After speaking with several law firms who specialize in this field. Ron Kight, KightonCannabis has put together a legal analysis that should ease some of your concerns.
Everything old is new again. The Drug Enforcement Administration (“DEA”) has overstepped its rule-making authority in almost exactly the same way that it did 13 years ago. The 9th Circuit Court of Appeals shot down the DEA then. Unfortunately, the DEA doesn’t seem to learn…Read the full article
We’ve seen this before. On October 9, 2001 the DEA enacted rules that, when taken together, prohibited importing and distributing sterilized hemp seed, oil, and cake derived from hemp seed, and manufacturing and selling food and cosmetic products made from hemp seed and oil, even if they contained only non-psychoactive trace amounts of tetrahydrocannabinols (“THC”). The DEA’s rule stated that “any product that contains any amount of THC is a
schedule I controlled substance . . . .” Interpretation of Listing of THC in Schedule I, 66 Fed. Reg. 51530, 51533 (Oct. 9, 2001) This rule would have banned the possession and sale of imported hemp products that contained only trace amounts of THC. In a set of companion cases, Hemp Indus. Ass’n v. DEA, 357 F.3d 1012 (9th Cir. Cal. 2004) and Hemp Indus. Ass’n v. DEA, 333 F.3d 1082 (9th Cir. 2003) (collectively referred to as “Hemp Indus.“) found that the DEA had exceeded its authority and struck down the rules as void. Because of its similarity to the present situation the Court’s holding is worth quoting in full:
“The DEA’s definition of “THC” contravenes the unambiguously expressed intent of Congress in the CSA and cannot be upheld. DEA-205F and DEA-206F are thus scheduling actions that would place non-psychoactive hemp in Schedule I for the first time. In promulgating the Final Rules, the DEA did not follow the procedures in §§ 811(a) and 812(b) of the CSA required for scheduling. The amendments to 21 C.F.R. § 1308.11(d)(27) that make THC applicable to all parts of the Cannabis plant are therefore void. We grant Appellants’ petition and permanently enjoin enforcement of the Final Rules with respect to non-psychoactive hemp or products containing it.”
This is, in fact, the basis of the third scenario in which marijuana extracts are explicitly legal, namely, when they are sourced from “non-psychoactive hemp” (commonly referred to nowadays as “industrial hemp.”) At the time Hemp Indus. was decided, it was illegal to grow hemp in the United States (“USA”). So, from a practical standpoint the Court’s ruling applied only to hemp that was imported from outside the USA. However, now that it is legal to cultivate hemp in the USA (at least in states that have enacted hemp laws), Hemp Indus. applies to domestically cultivated hemp and its products (such as extracts containing CBD) as well as imported hemp and its products. In other words, marijuana extracts from non-psychoactive (industrial) hemp containing only trace amounts (or less) of naturally occurring THC is wholly legal. The Hemp Indus.cases dealt with different DEA rules; however, they were strikingly similar to the Rule at issue today: The DEA enacted rules which unlawfully expanded the reach and scope of the CSA. And it did so by calling the rules “clarifications” of existing law in an attempt to conceal the fact that it was unconstitutionally usurping Congress’s legislative role. This is exactly what the DEA did today. Fortunately, based on the Hemp Indus. cases, the Rule- at least the part of it that applies to “any” marijuana extract- is void.
Importantly, and aside from the issue of legality and the Constitutional separation of powers, Congress has expressly forbidden any Federal funds from being used to “prohibit the transportation, processing, sale or use of industrial hemp that is grown or cultivated in accordance with section 7606 of the Agricultural Act of 2014, within or outside the State in which the industrial hemp is grown or cultivated.” Section 763 of the Omnibus Appropriations Act of 2016 (P.L. 114-113) passed on December 18, 2015 (“the Funding Act”). Unless and until this provision lapses and is not renewed, the DEA and the DOJ are prohibited from using any Federal funds to enforce any laws (or rules) that would interfere with hemp (or its products) that are lawfully cultivated under state law in accordance with the 2014 Farm Bill. So, even if the Rule was lawful, the DEA can’t enforce it. The 9th Circuit Court of Appeals ruled that the DOJ was prohibited from using Federal funds to interfere with a State’s medical marijuana program by prosecuting state compliant medical marijuana users based on a similar funding clause. USA v. McIntosh, 833 F.3d 1163 (9th Cir. Cal. 2016) (“McIntosh”)
So where does this leave us? My opinion is that the Rule is void. It clashes with existing Congressionally enacted Federal statutes. The DEA exceeded its Constitutional authority in enacting it. Additionally, even if it wasn’t void it is unenforceable, at least to the extent that it purports to make CBD which is sourced from lawfully cultivated industrial hemp illegal.
Finally, assuming that the Rule is void, what do we do about it? In the Hemp Indus. cases the parties sued the DEA to have the rules declared void. In the McIntosh case the defendants asserted the Funding Act provision as a defense to prosecution. What strategy should you employ? If you are in the business of selling CBD and other marijuana extracts I would be happy to discuss this development and your legal options. You can reach him directly by clicking here and sending him a message.
Rod Kight is a lawyer based in Asheville, NC. He is licensed in North Carolina and Oregon and represents legal cannabis businesses.