DEA Interim Rule on Cannabinoids: Shot Across the Bow or Misfire?

On August 21, 2020, the FDA fired the opening shot in a new war on hemp by promulgating an interim final rule on tetrahydrocannabinols (THC) in hemp extracts.[1] In short, the interim rule purports to make any hemp extract or concentrate a Schedule I controlled substance if it contains more than 0.3% of delta-9 THC. Anyone with even a passing familiarity with hemp extraction processes knows that it is impossible under available technology to produce cannabidiol (CBD) from hemp without handling in-process crude oils and distillates that “run hot” and exceed 0.3% of THC. Whether the DEA is intending to send a shot across the bow of the industry or has simply misfired remains to be seen. But clearly, this presents a mortal threat to the hemp industry. You need to take this very seriously.

Some background may help. According to Wikipedia, the term cannabis refers to a genus of flowering plants in the family Cannabaceae. The term hemp is really just a legal term that applies to a cannabis plant that has low levels of THC, which is the substance responsible for the high associated with marijuana. Marijuana is also a legal term that applies to (most parts of) a cannabis plant that has intoxicating levels of THC. Although somewhat arbitrary, federal law, and most state laws, recognize 0.3% of THC, as measured on a dry weight basis, as the threshold that distinguishes intoxicating marijuana from non-intoxicating hemp. If the THC level is 0.3% or lower it is hemp, and if the THC level exceeds 0.3% it is marijuana. Or as I frequently say, “if it’s hot, then it’s pot.”

The Agricultural Improvement Act of 2018, commonly known as the “2018 Farm Bill,” memorialized this distinction in federal law. It removed from the federal Controlled Substance Act any cannabis plant with a THC level not exceeding 0.3% on a dry weight basis. Under the 2018 Farm Bill, “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 tetrahydrocannabinol concentration of not more than 0.3% percent on a dry weight basis.” (emphasis added)

While this definition can easily be applied to distinguish a hemp plant from a marijuana plant, calculating the THC concentration of an oil or liquid “on a dry weight basis” is dubious at best. Further, it is manifestly obvious that Congress recognized and implicitly legalized an industry that is fundamentally dependent on processing hemp into salable products. Similarly, it is obvious Congress intended to keep intoxicating marijuana and related materials on the Controlled Substances list. So how can we reconcile these Congressional goals?

Perhaps common sense is a good place to start. According to the National Conference of State legislatures, 48 states have authorized the cultivation of hemp. In fact, many of those states further issue licenses to hemp processors and extractors and openly encourage investors and business owners to enter the emerging industry. This includes states that have not legalized recreational or medicinal marijuana. Or put differently, several states that are not marijuana-friendly are huge supporters of hemp cultivation and processing, including extraction processes that run hot while producing CBD. Why? Because they want the jobs and the tax revenues.

So this brings us back to the task of reconciling apparently contradictory Congressional goals of promoting the new hemp industry while keeping intoxicating products illegal. Again, common sense is our guide. The regulatory framework should allow but place controls over in-process materials that exceeds 0.3% THC to be tracked and handled only by licensed operators, and prohibit the sale of any products with a THC concentration exceeding 0.3% to end consumers. This would allow licensed processors that have been vetted by state regulators to produce, handle and sell bulk concentrates such as crude oil and full spectrum distillate, yet prevent intoxicating products from being sold to consumers.

Regardless of the DEA’s intention in promulgating the interim rule, this is a wake up call for the industry. I encourage you to comment on the interim rule. Also, contact your elected officials and let them know that the DEA’s interim rule is threatening your livelihood.

If you are a processor and have questions as to how this affects you, contact a qualified cannabis or hemp attorney.

Edward R. Culhane is an experienced cannabis attorney focused primarily in the areas of venture capital, private equity, securities and mergers and acquisitions. Mr. Culhane is a cannabis and hemp industry veteran and is licensed to practice law in the states of California, Colorado and Minnesota.

[1] https://s3.amazonaws.com/public-inspection.federalregister.gov/2020-17356.pdf?utm_campaign=pi+subscription+mailing+list&utm_source=federalregister.gov&utm_medium=email