Source: MarketWatch

Betsy Ross stitched the first American flag using hemp and actor Woody Harrelson was once threatened with jail time for growing the crop.

Today, retailers from Whole Foods Market Inc. WFM, +2.73%   to Wal-Mart Stores Inc. WMT, +1.88%   sell bags of shelled organic hemp seed for snacking, BMW stuffs some of its car seats with hemp, a hemp derivatives exchange has launched and an advocacy group, GrowHempColorado, wants to tap cryptocurrency for hemp transactions.

Industrial hemp’s evolving story stands at a crossroads. The cash crop is simultaneously helped and hurt by rule changes impacting its better-known and controversial cannabis cousin, marijuana. But the hemp market has financial-services and farmer backing, especially in states that once grew tobacco and want to replace that revenue. It’s also an industry that’s still working out the economics between importing hemp and reviving a legal domestic market that was shut down by drug regulation.

Marijuana was tagged for expansionary votes in a handful of states in Tuesday’s election. California approved recreational marijuana use on top of its already approved medicinal use. The Associated Press projected recreational pot measures also passing in Maine, Massachusetts, and Nevada; and medical pot measures passing in Arkansas, Florida and North Dakota. A recreational pot measure failed in Arizona.

Industrial hemp (basically the term for edible, wearable, buildable, non-pot cannabis) could benefit if these ballot measures show voters are more comfortable with marijuana, proponents said. Hemp is distinguished from marijuana by its use but also physical appearance (marijuana is coaxed to grow bushier and to bud) and its lower concentration of behavior-altering tetrahydrocannabinol or THC. But it’s also true that the ongoing health debate around marijuana doesn’t always help hemp’s U.S. case.

“National Hemp Association Chair Michael Bowman uses the comparison between beer brands O’Doul’s and Guinness. Both are beer, but one will not have an intoxicating effect on you,” said Joanne Lovato, direction of communications with the lobbying group. (That would be O’Doul’s.)

State marijuana initiatives have the potential to allow hemp cultivation under Farm Bill Section 7606 (passed in 2014), depending on how each state defines their statutes, said Lovato. NHA backed House and Senate bills (H.R. 525 and S. 134) that would have excluded industrial hemp from the definition of marijuana under the Controlled Substance Act, but the bills didn’t make it out of the last Congress.

Read: Marijuana industry finds unlikely spokespeople in athletes and parents

Federal change

The Agricultural Act of 2014, more commonly known as the Farm Bill, was a pivotal early step, say proponents. It allows states to grow hemp for research purposes and to build up a certified hemp seed bank after farmers register with the Drug Enforcement Administration. That’s because hemp, left to its own devices, can turn into pot, at which point the registered farmers alert the law enforcement officials who are supposed to know of the farmer’s hemp-growing status. The law change defined industrial hemp, which has the potential for thousands of products, including food, paper, textiles, cosmetics, wall board and cooking oil, as having less than 0.3% of THC compared to marijuana’s 10%-30%.

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