Duane Morris LLP - Why Hemp-Synthesized Intoxicants Need Uniform Regs

The next time you find yourself at a gas station loading up for a road trip on your snack or energy drink of choice, you may notice a surprising offering at the counter: products made from cannabis that have an intoxicating effect, but that are not governed under a state's recreational or medical marijuana laws and regulations.

Regardless of the status of legalized marijuana in your state, you have likely seen businesses in your neighborhood with advertisements bearing the cannabis plant's signature green leaf.

If you reside in a state where recreational or medical marijuana is still unlawful, you may be wondering — what exactly are these businesses selling and, more importantly, how are these products legal?

The swift proliferation of hemp-synthesized intoxicants, or HSIs, requires an equally swift response from our lawmakers to keep consumers safe. A normalized regulatory approach is necessary to provide producers with certainty and reduce the risk to individuals as much as possible.

Without the adoption of a uniform regulatory framework, producers and consumers alike will need to be very cautious, both of the laws in their respective states, and as to the products they may choose to consume.

Some definitions are required before discussing the legality of these cannabis products.

The first basic distinction is one between marijuana and hemp. These two plants belong to the same species, Cannabis sativa L., but differ greatly according to their chemical makeup. The Cannabis sativa L. plant produces between 80 and 100 compounds, called cannabinoids.

Two of the most well-known cannabinoids are Delta-9 THC and CBD. Delta-9 THC is the main cannabinoid responsible for the high associated with marijuana, whereas CBD does not have psychoactive characteristics. While both marijuana and hemp contain CBD, the marijuana grown today for recreational and medicinal use has high levels of Delta-9 THC.

Hemp, on the other hand, contains negligible, if any, Delta-9 THC.

The lack of Delta-9 THC in hemp has allowed for the explosive growth in hemp products today. THC has been regulated since the passage of the Controlled Substances Act in 1970, which classified THC, and therefore marijuana, as a Schedule 1 drug. Marijuana remains listed as Schedule 1 drug to this day.

However, in 2018, hemp was removed from the definition of marijuana through the passage of the 2018 Agriculture Improvement Act, known as the 2018 Farm Bill.[1] The definition of hemp was also updated to include derivatives, extracts and cannabinoids with a Delta-9 THC concentration of less than 0.3%.

The 2018 Farm Bill further provides that these hemp products are regulated by the U.S. Department of Agriculture, with the U.S. Food and Drug Administration maintaining authority over hemp-derived products intended for human consumption. The U.S. Drug Enforcement Administration retained control over marijuana and non-hemp-derived substances.

While the 2018 Farm Bill provides that the FDA has authority over hemp-derived products intended for human consumption, the FDA has not yet issued regulations for these products. In the absence of such a framework, an industry of hemp derived products operating in legal uncertainty has emerged.

CBD is arguably the most popular of the legal hemp-derived products. But manufacturers have begun synthesizing new intoxicating cannabinoids from the cannabinoids in hemp and have found a much larger market for intoxicating products. These are commonly referred to as hemp-synthesized intoxicants.

There are a number of HSIs, the most common being Delta-8 THC, Delta-10 THC and Delta-9 THC sourced from hemp.

HSIs lie in a legal gray area in federal law. The 2018 Farm Bill legalized hemp and its derivatives, however, synthetic THC remains a controlled substance under the CSA.

In response to requests from lawyers concerned with the control status of THCO, the DEA advised in a Feb. 13 letter that Delta-8 THCO and Delta-9 THCO, both HSIs, are in fact controlled substances.[2]

Delta-8 THCO and Delta-9 THCO are analogs of THC, do not occur naturally in the cannabis plant, and differ slightly from Delta-8 THC and Delta-9 THC. According to the DEA, cannabinoids must naturally occur in the cannabis plant — and meet the 0.3% Delta-9 concentration limit — to be considered hemp.

This differs slightly from the position taken by federal courts on the issue.

According to the U.S. Court of Appeals for the Ninth Circuit's 2022 decision in AK Futures LLC v. Boyd Street Distro LLC, the Farm Bill's definition of hemp is straightforward, and does not limit its application according to the manner by which HSIs are produced.

The court specifically rejected the argument that Delta-8 THC is synthetically derived because it must be refined through a manufacturing process. Accordingly, under AK Futures, as long as a product is a "derivative, extract, or cannabinoid originating from the cannabis plant" and does not contain more than 0.3% delta-9 THC, it is hemp, and not a controlled substance.[3]

State laws regulating HSIs are a patchwork with little consistency between any given state.

As of April, 24 states including Washington, D.C. have "unintentionally" legalized HSIs by updating their controlled substance law to match the 2018 Farm Bill.[4] Twelve states explicitly regulate the sale of HSIs, and 15 states outright prohibit the sale of HSIs either through statute or other regulation.

Complicating matters further, these laws are constantly evolving as states continue to update their regulation of HSIs. Often, where the laws may be clear — or silent — there are enforcement challenges.

For example, in 2019, Texas legalized hemp by updating its statutes to reflect the 2018 Farm Bill. However, the Texas Department of State Health Services subsequently banned the processing and manufacturing of smokable hemp in Texas. This decision was upheld by the Texas Supreme Court in 2022.[5] The department also attempted to halt sales of Delta-8 specifically in 2021 by classifying Delta-8 as a Schedule 1 drug.

In 2021, this attempt was challenged in court in Sky Marketing Corp. dba Hometown Hero v. Texas Department of Health Services. In this case, the 126th District Court of Travis County, Texas, issued a temporary injunction staying the Texas Department of State Health Services from reclassifying Delta-8. On appeal, the Texas Court of Appeals for the Third District upheld this injunction.[6]

Despite the legal uncertainties for the HSI industry, it is clear these products are here to stay.

According to the American Trade Association for Cannabis and Hemp, HSIs generated an estimated $2 billion in revenue nationwide in just two years after HSIs' appearance on the market. As Michael Bronstein, the association's president explains:

The real elephant in the room from a legal and regulatory perspective is the unregulated market for hemp synthesized intoxicants. These unregulated products are sold across America under the cover of supposedly being compliant with the Federal Farm Bill, but are a potential threat to public health and safety.

And while uncertainty may not slow the production of HSIs, it does create another problem for the industry beyond simply an unregulated gray market that competes with the regulated cannabis market — consumer safety concerns that could put either market under scrutiny if proper distinctions between the legal regulated market and the gray market do not emerge.

Without clear guidelines, testing protocols and labeling regulations, consumers are left with little assurance that the products they are ingesting are safe for consumption. Even if HSIs like Delta-8 or Delta-10 are not inherently unsafe compounds, which is yet to be confirmed, the production of these compounds could be unsafe.

The chemical solvents used to convert CBD into Delta-8 can be toxic if they aren't removed properly from the final product. Further, products made from hemp CBD could be contaminated with toxins like heavy metals, pesticides or mold.

The lack of safety standards for HSIs has yielded real-world consequences. According to the American Association of Poison Control Centers, between Jan. 1, 2021, and Feb. 28, 2022, poison control centers received 2,362 exposure cases of Delta-8 THC products.[7] Tragically, one case of accidental Delta-8 overconsumption resulted in the death of a small child in Virginia in 2022.[8]

Serious concerns regarding safety issues prompted the FDA to issue a warning letter to six different manufactures of Delta-8 gummies in July. The warning letters explain that the products at issue are adulterated under the Food, Drug and Cosmetics Act, because Delta-8 THC has not been authorized by the FDA as a "food additive."

They note that the FDA has received numerous adverse event reports pertaining to products containing Delta-8 THC, especially such products ingested by children, and emphasize the FDA is particularly concerned about the marketing of gummies containing Delta-8 to children. In this connection, the warning letters also claim the products at issue were marketed in a deceptive manner in violation of the Federal Trade Commission Act.

Should HSIs remain publicly available, it is imperative that federal and state-level officials implement a regulatory scheme to protect the health and safety of American consumers. The 2018 Farm Bill expires in 2023, and the American Trade Association for Cannabis and Hemp has issued a policy paper calling for the regulation of HSIs in the updated 2023 Farm Bill.

The association urged federal and state lawmakers to close the HSI "loophole" through a comprehensive regulatory framework. This framework would include: amending the definition of "hemp" to regulate by finished product and delineate intoxicating from nonintoxicating products; allowing the Alcohol and Tobacco Tax and Trade Bureau to regulate intoxicating hemp products, while the FDA would continue to regulate nonintoxicating products, adopting a uniform testing standard for hemp products; and developing uniform labeling standards for hemp products, among others.[9]

Clarified labeling requirements and implementing a uniform testing standard for HSIs would not only offer consumers protection, but provide producers or would-be producers in the market clarity as to the necessary safety measures they must take in creating their HSIs. A clear regulatory framework would reduce the risks to manufacturers on a microlevel and provide greater certainty that producers are operating within the federal purview.

This framework would also provide macro-level protections on at least two fronts: (1) stronger regulations would reduce the number of bad faith actors in the market, protecting manufacturers from competing with producers who are skirting federally required safety measures, and (2) regulations that reduce danger to consumers further legitimizes the hemp industry, increasing goodwill for hemp producers and lessening the probability of future outright federal or state level HSI bans, which jeopardize legitimately operating hemp businesses.

Strong regulation would not only affect producers, but offer additional clarity to businesses indirectly assisting hemp producers, such as banks, insurance, transportation, advertising and other industries seeking to provide services to hemp and HSI producers.

Congress has not turned a blind eye to the regulatory concerns related to HSIs. In a moment of bipartisanship uncommon in Washington, lawmakers from both parties agree that consumers face heightened risks from unregulated HSIs.

On July 27, the House Oversight and Accountability Subcommittee on Health Care and Financial Services held a hearing on the current state of the hemp industry and regulation of CBD.[10]

On Sept. 25, the Farm Bill Task Force endorsed 44 bills, 35 of which are bipartisan, for inclusion in the 2023 Farm Bill that would overhaul the vague requirements of the 2018 Farm Bill.[11]

It remains to be seen which of these bills will be included in the 2023 Farm Bill.

Those who represent businesses directly or indirectly involved in the hemp industry should pay close attention to finalized regulation that will have substantial effects on their clients' operations in the years to come. Navigating these uncertain regulatory waters is crucial to hemp producers' ability to continue their businesses legally.

Dylan J. Anderson is an associate and Seth A. Goldberg is a partner at Duane Morris LLP.