Kayla and Rio Baroch, co-owners of the Missoula dispensary Indo. Credit: Max Savage Levenson / MTFP

Following pushback from industry stakeholders and lawmakers, the state Department of Revenue has decided to remove an unpopular ban on CBD products from the state’s cannabis program rules.

DOR will additionally nix a separate rule that would have barred anyone with a minor criminal conviction (including cannabis-related charges) from gaining or renewing a permit to work in the cannabis industry.

Speaking before the Economic Affairs Interim Committee on Wednesday, Nov. 17, DOR Director Brendan Beatty acknowledged that the department’s interpretation of the two rules had strayed from the intent of House Bill 701, the Legislature’s cannabis legalization framework bill. 

“It’s been made very clear by the Legislature and members of the public that the department’s interpretation in those two places didn’t jive with the Legislature’s,” Beatty said.

“It’s our job to listen to public comment,” he added. “We’ve had an unprecedented amount of input.”

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Dispensaries scramble to adjust to unanticipated CBD ban

The Montana Department of Revenue and cannabis industry stakeholders alike were surprised to recently discover that HB 701, the state’s legalization framework bill, prohibits license holders from growing or selling hemp, and by extension, from producing cannabidiol or CBD products that are derived from hemp.

Both reversals are likely to have significant impacts on the state’s nascent adult-use cannabis industry. 

Many medical dispensaries already carry a wide array of CBD products, including edibles, tinctures and topicals. Those products, which are either manufactured in-house or sourced from other businesses, are required by law to contain less than 0.3% THC, the primary psychoactive compound in cannabis plants. If the ban had gone into effect, dispensaries would have been forced to either stop selling those products or establish a separate business to continue doing so.

Businesses without cannabis licenses, such as gas stations and grocery stores, however, would have been able to continue selling the products.

“If there were any concerns at all about the safety, efficacy or dosage of CBD, you might want people that actually know a little bit about it to be the ones selling it,” Jay Bostrom, co-owner of Dancing Goat Gardens dispensaries in Missoula, Seeley Lake and Havre, told Montana Free Press earlier this month. 

During the hearing, DOR attorney Courtney Cosgrove floated a potential amendment that would keep a ban on smokable hemp plant material in place.

“It’s been made very clear by the Legislature and members of the public that the department’s interpretation in those two places didn’t jive with the Legislature’s.”

Dor Director Brendan Beatty

The employment rule would have barred anyone with a conviction, guilty plea, or plea of no contest to either a criminal offense within the past three years, a charge of selling or dispensing alcohol or tobacco products to a minor, or a violation of any other state’s marijuana law from applying for or continuing to hold a job in the cannabis industry.

Dispensary owners were concerned that would limit their applicant pool at the same time they are expanding to meet the demands of the new recreational market.

“We’re talking about people’s livelihoods at a time when employees are very hard to come by,” said Pepper Petersen, CEO of the Montana Cannabis Guild

“The rule that was proposed was fundamentally against the intent, color and letter of House Bill 701 and [voter initiative] 190. It was extremely important that the committee saw that it strayed away from the intent,” Petersen added.

Dispensary owners also welcomed news of the CBD ban reversal.

“We were worried about our patients not having access to locally sourced and well-made CBD products,” said Rio Baroch, co-owner and lead cultivator of Indo in Missoula. “We have a lot of patients that come in for our CBD products and a lot of patients that purchase our CBD products for their pets,” he added. “It’s a huge relief.”

For shops that had already begun investing in separate retail space for CBD sales, however, the about-face was more bittersweet.

The owners of Greenhouse Farmacy in Missoula, for instance, had already sunk $43,000 into converting an auxiliary structure on their property into a CBD store.

“It’s a little frustrating,” said co-owner Emmie Purcell. “But I’m going to continue with the build-out. It’s not all for naught. Our dispensary is small, and it’ll be nice to have the garage for spillover, or if in five years [there’s another change in the law].”

The Economic Affairs Interim Committee will meet again in early December to hammer out remaining details about implementation of the adult-use cannabis program.

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Max Savage Levenson

Max Savage Levenson is a Missoula-based reporter on the cannabis beat. He is the founder of Montana Cannabis Weekly, a newsletter covering the state industry. His writing on cannabis and pop culture has appeared in outlets including Pitchfork, NPR's All Songs Considered, Leafly, the San Francisco Chronicle, and Reason.