Regulate: The Interim Final Rules, Key Participants And Background Checks

by Mark Yurachek

I’m kind of late to the party in offering my initial thoughts on the USDA’s interim final rules on hemp, but I finally got a few minutes to sit down and read them and I do have some thoughts. As a side note, I am a big fan of the CannaLaw Blog and Jesse Mondry wrote an excellent summary of the relationship between criminal history and licensing under the Rules last week. I want to expand upon some of the questions Jesse’s article raises and dig a little deeper into them.

7 USC §1639p(e)(3)(B)(i) and its parallel provisions in the Rules forbid “any person convicted of a felony relating to a controlled substance under State or Federal law before, on or after December 20, 2018,” from “partcipat[ing] in” the USDA program or “to produce hemp under any regulations or guidelines” established under that statute, “during the 10-year period following the date of the conviction.” The Supplemental Information to the Rules states:

[t]o meet this requirement, the State or Indian Tribe will need to review criminal history reports for each applicant. When an applicant is a business entity, the State or Indian Tribe must review the criminal history report for each key participant in the business. The State and Tribe may determine the appropriate method for obtaining the criminal history report for their licensees in their plan. Finally, any person found by the USDA, State or Tribal Government to have materially falsified any information submitted to this program will be ineligible to participate.

The text of the Rule raises a number of questions for me: 1) what discretion do the states have in applying this Rule? 2) what constitutes a “conviction?” 3) what is “participation?” and 4) what happens to an entity which produces without a license?

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