• Raffi Garnighian

Why the DEA's Recent Rule Change is Better for the Hemp and CBD Industry Than You May Think

Updated: Aug 31, 2020

On August 20, 2020, the U.S. Drug Enforcement Administration ("DEA") released Interim Final Rule 2020-1735 (the "IFR") codifying in DEA regulations the statutory amendments to the Controlled Substances Act ("CSA") contained in the Agriculture Improvement Act of 2018 (the "AIA," more commonly known as the "Farm Bill"). The statutory amendments and accompanying regulations implemented by the IFR reflect the carveout from the Schedule I definition of both Marihuana and Tetrahydrocannabinols for Hemp, as defined (and modified by the AIA) in Section 297A of the Agricultural Marketing Act of 1946. 7 U.S.C 1639o(1).

The IFR attempts to clarify that Schedule I classification under 21 U.S.C. 812(c) no longer applies to the plant Cannabis sativa L. (including any part of the plant and all derivatives, extracts, and cannabinoids) or to Tetrahydrocannabinols that are “naturally occurring constituents of the plant material” (emphasis added), so long as any such material contains a delta-9 tetrahydrocannabinol ("Delta-9") concentration of not more than 0.3 percent on a dry weight basis. This definition almost identically mirrors that of the definition propagated under the Farm Bill.

I. Why the IFR's "Synthetic" Language Has People Worried

The IFR contrasts the relaxation of control status for Marihuana and Tetrahydrocannabinols meeting the statutory definition of hemp (see 7 U.S.C. 1639o(1)) with that of synthetically derived tetrahydrocannabinols (Controlled Substance Code Number 7370). With respect to such synthetic compounds, the IFR maintains that the concentration of Delta-9 is irrelevant and any such substance remains entirely within the purview of Schedule I control.

In light of this IFR, some legal analysts have argued that the very existence of the blossoming hemp and CBD industry is at stake. Their analysis focuses on the IFR’s reiteration of the controlled status of synthetically derived tetrahydrocannabinols as it relates to cannabinoids obtained through the processing of naturally occurring CBD extracted from industrial hemp. It is, however, more likely than not that CBD and other cannabinoid extracts and derivatives obtained directly from industrial hemp biomass, and otherwise meeting the statutory definition of hemp, are exempt from controlled status. As the IFR itself states, “this interim final rule merely conforms DEA’s regulations to the statutory amendments…and it does not add additional requirements to the regulations.”

Potential implications of the IFR on derivatives obtained from plant material qualifying as Hemp and intermediate concentrate products are discussed below.

II. It is Unlikely that the DEA Intends to Qualify Processing Naturally Occurring Cannabinoids From Hemp as “Synthetic”

The statutory changes implemented by the AIA, including defining hemp and excluding the same from the definition of Marihuana in the CSA, have opened the door to a booming extract and consumer product industry that has primarily utilized cannabidiol ("CBD") extracted from industrial hemp. Industry players are aware, however, that CBD is only one of many naturally occurring cannabinoids. New research has shed light on the potential therapeutic uses of others such as cannabichromene ("CBC"), cannabinol ("CBN"), and cannabigerol ("CBG"). Many of these cannabinoids can be directly extracted or isolated from plant material qualifying as hemp and thereby clearly fall within the exception to Schedule I classification as a hemp extract. Other derivatives, such as delta-8 tetrahydrocannabinol ("Delta-8"), require some processing of the more abundant cannabinoids (such as CBD) in order to be isolated and utilized commercially.

The crux of the issue posed by the IFR is whether such processing of naturally occurring constituents draws any end product (e.g. Delta-8) into classification as controlled synthetically derived tetrahydrocannabinols.

Legislative history often provides a useful glimpse into Congressional intent when subsequent agency regulations or actions seem out of line with actual statutory text. Johnson v. Southern Pacific Co. (1904) 196 U.S. 1. Although simply a persuasive authority in any litigatory context, committee and conference reports are useful in understanding economic and social motivators underlying Congressional action. See, e.g., Natural Res. Def. Council Inc. v. Browner, 57 F.3d 1122, 1127 (D.C. Cir. 1995).

Here, one would hope that any such record could help shed light on whether Congress intended for derivatives of naturally occurring cannabinoids to be deemed “synthetic” within the meaning of the CSA. While the record is sparse, there exists no evidenced discussions indicating derivatives of naturally occurring cannabinoids are intended to be more regulated than before, or that they are intended to be considered controlled substances. See Report of the House Committee on Agriculture (H. Rept. 115-661). See also Conference Report (H. Rept. 115-1072). Additionally, the Senate amendment to the CSA found in the Conference Report, Title XII (65) reiterates the intent for conforming changes to the CSA to include hemp (as defined by the AIA) “and tetrahydrocannabinols in Hemp.”

Whether the reference to an exemption for tetrahydrocannabinols in hemp includes THC derivatives produced from naturally occurring cannabinoids, such as Delta-8, is unclear. Regardless, the statutory language under 21 U.S.C. 812(c)(17) now specifically excludes from control tetrahydrocannabinols in hemp. Determining if this exclusion applies only to those tetrahydrocannabinols extracted directly from conforming plant biomass or if it also includes derivatives processed from other cannabinoids requires an analysis of the administrative law and scope of authority underlying publication of the IFR.

III. The IFR Procedurally Lacks the Authority to Modify the AIA and is Intended to Simply Clarify Existing Rules

The self-stated purpose of the IFR is simply to codify those statutory changes made by the AIA in DEA regulations – specifically, to address changes in regulatory controls over marihuana, tetrahydrocannabinols, and other marihuana-related constituents. Put differently, the IFR “merely conforms DEA’s regulations to the statutory amendments to the CSA...and it does not add additional requirements to the regulations.”

One important area of clarification provided by the IFR is that any cannabis derivative or extract that exceeds the 0.3% Delta-9 threshold qualifies as a Schedule I controlled substance. This holds true regardless of whether or not the plant material from which such derivative or extract was produced qualified as hemp. The statutory definition of hemp directly conforms to this interpretation (see 7 USC 1639o), thereby aligning with the overall stated intent of the IFR to only implement statutory changes and not include additional limitations.

This same approach should be applied when interpreting the IFR’s changes to the definition of Tetrahydrocannabinols. The IFR reiterates that 21 U.S.C. 812(c) lists as Schedule I controlled substances “tetrahydrocannabinols, except for tetrahydrocannabinols in hemp (as defined in section 1639o of Title 7).”

It continues by attempting to clarify that the exemption from control applies to those tetrahydrocannabinols that are “naturally occurring constituents of the plant material” and which meet the 0.3% Delta-9 threshold. Unfortunately, the term “naturally occurring constituent” lacks a tangible, working definition which would prevent the current confusion with synthetically derived tetrahydrocannabinols (that remain entirely under Schedule I control, regardless of THC content). Instead we are left to extrapolate such meaning by comparing the administrative authority under which the IFR was promulgated with the scope of the Synthetic Drug Abuse Prevention Act which placed synthetic cannabinoids and cathinones into Schedule I of the CSA.

Beginning with the former, the IFR itself cites particular Administrative Procedure Act ("APA") language that permits deferring the notice-and-comment period to the post-publication period. 5 U.S.C. 553(b) generally requires notice of proposed rulemaking prior to publication to provide interested persons an opportunity to participate. However, an agency has discretion to forego such prior notice if it finds it to be impracticable, unnecessary, or contrary to the public interest (see U.S.C. 553(b)). Here, the DEA chose to exercise its ability to issue the IFR and delay comment procedures to the post-publication period because it believed that “these amendments merely conform the implementing regulations to recent amendments to the CSA” and that it had “no discretion with respect to these amendments.” Put differently, prior notice was unnecessary because the current interim rules do nothing more than amend existing regulatory language without providing any interpretive or novel component. If the IFR actually intended to modify existing rules, the procedure followed here would be inadequate.

The IFR reiterates its non-interpretative nature considering the DEA’s decision not to publish a notice or solicit public comment prior to publication. When a rule “does no more than repeat, virtually verbatim, the statutory grant of authority” notice-and-comment procedures are not required. Komjathy v. Nat. Trans. Safety Bd., 832 F.2d 1294, 1296 (D.C. Cir. 1987). Considering the procedural basis upon which the IFR was published and given that it is merely a regulatory reiteration of statutory language, it can hardly be said that the DEA intended to disrupt the current status quo of the hemp/CBD industry. It is more likely that the reference to synthetically derived tetrahydrocannabinols was intended to clarify that such compounds remain controlled and are not privileged to the 0.3% Delta-9 exemption. A closer look at what is in fact intended to be covered as synthetic THC is useful in comparing those natural derivatives currently called into question.

IV. More Likely than Not, Delta-8 Derived from Hemp is not Controlled as a Synthetic Cannabinoid

Synthetic cannabinoids and cathinones were first made subject to federal control under the CSA upon passage of the Synthetic Drug Abuse Prevention Act (as part of the FDA Safety and Innovation Act of 2012). The law permanently placed 26 types of synthetic cannabinoids and cathinones into Schedule I of the CSA. Control was spurred by the public health crisis caused by consumption of bath salts and plant material sprayed with such synthetic substances. In an Office of National Drug Control Policy press release following passage of the Synthetic Drug Abuse Prevention Act, prevalent consumption among minors and the sharp rise in adverse side-effects and hospitalizations were highlighted as especially convincing factors in Congressional action. See Press Release. The same press release defines synthetic cannabinoids as “man-made chemicals that are applied onto plant material and marketed as a ‘legal’ high.”

The specific language added to the CSA to include synthetic cannabinoids in Schedule I refers to such compounds as cannabimimetic agents – defined as “any substance that is a cannabinoid receptor type 1 (CB1 receptor) agonist” within any one of the explicitly listed structural classes (see 21 U.S.C. 812(c), Schedule I(d)). Delta-8 is not a cannabimimetic agent as defined in the CSA because it does not fall within any of the enumerated and qualifying structural classes. Likewise, Delta-8 is not covered as a cannabimimetic agent under 21 CFR § 1308.11(g). See https://isomerdesign.com/Cdsa/scheduleUS.php?schedule=1&section=7 (listing all cannabimimetic agents).

More important to the analysis of Delta-8 derived from hemp is the definition of tetrahydrocannabinols in 21 CFR § 1308.11(d)(31). Under that regulation, tetrahydrocannabinols means those cannabinoids naturally contained in the cannabis plant (which now excludes those derived from hemp), as well as “synthetic equivalents of the substances contained in the cannabis plant…and synthetic substances…with similar chemical structure and pharmacological activity.” This of course is the source of ambiguity within the reference to synthetic tetrahydrocannabinols in the IFR itself.

No clear definition is provided for the term “synthetic” in either 21 CFR § 1308.11 or the IFR. Both the referenced Office of National Drug Control Policy press release and a later CDC press release explicitly refer to such substances as “man-made.” Looking at the public health crisis leading to both the emergency control action taken by the DEA and subsequent Congressional action, one may deduce that the target was those entirely lab-made compounds with no natural origin that act on identical cannabinoid receptors in the brain – not compounds extracted from naturally occurring cannabinoids, such as Delta-8. Recent DEA and FBI law enforcement activity categorizes "synthetic marijauna" as a specific term of art that appears to mean something different than each of the separate terms, and typically refers to designer drugs, synthetic sprays on existing plants, or compounds intended to emulate the effects of marijuana. See https://leb.fbi.gov/articles/featured-articles/synthetic-marijuana. See also Jessica Wehrman, “Fake Marijuana Spurs More Than 2,500 Calls to U.S. Poison Centers This Year Alone,” American Association of Poison Control Centers, http://www.aapcc.org/dnn/Portals/ 0/K2releasedec21.pdf .

By way of background, Delta-8 is in fact an entirely naturally occurring cannabinoid in both marihuana and hemp, albeit at significantly lower quantities than Delta-9. Recent industry developments have made Delta-8 more desirable, leading to its increased isolation from hemp biomass by way of processing other cannabinoids. It would certainly be a stretch to say that a tetrahydrocannabinol that is otherwise a naturally occurring constituent of hemp plant material is “synthetic” (within the contemplation of 21 CFR § 1308.11(d)(31) and the IFR) simply because a greater amount is extracted than naturally occurs through minimal additional processing.

In summary, more likely than not, Delta-8 extracts or derivatives that otherwise conform to the definition of hemp are not the intended synthetic tetrahydrocannabinols referenced in either the IFR or underlying DEA regulations.

V. More Likely than Not, Intermediate Concentrate Products Derived from Hemp and Which Are Not Intended for Consumer Use are Not Intended to be Controlled under the CSA

As with the uncertainty surrounding use of the term “synthetic,” commercial hemp extractors and laboratories often operate within a grey area with respect to intermediate products produced during the cannabinoid extraction process. Although final consumer products must clearly conform to the applicable Delta-9 threshold, processing of the hemp biomass requires several stages and intermediary solutions that are often in excess of 0.3% Delta-9 (also referred to as “hot” products or intermediaries). Hot products arise as a result of the extraction process where cannabinoids from low-THC hemp plant material are temporarily distilled into a concentrated mixture (e.g. crude oil or first pass distillate) prior to being prepared into a marketable end product. Such concentrated mixtures typically exceed the Delta-9 threshold for hemp even though the initial plant material is in fact conforming. The intent is ultimately to produce a complying extract, but current limitations in scientific equipment and process make hot intermediate products unavoidable.

An issue therefore arises as to whether such hot intermediate products are intended to be subject to control under the CSA. Again, to be commercially viable and within the CSA exemption for hemp, both the hemp biomass received for processing and any derivative must conform to the 0.3% Delta-9 threshold. The IFR reiterates that “a cannabis derivative, extract, or product that exceeds the 0.3% Delta-9 limit is a Schedule I controlled substance, even if the plant from which it was derived contained 0.3% or less Delta-9 on a dry weight basis” (emphasis added).

It is unclear whether this clarifying statement in reference to derivatives and extracts is intended to apply only to final products, or also to those intermediary and production stage solutions that are not intended for public consumption. More likely than not, however, any attempt to control such intermediaries would render the entire extraction process infeasible and directly controvert the intent of the AIA to make hemp plant material and extracts available to the public (and exempt from control under the CSA). Hot intermediary products are not only a required step in the scientific extraction process but are critical to testing facilities’ ability to provide accurate testing results. It follows that the reference to the 0.3% Delta-9 threshold in the statutory definition of hemp (as implemented through conforming regulatory language and the IFR) must exclude as a practical matter those hot intermediary products not intended for use.

Additionally, the DEA has made it clear that certain individuals and entities are permitted to handle cannabis controlled substances for testing purposes, and has even provided a suggested list of laboratories in each state that it has approved to handle the testing such products under the U.S. Domestic Hemp Production Program. See https://www.ams.usda.gov/rules-regulations/hemp/dea-laboratories. To this date, there has been no action by the DEA to stop the production of compliant products leaving a facility if non-compliant industrial hemp input materials are being used. More likely than not, the DEA rule simply clarifies that the sale of such noncompliant goods or the introduction of such noncompliant goods into commerce is not permitted. While this might seem like a loss for certain producers, more likely than not, it was never intended under the AIA for the sale of noncompliant products, such as hot distillate, THC fractions, or Delta 9 concentrates to be permissible.

Thus, in our opinion, the IFR serves as a helpful clarification to weed out labs that fail to properly test their products or that mislabel their products as compliant.

VI. Summary

The IFR intends to clarify the existing rules surrounding the production of products extracted from industrial hemp in order to solidify the amendments passed under the AIA and to further exclude harmful synthetic and noncompliant products from being introduced to the public. More likely than not, the rule change provides not much more than clarity and compliant products produced under the AIA rules therefore are likely safe to be produced in the same way as before the IFR was introduced.

Raffi Garnighian is a published author and Colorado and New York licensed attorney at Wysocki Law Group, P.C. Ori Noiman is an attorney pending admission in Colorado and assisted in the publication of this article. © Wysocki Law Group 2020. All rights reserved. All opinions published herein are those of the individual authors and are not to be construed as legal advice. Please contact Wysocki Law Group for any legal questions you may have in response to this article or any others.

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