Cannabis product retailers bristle at new North Dakota rules

The Your CBD Store on 45th Steet South is one of two Fargo locations. There are 450 locations nationwide. (Jeff Beach/North Dakota Monitor)

New rules for cannabis products sold in North Dakota went into effect July 1, but members of the industry said it’s already difficult running a hemp business in the state.

The new rules implemented by the North Dakota Agriculture Department are aimed at addressing more detailed labeling on cannabis product packaging and reinforcing restrictions on psychotropic hemp products that may be trying to get around established rules.

Some North Dakota hemp processors see the continuous updating of regulations as a major hurdle to their businesses in what is generally considered a business-friendly state.

Shane Weber, co-owner of Badlands Hemp, near Taylor, N.D., said his company has been processing hemp into different products in-state since 2020 and, while starting a small business is challenging enough, starting a hemp business is in a category all of its own.

“There’s more hurdles, there’s more red tape,” Weber said. “Anything from banking to insurance, all of that stuff is more difficult for us compared to someone who’s just making candles or something like that.”

He added the North Dakota Agriculture Department has been helpful answering any questions Weber’s company had about the state’s cannabis rules, but he’s also noticed other hemp processors moving to nearby states with looser cannabis regulations in recent years.

“I live here, we’ve got a chunk of land out here, we’re not gonna go anywhere,” Weber said. He added that Badlands Hemp would expand if voters approve a recreational marijuana law.

Timothy Frey, spokesperson for Ignite Dispensary in Bismarck, said while the CBD dispensary is a legal business in North Dakota, he’s found it difficult maintaining business relationships needed to operate.

“I’ve been dropped by two credit card processors, I’ve been dropped by my payroll company,  and I’ve gotten denied by 12 banks in Bismarck,” Frey said.

He said the 13th bank, which the business ended up using, requires him to send the bank quarterly lab reports; the bank conducts an annual on-site inspection at the store; and Ignite Dispensaries are charged a $500 premium per month to use a checking account.

Frey said he doesn’t mind following all the rules because he wants to prove to the state Agriculture Department his business is completely above board and ready to become one of the first retail cannabis stores, if a recreational marijuana law is passed in the state.

Sponsors of a North Dakota recreational cannabis ballot initiative are expected to submit signatures on Monday to the Secretary of State’s Office for possible inclusion on the general election ballot.

‘A quagmire’

In new rules from the state Agriculture Department, labels on cannabis products sold in North Dakota will need to be tied to a certificate of analysis from a certified lab that discloses the total cannabinoid levels of the product

The new rules will also change the definition of tetrahydrocannabinol (THC) and cannabinol (CBD) products to include language aimed at catching additional cannabis product offshoots and precursors, like tetrahydrocannabinolic acid (THCa).

THCa is created by cannabis plants during their grow cycle and transforms into non-acidic, Delta-9 THC as it is exposed to air and heat, according to the National Institute of Health . The Cannabis Business Times reported the THCa product industry went from “negligible” sales in 2022 to more than $200 million in sales just one year later , which accounted for more than 7% of sales for the entire hemp-derived THC market.

North Dakota Agriculture Commissioner Doug Goehring said the new rules prohibit THCa products sold in North Dakota and any additional precursor or THC variants used in the future.

“We are going to make sure that psychotropic substances, or any altered product, is not available for retail sales in North Dakota,” he said.

Goehring said the department has been running a hemp program for production, processing and distribution, as well as other facets of the hemp product industry since Congress approved the 2014 farm bill. After the 2018 farm bill, he said, Delta 8/9/10 THC-variant products began appearing in the marketplace.

“What was happening is they were cutting product with an organic acid and creating a psychotropic drug and that was never intended with hemp,” Goehring said.

He said the process continued with more synthetic substances being used to make cannabis products that seem to skirt hemp regulations.

“It was just creating such a quagmire that you couldn’t continue to address in Century Code, so the Legislature said, ‘We want this clarified, just create administrative rules,’” Goehring said. “We have the ability then to address things and we have to keep it within legislative intent and what the directive was.… It also means that we can react much quicker to something, if it changes.”

A hearing for the cannabis product rule changes was held in February and multiple retailers made comments during the event.

Frey made comments on behalf of Ignite Dispensaries during the event and said many of their customers use hemp, CBD and low, microdose Delta-9 products to address chronic conditions and pain.

“History has proven that prohibition is not the answer,” Frey said during the hearing. “Hemp, CBD and low dose, microdosing of Delta 9 is not the ‘devil’s lettuce’ the older generations grew up on.”

Frey said the new prohibitions will increase black market sales of THC products and increase the number of North Dakotans traveling to other states to purchase the products legally in those states.

He also pleaded for cannabis products to be removed from gas stations and only be sold through licensed dealers to ensure the products can’t be obtained by minors.

Matt Yde, the owner of two Your CBD Store locations in Fargo, testified that his customers were not looking for a product that gets them high. “They’re just looking for the most therapeutic products to help them,” he said.

Goehring said if any retailer or hemp product licensee wants to challenge the new rules in court, the department believes it has the knowledge and data to explain the differences between various cannabis products and why they are legal or illegal to a judge or jury.

Fine print

John Mortenson, hemp product specialist for the Agriculture Department, said the new labeling rules for cannabis products may require retailers to use a QR code that links to a certificate of analysis -product report on a website in order to keep the label in a readable font size.

If products didn’t use a QR code and tried to fit all the information on the label, Mortenson said, “It would be lawyer-print beyond belief.”

The new labeling rules require cannabis products sold in the state to include:

• All ingredients, allergens and expiration date.
• A recommended serving suggestion.
• The maximum total THC of the product expressed in milligrams.
• A nutritional panel.
• Consumer warning messages.
• Messages to prevent product access by minor children.
• No health claims.

Weber said Badlands Hemp was already including detailed product labels with all the necessary information, so that new rule won’t affect their business.

Many of the prohibited products are being shipped to North Dakota customers through the U.S. Postal Service, which limits state-level oversight, Mortenson said.

“The feds are actually working towards fixing that right now through the (new) farm bill and then the DEA just released a letter … saying that THCa is a component of marijuana. This is not a hemp product,” he said.

Mortenson said he visits retailers to ensure they are in compliance with state law. Those shop owners told him they have been approached by lawyers in the past who presented them with a letter that said the state’s prohibited cannabis products are actually legal, something Mortenson disagreed with.

Mortenson said the letters cover U.S. Department of Agriculture rules that govern hemp production in the farm bill, not the final products themselves.

“It’s kind of this weird little loophole, but we’re not the only state that has come at this problem,” he said.

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