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How Delta-8 Hemp Sucker Punched Legalized Marijuana

Mirroring legalized marijuana’s tetrahydrocannabinol (Delta-9 THC) effects, hemp derived tetrahydrocannabinol (Delta-8 THC) requires no license, is readily available online and over-the-counter, and is cutting into legalized cannabis’ $20 billion-plus annual revenue.

It gets you high, it’s cheaper than cannabis, and the Feds aren’t prosecuting it.

Mirroring legalized marijuana’s tetrahydrocannabinol (Delta-9 THC) effects, hemp derived tetrahydrocannabinol (Delta-8 THC) requires no license, is readily available online and over-the-counter, and is cutting into legalized cannabis’ $20 billion-plus annual revenue.

Despite growing state illegality and confusion over whether compromising a Schedule I controlled substance prohibited by the Comprehensive Drug Abuse Prevention and Control Act of 1970, 21 U.S.C. Sections 801, (1970) (Controlled Substance Act), Delta-8 THC smokable flower, vape, and edibles sales are exploding creating concerns regarding these untested and unregulated products’ safety and potency and an outcry from vested legalized marijuana interests.

The Difference Between Cannabis and Hemp

Although the Wall Street Journal reports that cannabis 2020’s domestic sales exceeded $20 billion, and despite being legal in 38 states, marijuana remains 100% federally illegal.

The Controlled Substance Act currently lists marijuana next to heroin as a Schedule I controlled substance having “a high potential for abuse” and for which there’s “no currently accepted medical use in treatment” and “a lack of accepted safety for use” “under medical supervision.” The Controlled Substance Act prohibits marijuana’s cultivation, distribution, dispensation and possession and, pursuant to the U.S. Constitution’s supremacy clause, state laws conflicting with federal law are generally preempted and void. See U.S. Const., Art. VI, cl. 2; Wickard v. Filburn, 317 U.S. 111, 124 (1942) (”No form of state activity can constitutionally thwart the regulatory power granted by the commerce clause to Congress”).

A fast-growing, sustainable, and inexpensively produced plant, hemp is a variety of cannabis sativa L. containing less than 0.3% plant chemical Delta-9 THC. See Agricultural Act of 2014, 7 U.S. Code Section 5940. Hemp yields more than 25,000 oil and fibrous products including cannabidol (CBD), which offers broad health and wellness uses, serves as a food additive and is contained in many beauty items.

On Dec. 20, 2018, the Agriculture Improvement Act of 2018 (Farm Bill) was enacted legalizing hemp and its derivatives and removing plant cannabis sativa L. containing no more than 0.3% Delta-9 THC on a dry-weight basis from the Controlled Substances Act and the Drug Enforcement Administration’s (DEA) purview. The Farm Bill permits importing, exporting and transporting hemp and hemp-derived products like any other crop, and tasks the U.S. Department of Agriculture (USDA) with promulgating hemp regulations, and charges states, territories and Indian tribes with submitting hemp-growing regulations plans to the USDA including “THC testing procedures.”

The hemp market soared in 2019, with $641 million in domestic hemp-derived product sales (78% of which was CBD), 510,000 acres licensed to cultivate hemp across 34 states (a 455% increase over 2018), and hemp-derived cannabinoids like cannabinol (appetite stimulant, sleep aid, anti-inflammatory and anti-bacterial) were poised to storm the market.

Following massive overproduction, diminution of investment capital, and COVID-19 virus imposed complications, hemp and hemp-derived products experienced a drastic decline in price and profits leaving hemp cultivators with a glut of unsold biomass, extract and CBD in 2020.

Delta-9 THC Versus Delta-8 THC

A cannabinoid of the tetrahydrocannabinol “family” of compounds commonly derived from the cannabis plant, Delta-8 THC is a double bond isomer of Delta-9 THC, the federally illegal psychotropic-effect-producing cannabinoid sourced from cannabis. An isomer is a type of “chemical analog” comprising one of two or more compounds containing the identical number of atoms of the same elements but differing in structural arrangement and properties. There are 30 known THC isomers, and Delta-9 THC and Delta-8 THC differ regarding the single double bond’s location. Stated another way, while similar in molecular structure, Delta-8 THC is a different molecule than Delta-9 THC.

Delta-8 THC is derived either directly from the hemp plant or converted from the CBD isolate.

Because hemp cultivars do not express Delta-8 THC in sufficient concentrations or quantities to be economically viable to extract for commercial purposes, and CBD is cheap and abundant, deriving Delta-8 THC by converting from CBD isolate is the faster, cheaper and more popular method.

Delta-8 THC’s Murky Legality

Fourteen states have already banned Delta-8 THC (Alaska, Arizona, Arkansas, Colorado, Delaware, Idaho, Iowa, Kentucky, Mississippi, Montana, Rhode Island, Utah, Vermont and Washington) and four more are mulling over its prohibition (Illinois, Nevada, North Dakota and Oregon).

Whether Delta-8 THC is federally legal appears to hinge on whether it is derived directly from Hemp or converted from CBD. Because the 2018 Farm Bill’s “hemp” definition encompasses “cannabinoids” and “derivatives” of hemp, hemp-derived Delta-8 THC is probably not prohibited by the Controlled Substance Act and Delta-8 THC derived from CBD is probably also exempt (if not containing Delta-9 THC concentrations exceeding “0.3% by dry weight” legal limit).

First, because the Farm Bill’s “hemp” definition distinguishes it from illegal marijuana, hemp falls outside of the Controlled Substance Act, which, in turn, excludes “hemp, as defined in Section 1639o of title 7”, from its “marihuana” definition. Further, because, under the Farm Bill, hemp-derived “cannabinoids,” “derivatives,” “extracts” and “isomers” are themselves “hemp,” Delta-8 THC comprises Farm Bill defined “hemp” beyond the Controlled Substance Act’s scope.

Second, while clear that Delta-8 THC naturally expressed in the Hemp plant is not a controlled substance, the legal status of Delta-8 THC derived from CBD or other Hemp-derived cannabinoid requires satisfying the Farm Bill’s broad “hemp derivative” definition. Stated another way, is a derivative of a derivative included in the Farm Bill’s Hemp definition or is it a “synthetic” falling out of this Controlled Substance Act “safe harbor.”

A division of Federal authority exists. The “source rule” (i.e., that the source of a cannabinoid determines its legal status) suggest the former. Conversely, the DEA’s internal “Scheduling Actions, Controlled Substances, Regulated Chemicals” document, the “Orange Book,” flatly lists “Delta-8 THC” as a “Schedule 1 Tetrahydrocannabinol” without any distinction as to “source.”

However, under the “Lex Specialis Doctrine” (i.e., that when two federal laws appear in conflict on an issue, and one is older and more general than the other, the more recent and specific law controls), the more recent and specific Farm Bill would take precedence over the older and more generalized Controlled Substance Act, encompass Delta-8 hemp in its hemp definition, and remove it from the DEA’s purview. See In re Lazarus, 478 F.3d 12 (1st Cir.  Jan. 9, 2007).

Is Selling Delta-8 THC Legal?

Until Congress, the DEA, or the USDA take action, Delta-8 THC’s federal legality remains unclear and proceeding hinges on the following.

First, is the Delta-8 THC derived from cannabis (i.e., containing Delta-9 THC concentrations exceeding “0.3% by dry weight” legal limit) or hemp? Producing or selling Delta-8 products without a permit to produce or sell THC violates the Controlled Substance and risks criminal and civil sanctions from the DEA, USDA, Federal Trade Commission, and state law enforcement and regulators.

Second, if not cannabis-sourced, is Delta-8 THC derived directly from Hemp or CBD and what is the seller’s risk tolerance? While seemingly fairly settled that hemp derived Delta-8 THC falls outside of the Controlled Substance Act, questions remain whether CBD derived Delta-8 THC is allowable under the Farm Bill or impermissible as a “synthetic.” Further, unlike “fly-by-night sellers,” licensed cannabis and hemp growers, processers and sellers are subject to, and face the wrath of, their respective regulators.

Third, in which state is the online or over-the-counter purchase and sale occurring, has that state prohibited Delta-8 THC, and how robust are these respective enforcement efforts?

Fourth, even if not illegal, what risk management concerns exist and what tools are available to manage them? Tremendous safety, potency and torts risks and exposure are imposed by selling untested products in an unregulated market for which neither product certification nor insurance coverage is available.

Reprinted with permission from the June 23, 2021 edition of the The Legal Intelligencer©2021 ALM Media Properties, LLC. All rights reserved. Further duplication without permission is prohibited, contact 877-257-3382 or [email protected].

Steven SchainSteven Schain

Steven Schain

Winner of National Law Journal’s “2019 Finance, Banking, & Capital Markets Trailblazer” award, Steve Schain is Counsel to national Cannabis, Hemp and Hallucinogens law firm Smart-Counsel, LLC, is admitted to practice in PA and New Jersey and represents entities, governments and individuals in litigation, regulation and compliance, license applications, and entity formation.  Reach Steve at [email protected]

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