Colorado's industrial hemp industry continues to grow despite ongoing federal prohibition. The early successes in creating a viable hemp marketplace hinged on the state's willingness to ignore federal law, along with the actions of farmers and entrepreneurs who have taken advantage of the relaxed state legal structure.

The Centennial State legalized industrial hemp production for commercial purposes in 2012. This was before the federal government loosened laws to allow hemp cultivation within pilot programs for research purposes. At the time, the federal government maintained almost complete prohibition of the plant. People could legally grow hemp, but they had to get a permit from the FDA, a nearly impossible feat.

There is one thing that sets Colorado apart from most of the others: an almost total disregard of federal law.

The Colorado law simply ignored the federal ban and set up a legal framework under which farmers could grow hemp anyway. By legalizing hemp, the state removed a layer of laws prohibiting hemp production. But it went even further by legitimizing the crop and creating a legal structure to facilitate the development of a viable market.

Legitimizing the Hemp Market

Colorado farmers walked right through the door opened by hemp legalization. And despite the threat of federal prosecution, they started growing hemp. Since then, the fledgling industry has grown at a steady pace, despite ongoing federal prohibition.

Farmers in southeastern Colorado began harvesting hemp in the fall of 2013 and the acreage devoted to the crop's cultivation has grown steadily since. By 2015, farmers were growing 3,600 acres outdoors along with 571,000 square feet of indoor production. The amount of acreage used to grow industrial hemp in the state increased in 2016 to nearly 5,000 acres and then nearly doubled in 2017.

According to the Telluride Daily Planet, to date 386 licensed growers produce industrial hemp in Colorado. There are 12,042 outdoor acres of hemp, along with 2.35 million square feet licensed for indoor cultivation.

Why the Centennial State Is Different

A number of states have legalized hemp, but none have been as successful as Colorado. And there is one thing that sets this state apart from most of the others: an almost total disregard of federal law. While most hemp states have tried to operate their programs within federal parameters, Colorado has not. It simply set up its own commercial licensing system and let farmers go to work.

Last year, Colorado accounted for more than half of the country's hemp production.

According to a Marijuana Business Daily story cited by the Daily Planet, Colorado has, “more acres in hemp, more farmers growing the crop, more processors extracting CBD from hemp and more market opportunities for selling the plant than any other state."

In fact, last year, Colorado accounted for more than half of the country's hemp production. The Daily Planet pinpoints one of the main reasons why.

The success of the industry perhaps stems from the state's 'look the other way' stance on hemp seed acquisition. That flies in the face of federal direction to get approval from the U.S. Drug Enforcement Administration."

The early success of Colorado's hemp industry traces directly to its willingness to simply ignore federal law.

Federal Prohibition

In 2014, Congress cracked the door open for limited hemp farming in the U.S. with an amendment to the 2014 Farm Bill. The law allows hemp cultivation for research purposes but prohibits “commercial” production.

The “hemp amendment” in the 2014 farm bill allows:

...State Agriculture Departments, colleges and universities to grow hemp, defined as the non-drug oil-seed and fiber varieties of Cannabis, for academic or agricultural research purposes, but it applies only to states where industrial hemp farming is already legal under state law.”

In 2016, the U.S. Department of Agriculture and Drug Enforcement Agency released a “statement of principles” to guide interpretation of the Farm Bill's hemp section. It states:

The growth and cultivation of industrial hemp may only take place in accordance with an agricultural pilot program to study the growth, cultivation, or marketing of industrial hemp established by a State department of agriculture or State agency responsible for agriculture in a State where the production of industrial hemp is otherwise legal under State law.”

In short, the current federal law authorizes farming of hemp—by research institutions, or within state pilot programs—for research only. Farming for commercial purposes by individuals and businesses remains prohibited.

The definition of “commercial” and the extent to which sales and marketing are allowed under the rubric of “research” remains murky. This has created significant confusion.

The statement of principles also asserted that industrial hemp programs are limited to fiber and seed. It didn’t mention the CBD oil or other edible hemp products. The DEA has apparently interpreted that to mean they remain illegal. The agency has flat-out said CBD cannot be sold under any circumstances. An Indiana TV station interviewed DEA spokesman Rusty Payne who said, “It’s not legal. It’s just not.”

Payne says cannabis plants are considered a Schedule I controlled substance, and medicinal oils derived from cannabis plants are illegal according to two federal laws: the Controlled Substance Act and the Food, Drug, and Cosmetic Act. He said confusion surrounding the Agricultural Act of 2014 (better known as the “Farm Bill”) is frequently cited as legal justification by those who want to manufacture, sell or use CBD oil. The DEA believes the Farm Bill permits only CBD research—not CBD marketing and sales. “Anybody who’s in violation [of the federal laws] always runs that risk of arrest and prosecution,” he said.

With federal shackles locked tight by state policy, these states are not legally allowed to develop any kind of commercial market.

The DEA's declaration notwithstanding, CBD continues to soar in popularity. The hemp-derived oil has proven effective in treating a number of medical conditions, including seizures, pain, and anxiety. According to Marijuana Business Daily, Cannabis research firm Brightfield Group estimates that the U.S. market for CBD oil hit $291 million in 2017 and will swell to $1.65 billion by 2021—a nearly sixfold increase.

Hemp producing states are scrambling to meet the demand, including states that claim to allow only hemp research programs within the scope of federal law.

Several states with federally-compliant structures for hemp production, such as Kentucky, North Dakota, Minnesota and New York, have grown significant acreage under federally-approved research programs. With federal shackles locked tight by state policy, these states are not legally allowed to develop any kind of commercial market.

And yet, that is exactly what these states are doing. This is because many of these “federally compliant” programs are not actually federally compliant. Any state program producing CBD oil for the general market is operating outside the law.

The commercial sale of edible hemp products violates federal law, according to some federal officials. Even so, more than half of Kentucky’s hemp acreage has been cultivated for CBD. And you can walk into virtually any health food store in the commonwealth, or even many major grocery chains, and find edible hemp products on the shelf.

This reveals a dirty little secret: you simply can't develop a legitimate hemp industry while remaining bound by federal rules and regulations. Colorado has had success developing a vibrant hemp industry due in large part to its willingness to cast aside the pretenses and simply push forward to develop a commercial hemp industry no matter what the DEA says.

Moving Forward

According to the Daily Planet, one of the biggest challenges facing the budding hemp industry is the lack of processors and the need for more end-users. Farmers won't benefit unless there are people processing the plant, businesses developing and producing products, and customers to buy them.

People in Colorado are stepping up to fill that void, even though the feds say it's against the law.

In spring 2015, the PureVision Technology processing plant in Ft. Lupton began hemp processing. Ed Lehrbuger runs PureVision Technology, and he gave an ABC 7 reporter a tour of the facility. It processes hemp stalks into pulp that can be made into paper, and sugar that serves as a basis for biofuel. “Our tagline is 'Pioneering the hemp revolution,'” Lehrbuger said.

People in Colorado are stepping up to fill that void, even though the feds say it's against the law.

At the time, company officials said the pilot plant would initially process a half-ton of hemp each day. The plan was to scale up to 25 tons a day by the fall in a larger facility as the hemp harvests grow.

Paradox Ventures recently set up shop in an old schoolhouse. The company plans to install machines for extracting medical-grade CBD oil from hemp. It also plans to provide seedlings and to offer harvesting equipment, oil processing, and fiber processing from the facility.

In the long-term, the real success or failure rides on the shoulders of entrepreneurs developing products to meet the needs of the market. Processors told the Daily Planet more of these "end-users" will make hemp truly valuable, thereby encouraging more farmers to give it a go.

Scott Abrahams counts among Colorado's growing number of hemp entrepreneurs. He founded Kind Life Farm Institute, a licensed hemp cultivation company that specializes in seed banking, breeding, and tissue culture services. Abrahams offered Mary Jane’s Medicinals as an example of the kind of end-user that the industry needs to create more demand for industrial hemp.

Dahlia Mertens founded Mary Jane’s Medicinals and it produces salves and other topical medications. “We need more Dahlia Mertens,” Abrahams said. “More processors are needed. We need more value-added resellers; otherwise, we’ll create a back stock of material.”

Another creative entrepreneur founded RXCBD, a Ridgway-based company that specializes in CBD-infused products for pets. John Lyons was all set to retire when the hemp bug bit him. After attending a conference, he founded The Colorado Hemp Institute. Lyons hopes to develop an all-in-one center for doctors, growers, and scientists to research hemp, as well as treat patients. According to Westword, the company will primarily focus on non-psychoactive hemp and CBD, but will also offer some medical marijuana products.

The facility will include a walk-in clinic, two or three doctors who can see patients in fifteen to twenty rooms, and an assisted-living center where visitors can receive cannabis treatment plans; there will also be an end-of-life facility to treat terminally ill patients.

People like Lyons, Abrahams, and Mertens serve as the backbone of the successful movement to nullify federal hemp prohibition in Colorado. The state can open the door by creating a favorable environment for a market to develop, but ultimately the movement needs people to step through that door and actually create and expand markets. These people are doing just that.