Regulators Approve Hemp Derivatives Exchange

By Gabriel T. Rubin
Source: wsj.com

CFTC allows Seed SEF to register a trading platform for industrial hemp derivatives

Industrial producers have long sought to distance hemp, which is used in an array of products from biofuels to clothing, from marijuanaPHOTO: ZUMA PRESS

Fully legalized marijuana might be a pipe dream, but trading hemp derivatives is about to become a reality.

The Commodity Futures Trading Commission approved the first exchange for hemp derivatives when it allowed Seed SEF to register a swap execution facility, a trading platform. The industrial hemp trading platform is one of 23 SEFs registered with the CFTC, the agency said.

Industrial producers have long sought to distance hemp, which is used in an array of products from biofuels to clothing, from marijuana, a biological cousin that also comes from a variety of the cannabis sativa plant. Unlike marijuana, however, industrial hemp must contain less than 0.3% tetrahydrocannabinol, or THC, the compound that produces a high.

Since 2014, the federal government has allowed the cultivation of industrial hemp for research purposes and 30 states have passed legislation related to industrial hemp, according to the National Conference of State Legislatures. But the Drug Enforcement Administration still includes industrial hemp in its schedule of controlled substances along with marijuana, presenting legal risks to those who grow and sell it unless they are licensed by their states.

Seed said in a statement that it would “provide new means for agricultural market participants to hedge risk…in areas where there have been recent regulatory shifts or dramatic market restructurings.”

Efforts to smooth state and federal regulatory dissonance for industrial hemp have gained some traction in Congress. A bill to exclude industrial hemp from the Controlled Substances Act’s definition of marijuana has 14 Senate co-sponsors, including nine Democrats and Majority Leader Mitch McConnell (R., Ky.). A companion bill in the House has a bipartisan mix of 73 co-sponsors. But neither measure has moved out of committee.