectrum hemp and CBD products from new and national brands alike were introduced everywhere at the trade show: carob snacks with hemp extract from Missy J’s; CBD sparkling water from Weller; hemp-infused honey from Colorado Hemp Honey; CBD wellness shooters introduced by Navitas; organic full-spectrum hemp extract from Gaia Herbs, Charlotte’s Web, CV Sciences and others; hemp supplements by Leaf Therapeutics, a new brand launched by legacy brand Solaray; hemp gummies and caramels from Boulder-based Restorative Botanicals; CBD sports nutrition, hemp balms, hemp infused body care products and more. Honestly, what didn’t have CBD hemp extract at Expo West?

And that’s not to mention hemp foods derived from hemp seed – high in plant-based protein and omega-3 essential fatty acids, but with no CBD or cannabinoid compounds. Sold for over 20 years in natural foods stores, hemp seed-derived products are now widely regarded as superfoods. Brands such as Tempt, Manitoba Harvest, Evo Hemp and others presented new hemp food offerings at Expo West, capitalizing on heightened interest in all things hemp.

CBD or Hemp Extract?
The FDA may yet come out against use of the term “CBD.” While the agency is expected to review CBD and hemp extracts in food and supplements in the near future, according to outgoing FDA Commissioner Scott Gottlieb, CBD isolate was approved as a drug by the agency after granting license for Epidiolex, the first pharmaceutical derived from cannabidiol (CBD), manufactured by the company GW Pharmaceuticals. The commissioner had recently spoken of a “pathway” to acceptance of hemp CBD as a dietary ingredient. However, with Gottlieb announcing his resignation in early March, many in the natural products industry are uncertain whether progress on FDA regulatory policy regarding hemp and CBD will be made.

However, judging from exhibit after exhibit on the trade show floor, you wouldn’t know the regulatory waters around the use of the term “CBD” are murky. For many exhibitors at Expo West, “CBD” was the go-to phrase on product packaging, literature and exhibit signage, while others more conservatively stuck to the phrase “full-spectrum hemp extract.” 

Despite FDA’s lack of a decision to date in this regard, manufacturers, retailers and consumers alike are responding positively to the use of CBD on the product label, and are not waiting for FDA to decide. This could be an issue down the road for many manufacturers, should the FDA decide to crack down on use of CBD on labels. The key, advised a number of speakers at the show, is avoid the use of CBD isolate in products and stick with full-spectrum hemp extract to avoid unwanted attention from the FDA. 

While "it’s still unclear how different federal agencies will interpret the new [Farm Bill] rules...it doesn’t matter — people in the CBD industry are calling the new legislation a game changer," observed Chafin in Rolling Stone.

Transparency and Testing Are Crucial
A major theme at Expo West’s Hemp & CBD Summit focused on manufacturers operating with safety and integrity, noted CBD Insider in a March 9, 2019, report. “To preserve integrity, businesses must always test their products, especially in these six areas: cannabinoid potency, residual solvents, heavy metals, pesticides, microbes, and terpenes. After this testing is complete and the products are verifiably ready for consumption, companies should be transparent with their testing and provide documentation of third-party lab results. Companies — and consumers — must do their homework and ask questions. If a laboratory, farmer, brand, or any other entity in the supply chain is not willing to be transparent, it’s a sign that you should do business elsewhere. Many of the speakers discussed how they personally vet businesses before working with them, such as requiring documentation or personally visiting the company’s facility,” reported CBD Insider.

In addition, and importantly, retailers and consumers should seek out hemp products that are grown in accordance with certified organic and preferably climate friendly regenerative practices, emphasized John Roulac, founder of Nutiva and RE: Botanicals, a new hemp “apothecary,” which debuted at Expo West. Beware of low-cost hemp extract products that may have been produced with industrial agriculture practices including toxic, synthetic pesticides and synthetic nitrogen fertilizers derived from natural gas and fracking – contributors to global warming – and extracted with toxic organic solvents, he cautioned.

U.S. Hemp Acreage – 80,000 Acres and Growing
Although hemp is now legal across the U.S., the message seems to be getting out slowly, and state and local authorities are still seizing hemp crops and truckers are being arrested for crossing state lines with container loads of harvested industrial hemp for processing, tying up individuals in jail and leaving valuable inventory in limbo.

Currently, nine states – Idaho, Louisiana, Mississippi, Georgia, Ohio, South Dakota, Iowa, Texas, and Connecticut – still prohibit hemp production under any circumstances. And four states – Idaho, South Dakota, Nebraska, and Kansas – still prohibit hemp-derived CBD. “For now, transporting hemp across these state lines may still be as dangerous as it’s ever been,” reported science writer Leo Bear-McGuiness in Analytical Cannabis.  

Yet, “damn the torpedoes,” U.S. farmers are saying, as they respond to soaring demand by dedicating farmland to hemp cultivation, seeing it as a potential cash crop and an alternative to growing GMO corn, soy, tobacco and other commodity crops. 

According to hemp advocacy group Vote Hemp, the U.S. hemp crop tripled in 2018 to 78,176 acres, up from 25,713 acres in hemp cultivation in 2017. That figure is expected to grow now that the Farm Bill has opened the door nationwide to hemp production, says Vote Hemp. Montana emerged as the top hemp growing state in 2018, followed by Colorado, Oregon, Kentucky, Tennessee, North Carolina and North Dakota, respectively, according to Vote Hemp.

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