Search results for: Federal Court Rules Hemp-Derived Delta-8 THC is Lawful

On May 19, 2022, the United State Court of Appeals for the Ninth Circuit ruled in a landmark case regarding the legality of delta-8 tetrahydrocannabinol (delta-8 THC). The court held, in AK Futures LLC v. Boyd Street Distro, LLC, that the plain and unambiguous text of the 2018 Agricultural Improvement Act (2018 Farm Bill) compelled the court to the conclusion that e-cigarette and vaping products containing delta-8 THC are lawful.

The 2018 Farm Bill Legalized Hemp Derivatives and Extracts, Which Includes Intoxicating Cannabinoids Such as Delta-8 THC

In the opinion, the court analyzed the text of the 2018 Farm Bill to determine whether hemp-derived delta-8 THC was lawful. The 2018 Farm Bill removed hemp from the Controlled Substances Act (CSA) definition of “marihuana” as well as tetrahydrocannabinols in hemp. The court then turned to the definition of “hemp,” which in full reads as follows:

The term “hemp” means the plant Cannabis sativa L. and any part of that plant, including the seeds thereof and all derivatives, extracts, cannabinoids, isomers, acids, salts, and salts of isomers, whether growing or not, with a delta-9 [THC] concentration of not more than 0.3 percent on a dry weight basis.

The court analyzed the language of the 2018 Farm Bill as follows:

Importantly, the only statutory metric for distinguishing [CSA] controlled marijuana from legal hemp is the delta-9 THC concentration level. In addition, the definition extends beyond just the plant to ‘all derivatives, extracts, [and] cannabinoids[.] This seemingly extends to downstream products and substances, so long as their delta-9 THC concentration does not exceed the statutory threshold[.] Certainly, a substance must be a derivative, extract, cannabinoid, or one of the other enumerated terms to fall within the 2018 Farm Bill’s statutory definition. However, these terms do not impose meaningful constraints.

The court concluded that the 2018 Farm Bill explicitly included all hemp derivatives, including psychoactive substances such as delta-8 THC, in the definition of hemp, and therefore, those compounds are lawful and distinguishable from “marihuana” under federal law. While this case dealt with delta-8 THC to the exclusion of other hemp-derived cannabinoids, its reasoning certainly suggests that hemp-derived cannabinoids and their downstream products, such as CBN, enjoy the same federal legality as delta-8 THC.

Context is Key

It is important to note that this decision is only binding in states inside the jurisdiction of the 9th
Circuit, which includes Alaska, Arizona, California, Hawaii, Idaho, Montana, Nevada, Oregon, and Washington. While this decision is likely to be persuasive in other regions, it is not dispositive and other Circuits could deviate from the 9th Circuit’s analysis.

While proponents of products containing delta-8 THC are justifiably pleased with this result, the facts of the case are important to consider when planning operations after AK Futures v. Boyd Street Distro. Here is how the Court framed the dispute:

AK Futures LLC, a manufacturer of popular e-cigarette and vaping products, brought suit for trademark and copyright infringement against Boyd Street Distro, LLC, a downtown Los Angeles storefront and smoke products wholesaler. According to AK Futures, Boyd Street has been selling counterfeit versions of its “Cake”-branded e-cigarette and vaping products containing [delta-8 THC], a chemical compound derived from hemp. Boyd Street contends that AK Futures does not have protectible trademarks for its Cake products because delta-8 THC remains illegal under federal law.

AK Futures was seeking to affirm an injunction issued by the District Court to prevent Boyd Street from continuing to infringe on its intellectual property. An injunction is an order from a court that enjoins (stops) a person from beginning or continuing an action that threatens another person’s legal rights. The District Court enjoined Boyd Street from selling goods bearing imitations of AK Futures’ two Cake logo trademarks or copying of Cake’s branding and from “reproducing, distributing . . ., or displaying” copies of the copyrighted Cake design.

To obtain a preliminary injunction, a party must show, in part, that it will likely succeed on the merits. Boyd Street did not contend that it was selling counterfeit Cake products, instead, it argued that AK Futures could not own a valid trademark because delta-8 was illegal under federal law. The court held that “AK Futures is likely to succeed on its trademark claim because its delta-8 THC products are not prohibited by federal law, and they may therefore support a valid trademark.” In reaching this conclusion, the court first determined that AK Futures legally used the Cake brand in commerce. Then the court turned to whether the use was lawful. Only the lawful use of a trademark can establish a trademark priority. Because the US Patent and Trademark Office (USPTO) is a federal agency, the use must comply with federal law. This has prevented many cannabis brands from obtaining federal trademark protection. In order to determine whether trademark protection extended to AK Futures’ products, the court had to evaluate whether the 2018 Farm Bill legalized delta-8 vapor products.

FDA Tension

An important component of this analysis is that it involved smokable delta-8 products that did not contain tobacco or nicotine. This case did not involve delta-8 THC in consumable form, such as gummies or tinctures. Early this month, the Food and Drug Administration (FDA) issued warning letters to companies selling delta-8 products. The FDA does not necessarily have jurisdiction over smokable hemp products so long as they do not contain nicotine or tobacco and so long as they are not marketed as a drug through claims made by the manufacturer or distributor. The court’s holding that delta-8 smokable products are lawful may not necessarily apply to ingestible products containing delta-8 THC because those products are regulated by the FDA, and the FDA has determined that adding delta-8 THC to food or dietary supplements is a violation of the Food, Drug, and Cosmetic Act (FDCA). This is true even though delta-8 THC derived from hemp is not a controlled substance. There are many things that are not controlled substances that cannot be added to food, for example, bleach is lawful to possess but unlawful to add food. CSA exclusion does not equate to FDCA compliance.

Accuracy of Claims

The court also noted that its analysis turned on the veracity of AK Futures’ claims that its products contained hemp derivatives and did not contain more than 0.3% THC:

The conclusion that AK Futures’ delta-8 THC products are lawful necessarily depends on the veracity of the company’s claim that these products contain no more than 0.3 percent delta-9 THC. A showing that AK Futures’ products contain more than the permitted threshold level of delta-9 THC would defeat AK Futures’ entitlement to trademark protection.

Rejected Arguments that the Farm Bill Did Not Legalize Hemp-Derived Delta-8 THC

Boyd Street presented two arguments that were rejected by the Court:

  • The DEA interpreted the Farm Bill not to apply to Delta-8 because the method of manufacturing the compound; and
  • Congress never intended to legalize any psychoactive substances, such as delta-8 THC.

Boyd Street cited the DEA’s explanation that accompanied its hemp-related regulation that “[a]ll synthetically derived tetrahydrocannabinols remain Schedule I controlled substances” and claimed that because delta-8 is refined through a manufacturing process, it is synthetic. The court did not need to consider the agency’s interpretation because the text of the 2018 Farm Bill was unambiguous and did not limit how hemp derivatives, extracts, and cannabinoids were produced. The court wrote that “the source of the product – not the method of manufacture – is the dispositive factor for ascertaining whether a product is synthetic.”

Boyd Street also argued that Congress did not intend the 2018 Farm Bill to legalize psychoactive substances like delta-8 but instead intended to legalize truly “industrial” hemp. The 2014 Farm Bill, which did legalize the cultivation of hemp for research purposes, specifically used the term “industrial hemp” to define cannabis with less than 0.3% THC. The 2018 Farm Bill dropped the term “industrial,” defining hemp simply as “hemp.” Boyd Street pointed to testimony in the Congressional record of lawmakers using the term “industrial hemp,” but the court did not read that limitation into the unambiguous language of the 2018 Farm Bill and therefore was not persuaded.

The Takeaway

The AK Futures case provides clarity on the legality of Delta-8 THC vapor products and e-cigarettes under federal law. It shows that the federal courts are not reading into some limitation on psychoactive hemp derivatives that do not appear in the 2018 Farm Bill. Regardless of how you feel about delta-8 THC, this is a significant case in the history of cannabis legalization.

Tetrahydrocannabinolic acid (THCA) is one of the most misunderstood and controversial cannabinoids in the Cannabis sativa (cannabis) plant. While booming in popularity, THCA is also a high-risk cannabinoid from a legal standpoint.

Following the passage of the 2018 Farm Bill, the marketplace for “alternative” or “minor” cannabinoids – chemical compounds other than delta-9 THC (THC) – soared due to what some consider a “loophole” in federal law, which excluded hemp-derived cannabinoids from the definition of “marijuana.” THCA is one of these compounds.

A simple Google search for the term THCA turns up a myriad of misinformation. Misleading headlines read: “THCA is completely legal across the U.S.,” “THCA flower is fully legal,” and “It is legal to sell THCA.” However, this information is not necessarily correct, and as industry insiders have been warning clients for years – and as recent actions by both the federal government and the state of California demonstrate – following such advice can be costly, if not criminal.

Further, with the 2018 Farm Bill expiring at the end of September 2023, all eyes are on Congress, waiting to see whether and how the regulation of hemp-derived cannabinoids may change under the new 2023 Farm Bill.

What Makes THCA Controversial?

THCA is controversial for a number of reasons.

The so-called “loophole” making cannabinoids such as THCA legal comes from the 2018 Farm Bill, where Congress carved “hemp” out of the definition of marijuana under the Controlled Substances Act (CSA) and defined hemp as “the plant Cannabis sativa L. and any part of that plant, including the seeds thereof and all derivatives, extracts, cannabinoids, isomers, acids, salts, and salts of isomers, whether growing or not, with a [THC] concentration of not more than 0.3 percent on a dry weight basis.” Thus, cannabis that has been harvested is considered hemp (which is not a federally controlled substance) if it contains less than 0.3% THC, regardless of whether or not the same cannabis or product contains THCA, which will overwhelmingly be converted into the highly psychoactive cannabinoid THC once heated.

Because of the chemical nature and function of THCA, it may be best understood as a “precursor” to THC, the main psychoactive compound found in the Cannabis sativa plant. THCA is found in the flowers and leaves of the cannabis plant and can be converted into THC when it is exposed to heat, a process called “decarboxylation.” THCA also decarboxylates to form THC during storage and fermentation.[1]

However, claiming that THCA falls in a “loophole” may be a misnomer. THCA was contemplated by Congress and expressly incorporated into the 2018 Farm Bill through hemp testing requirements. This distinguishes THCA from other alternative cannabinoids such as delta-8, delta-10, or CBD because those cannabinoids are not considered in testing. In June 2023, the DEA acknowledged THCA when expanding the USDA-required post-decarboxylation testing requirement, writing, “Congress has directed that, when determining whether a substance constitutes hemp, delta-9 THC concentration is to be tested ‘using post-decarboxylation or other similarly reliable methods.’ 7 USC § 1639p(a)(2)(A)(ii); 7 USC § 1639q(a)(2)(B).” Both of these cited code sections apply to the “production” – that is, the growing – of hemp, not hemp that has already been harvested or products containing hemp derivatives. Thus, by the plain language of the relevant federal statute, the post-decarboxylation test does not apply to post-production hemp. In other words, hemp being grown must have a Total THC (THCA + THC) concentration of 0.3% or less[2] in order to be harvested.

It also seems clear that Congress intended these legal distinctions to control the legal hemp versus marijuana markets in the United States. Indeed, not only Congress but also the DEA[3] and federal courts interpreting relevant federal laws have all determined: “[i]mportantly, the only statutory metric for distinguishing controlled marijuana from legal hemp is the delta-9 THC concentration level. In addition, the definition extends beyond just the plant to all derivatives, extracts, [and] cannabinoids.” 7 U.S.C. § 1639o (1). The use of “all” indicates a sweeping statutory reach. See Lambright v. Ryan, 698 F.3d 808, 817 (9th Cir. 2012).” AK Futures LLC v. Boyd St. Distro, 35 F.4th 682, 690-91 (9th Cir. 2022).[4]

How Do States Regulate Hemp?

Although Congress’s conduct was intentional in distinguishing controlled marijuana from legal hemp solely by the substance’s delta-9 THC concentration level as written in the 2018 Farm Bill, both federal and local lawmakers are becoming increasingly better educated on cannabis-related issues as compared to five years ago (when the 2018 Farm Bill was first passed). And these lawmakers’ attitudes appear to be increasingly hostile to THCA and other potentially intoxicating minor- or alternative-cannabinoids.

Indeed, several states now expressly prohibit THCA flower, or certain products containing THCA, from being produced, sold, purchased, or consumed within the state. States have accomplished this through many methods. One method employed by several states – and, increasingly, private companies providing ancillary products and/or services to the cannabis industry, such as website hosting services, payment processors, and more – is to define legal hemp and hemp-derived products in the state by their Total THC levels.

For example, no legal hemp product in California may contain a Total THC concentration greater than 0.3%. Under current California law, “THC” includes “[a]ny tetrahydrocannabinol, including, but not limited to, Delta-8-tetrahydrocannabinol, Delta-9-tetrahydrocannabinol, and Delta-10-tetrahydrocannabinol, however derived […].” The term Total THC is defined in California Assembly Bill 45 as “the sum of THC and THCA.”[5] Thus, if the Total THC exceeds this limit, then such product violates California’s laws applicable to hemp and is deemed “adulterated” or is considered cannabis[6], which may only be sold within California’s tightly regulated market and under control of the Department of Cannabis Control (DCC).

Further, California law categorically prohibits the sale of inhalable hemp products within California until relevant regulations are developed, and the legislature imposes a tax on said product. Cal. Health & Safety Code § 111929 and 111929.2.

How Do You Solve a Problem Like THCA?

Learning that THCA may not be legal to produce, sell, possess, or consume in any particular state may be confusing to producers, retailers, and consumers alike. There is no dispute that THCA products can be purchased openly online and in brick-and-mortar stores, can be found in states with both legal and unregulated marijuana industries, and are displayed on shelves in marijuana dispensaries as well as in regular corner stores. This is true regardless of whether the state defines hemp by its delta-9 THC or Total THC content and regardless of whether the state expressly prohibits inhalable hemp products.

In such cases, the business conduct is in conflict with the “black letter” of the law; the relevant issue is one of enforcement. That is, while a company’s cannabinoid-containing product(s) may be illegal under state law, some companies stillengage in the illegal conduct. Instead of complying with the relevant laws and regulations, these companies incorporate the enforcement practices of the relevant state and local jurisdiction in their risk assessments regarding their proposed and ongoing business activities. In other words, if a (federal or) state agency has not taken any legal action to enforce its laws or has only selectively enforced in egregious situations involving public health, a company may decide to engage in the otherwise illegal conduct after determining the benefits (e.g., profit) outweigh the costs (e.g., risk of enforcement, penalties if legal action is taken against the company, etc.).

Such risk-taking is not uncommon – and some believe it is necessary to succeed – in the burgeoning cannabis industry. However, it is little discussed. Cannabis journalist Rachelle Gordon recently reported for greenstate.com that, while researching an article addressing THCA, she was in contact with several brands producing and selling THCA flower for her piece. However, when questions about legality arose, according to Gordon, every one of these companies stopped responding to her emails.

Despite taking on these risks, many companies are operating without a strategy or exit plan should they find themselves on the receiving end of a government enforcement action (or, perhaps worse, a private lawsuit), and without any legal defense. An agency’s history of non-enforcement is not a defense to legal action. For example, just last month, the state of California began cracking down on inhalable hemp products, filing multiple claims against multiple cannabis businesses. While the facts involved in the litigation have not been fully fleshed out, the state alleges that the Defendants in the litigation were simply breaking the law by selling prohibited inhalable hemp products in the state, and also failed to comply with the warning provisions of Prop 65.[7] These companies now potentially face significant legal repercussions.

Anticipating Risks Before They Arise: Georgia as a Case Study

State legislatures are increasingly passing – and are prepared and poised to enact – new laws far more restrictive of hemp and hemp-derived cannabinoids. For example, under the law of the state of Georgia, the “federally defined THC level for hemp” means a THC concentration of not more than 0.3% on a dry weight basis. Therefore, under present law, as long as a hemp product in the state contains no more than 0.3% delta-9 THC (and is not a food product[8] infused with THC), it is considered a legal hemp product under both federal and state law.

However, multiple new bills proposed in Georgia’s House of Representatives and Senate seek to impose drastic restrictions on the state’s hemp industry. By way of example, SB 22 – proposed earlier this year – sought to (among other things) remove the reference to Delta-9 in state code. In other words, if adopted, the state would define products by their Total THC. Indeed, “[t]he intention of that is to broaden it to cover any product that has that THC concentration,” said sponsor of the bill and East Cobb Republican Sen. Kay Kirkpatrick. “So that would be Delta-8, Delta-10, Delta-omega, Delta-whatever it is next year, so that all of those will come under the same testing and labeling requirements as Delta-9.” Such legislative action was not limited to the state of Georgia, and similar laws are expected to be passed in several states in the near future.

Takeaway

The 2018 Farm Bill expired at the end of September 2023. Industry insiders expect an influx of attention – not to mention lobbying efforts – dedicated to Congress throughout the next several months, waiting to see whether (and, if so, how) the regulation of hemp-derived cannabinoids may change under the new 2023 Farm Bill.

We will see whether Congress will attempt to implement changes to the definition of hemp in the 2023 Farm Bill, impose new or ongoing testing requirements, or enact other mechanisms to close the so-called “loophole” that resulted in the multi-billion dollar[9] marketplace in the United States for hemp-derived cannabinoids.

Participants in the federally legal hemp industry are required to navigate a complex web of federal and state laws and should be prepared to pivot on a moment’s notice should the law and/or enforcement risks relevant to their business change. In the case of THCA and inhalable hemp products, this is inevitable – whether due to the action or non-action of Congress, state legislators, local regulators, state agencies, or even the filing of, or a court’s resolution of, a relevant public or private lawsuit. Failure to follow such advice can be costly, if not criminal, under the laws and regulations applicable to hemp-related business activity.

[1] Can You Pass the Acid Test? Critical Review and Novel Therapeutic Perspectives of Δ9-Tetrahydrocannabinolic Acid A – PMC (nih.gov)

[2] THCA is multiplied by 0.877 under the formula set forth by the United States Department of Agriculture (USDA) for the testing and determination of “Total THC” in a pre-harvest analytical test. The remaining 0.123% is intended to account for the weight of the carboxyl group that is lost once the THCA is converted to THC.

[3] On June 24, 2021, Sean Mitchell, Chief of Intergovernmental Affairs for the DEA stated: “I’ll be very, very deliberate and clear. At this time, I repeat again, at this time, per the Farm Bill, the only thing that is a controlled substance is delta-9 THC greater than 0.3% on a dry-weight basis” “Town Hall with USDA and DEA” conducted by the Florida Department of Agriculture and Consumer Services (FLDACS) on June 24, 2021

[4] GreenLeafBrief: “Federal Court Rules Hemp-Derived Delta-8 THC is Lawful,” May 25, 2022

[5] Thus, “Total THC” in California is currently defined as (THCA) + (Delta-8 THC) + (Delta-9 THC) + (Delta-10 THC). Cal. Health & Safety Code § 111920 (l) and (m).

[6] Unlike federal law, California uses the term cannabis in place of marijuana.

[7] This is a well-settled issue in California. It pains us to learn that cannabis companies may not have been advised to comply with these oft-litigated requirements. Indeed, the Plaintiff’s bar in California began cracking down on Prop 65 violations in the cannabis industry nearly a decade ago, settling numerous cases for tens of thousands of dollars starting around the year 2015. See, DiPirro v. Grass Roots Nonprofit Collective, Inc., 11/06/2015, $33,000; DiPirro v. The Vapor Room Cooperative of San Francisco, Inc., 11/06/2015, $ 8,500.00; DiPirro v. The Love Shack Cooperative, Inc., 05/27/2015, $ 26,500.00; DiPirro v. LA Wonderland Caregivers Inc., 11/06/2015, $ 33,000.00; CAPA v. Telegraph Patients Group, Inc., 10/17/2017, $ 85,000.00; CAPA v. The Richmond Patient’s Group, Inc., 10/17/2017, $ 85,000.00.

[8] Unless approved by the FDA, which no product presently is.

[9] In the U.S., nearly $6 billion of products containing CBD were sold in 2021. CBD is a chemical compound naturally produced by the cannabis plant that does not cause the euphoric feeling, or “high,” that can result from more psychoactive compounds found in cannabis.

As we approach the end of 2022, we are looking at the top ten national cannabis stories of the year. Here is what we view as the most important cannabis stories of 2022:

1) Joe Biden’s Statement on Cannabis

On October 6, 2022, President Biden announced that he would pardon all Federal offenses of simple marijuana possession, urge governors to do the same for state offenses, and instruct his administration to initiate proceedings to reschedule or deschedule cannabis. The Department of Justice and the Department of Health and Human Services have the power under federal law to move marijuana out of Schedule I of the Controlled Substances Act (CSA). Biden’s announcement could very well be the beginning of the end of Federal cannabis prohibition.

2) The Medical Marijuana and Cannabidiol Research Expansion Act is Signed into Law

In December, President Biden signed the first-ever standalone cannabis bill into law. The new law will allow U.S. researchers to study cannabis without cutting through quite as much red tape. The research conducted under this new law could be used to reevaluate marijuana’s status as a Schedule I substance.

3) Dormant Commerce Clause Challenges

In 2022, several states faced legal challenges related to the Dormant Commerce Clause (DCC). The DCC is based on the Commerce Clause in the Constitution, which grants Congress the power to regulate commerce among the states. The DCC is a well-established legal doctrine establishing that because the Constitution granted the power to regulate interstate commerce to the federal government, states are prohibited from enacting laws that discriminate against or unduly burden interstate commerce. In August, a federal judge nullified Maine’s residency requirement for cannabis business, as covered by MJBizDaily. Regulators in New York have faced a similar challenge.

4) The US Court of International Trade Allows for Cannabis Paraphernalia Importation

In the case, Eteros Technologies USA vs. United States, the U.S. Court of International Trade held that Washington’s repeal of certain prohibitions related to marijuana drug paraphernalia exempted the federal prohibition on importing drug paraphernalia to ports in Washington.

5) DEA Considers Cannabis Seeds with Less Than 0.3% THC to be Hemp and not Marijuana

In January, a letter from the DEA stated that the agency does not consider cannabis seeds with less than 0.3% THC to be marijuana. Instead, the DEA considers such seeds to be hemp, which is federally legal, though tightly regulated, and not as a controlled substance.

6) Federal Court Rules that Delta-8 Smokable Products are Federally Legal Hemp

On May 19, 2022, the United State Court of Appeals for the Ninth Circuit (9th Circuit) ruled that the plain and unambiguous text of the 2018 Agricultural Improvement Act (2018 Farm Bill) compelled the court to the conclusion that e-cigarette and vaping products containing delta-8 THC are lawful under federal law.

7) FDA Targets CBD and Delta-8 in Warning Letters

The FDA sent more enforcement letters to CBD businesses in 2022 than in any prior year, with the latest batch sent in November pushing the total to 33. The FDA also expanded its focus to products containing Delta-8 THC.

8) Minnesota (Likely Unintentionally) Broadly Legalizes Hemp-Derived THC

Over the summer, Minnesota lawmakers passed legislation allowing THC-infused food and beverage items containing up to five milligrams per serving and 50 milligrams per package but did not outright legalize “marijuana” (i.e., cannabis plants with a THC concentration of greater than 0.3%). Instead, THC products in Minnesota must be derived from hemp plants and cannot exceed a total concentration of 0.3% delta-9 THC. This makes Minnesota, at least temporarily, a hot spot for hemp products containing an intoxicating level of THC. While a single item can only contain 50 milligrams of THC, there is no limit as to how many such products one person can purchase or possess.

9) Cannabis Reform Progresses

On Election Night, cannabis-related initiatives five states considered initiatives that would legalize cannabis, with only two passing. Despite these high-profile losses, 2022 saw major legislative victories for cannabis. For a detailed list of these developments, check out NORML’s 2022 Legislative Report.

10) Brittany Griner Returns Home

Brittany Griner, two-time Olympic Gold medalist, WNBA Champion, and Phoenix Mercury all-star, spent nearly ten months in Russian custody for the possession of less than a gram of cannabis oil. On December 8, President Biden announced that she would be released in a prisoner swap with Russia. She is now safely back in the U.S. Hopefully, seeing the harsh penalties imposed by Russia will cause the Biden Administration to fast-track legalization in the U.S. For more information on Griner’s release, check out this article by Char Adams from NBC News: Black Women Played a Critical Role in Helping to Free Brittney Griner.

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