Hemp and CBD – Legal or Not?

Justin Keller and Amber Les, Frontera Law Group

The United States is the largest consumer of hemp products in the world, with the annual market value of retail sales estimated at more than $688 million. You see it in oils and extracts and in bottles of lotion at your local Trader Joe’s—the Senate dedicated a whole week to its existence—so, it only makes sense to assume that industrial hemp used in products on your grocery store’s shelf is not a Schedule I illicit drug, right?

Well, you might be wrong.

Under current U.S. drug policy, all cannabis varieties, including industrial hemp and cannabidiol (“CBD”), are listed as Schedule I controlled substances under the Controlled Substances Act (“CSA”), the same classification used for heroin. Although the federal Food and Drug Administration (“FDA”) recently approved Epidiolex, a pharmaceutical drug containing liquid CBD used to treat certain epilepsy syndromes, the DEA rescheduled CBD only for that specific drug. Outside of Epidiolex, CBD and industrial hemp still retain their Schedule I classifications. Because this is the only major industrialized country that restricts hemp farming, the booming U.S. industrial hemp market has depended almost entirely on imports amid conflict, confusion, and ambiguity surrounding federal laws concerning industrial hemp and CBD products.

Much of the confusion has stemmed from the obvious—hemp comes from the same species of plant as marijuana, and certain by-products, including CBD, can be derived from either hemp or the cannabis plant itself. The legality of industrial hemp has largely been a matter of interpretation, and one sticking point has been over the CSA’s definition of “marijuana.” According to the CSA, marijuana is “all parts of the plant Cannabis sativa L., whether growing or not; the seeds thereof; the resin extracted from any part of such plant; and every compound, manufacture, salt, derivative, mixture, or preparation of such plant, its seeds or resin.” However, this federal definition does not include “the mature stalks of such plant, fiber produced from such stalks, oil, or cake made from the seeds of such plant,” but it does include “the resin extracted [from the mature stalks].”

This definition, the exceptions and the exception to the exceptions, has put CBD products in a legal gray area–are they prohibited under federal law or not?

Although CBD- and cannabis-legalization proponents argue that industrial hemp and CBD products fall within the exception in the definition, the Drug Enforcement Administration (DEA) has disagreed. It has consistently held that industrial hemp, hemp by-products and CBD are included in the definition of “marijuana” and are therefore federally illegal.

In contrast, the U.S. Court of Appeals for the Ninth Circuit held in 2004 that industrially made products made from sterilized hemp seed and hemp seed oil are not federally illegal, since such products are non-psychoactive (containing less than 0.03% THC) and not technically “marijuana” under the CSA’s definition.

Although the court ruled that the DEA has no authority to prosecute businesses for using hemp seed or hemp seed oil, it did not address the use of CBD extracted or derived from hemp stalk, or what else could or could not be considered “marijuana” under the federal definition. Consequently, the DEA continued to treat CBD and other resins extracted from hemp stalk as federally illegal, and the Ninth Circuit’s ruling only applies to the nine states within its jurisdiction.

However, on May 22, 2018, the DEA finally addressed the 2004 ruling, issuing an internal directive stating that, consistent with the Ninth Circuit’s decision, the DEA does not enforce THC’s Schedule I status with respect to products made from the cannabis plant that “fall outside the CSA definition of marijuana,” and the “mere presence of cannabinoids is not itself dispositive of whether a substance is within the scope of the CSA.”

The Farm Bill: Then and Now
Congress made its first significant changes to federal policy regarding hemp in the 2014 Farm Bill, authorizing the creation of state industrial hemp pilot programs. The Farm Bill allows universities and state departments of agriculture to cultivate hemp for various research purposes and establishes a statutory definition for industrial hemp as “the plant Cannabis sativa L. and any part of such plant, whether growing or not” with a THC concentration of less than 0.3%. Subsequent provisions in the 2018 Appropriations Act also bar the DEA from interfering with or prosecuting the transportation, processing, sale or use of industrial hemp or its by-products (e.g., CBD) grown or cultivated in accordance with the 2014 Farm Bill.

Certain provisions that may be included in the 2018 Farm Bill have brought new hope for proponents of federal legalization for hemp and CBD. In April, Senate Majority Leader Mitch McConnell (R–KY) introduced the Hemp Farming Act of 2018, which aims to legalize and clearly define hemp as an agricultural commodity, potentially removing hemp cannabinoids and extracts from the list of controlled substances and allowing states to regulate the production, commerce and research of the plant. Additionally, the Hemp Farming Act would expand federally legal commercial hemp cultivation to tribal lands, reservations and U.S. territories—lands that had been excluded from the 2014 Farm Bill.

Although this year’s proposed law is an expansion of four different versions of the bill that Congress has previously rejected, McConnell inserted the same hemp-legalization language used in the Hemp Farming Act into the Senate version of the 2018 Farm Bill. In June, the Senate easily passed this version by a vote of 86–11. The Republican-led House also passed its own version of the 2018 Farm Bill, but it did not include the hemp-legalization provision. Following the passage of two contrasting versions of the bill, a committee of House and Senate negotiators met in the subsequent months to compromise on the differences between the measures, including the measure legalizing hemp. Although Congress did not come to an agreement before the then-current farm bill’s expiration on September 30th, the majority of the baseline programs funded by the expired bill remain funded until later this year. Negotiations to resolve controversies with the new bill, mainly surrounding food stamp and work-requirement provisions, will continue after the midterm elections, and proponents are hopeful that a new farm bill will be in place before the end of 2018.

On June 25, in the middle of the controversy surrounding the Farm Bill, the first CBD-based drug, Epidiolex, was approved by the FDA, a move that many believe is another step toward legalizing hemp, CBD and, ultimately, cannabis at the federal level. Following its approval, the U.S. Department of Health and Human Services recommended that the DEA place the Epidiolex CBD formulation on Schedule V, the least restrictive schedule. Although there is no immediate impact on the legality of CBD with this single drug’s approval, the FDA’s recognition of the possible health benefits of CBD is at least another step forward for the industrial hemp industry.

In the wake of this narrow rescheduling for just one CBD-based drug, the possibility of industrial hemp and CBD’s legality as a whole has had broader implications, particularly at the international level. The United States is a signatory to the 1961 Single Convention on Narcotic Drugs and the 1971 Convention on Psychotropic Substances, both enacted to establish consistent control over international and domestic drug trafficking. Because of its commitment to these treaties, the U.S. is obligated to enact drug control laws consistent with the scheduling outlined in the agreements. To comply with these international obligations, the DEA is, at a minimum, obligated to classify FDA-approved drugs containing CBD (as of now, only Epidiolex) as Schedule V controlled substances.

The World Health Organization (“WHO”) is the principal regulatory group that makes recommendations related to amendments or changes made to the 1961 and 1971 treaties in effect. In June 2018, the WHO conducted a critical review of CBD and announced that it would meet again in mid-November to conduct a similar review of other substances, including cannabis. In September 2018, the WHO’s Expert Committee on Drug Dependence (“ECDD”) recommended that CBD relinquish its current schedule previously established by the 1961 and 1971 international drug conventions, since it has “no psychoactive properties and presents no potential for abuse or dependence.”

Even if the UN Commission eventually removes the scheduling of CBD or cannabis from the regulatory treaties the U.S. adheres to, the U.S. Department of Health and Human Services and the DEA will still have the discretion to keep CBD, cannabis and industrial hemp on its list of Schedule I controlled substances and may continue to only provide a Schedule V classification to any future FDA-approved, CBD-derived pharmaceuticals.

Until the 2018 Farm Bill officially passes, it remains uncertain how the legality of the industrial hemp industry will change before the start of 2019. Although the Farm Bill could be passed without the hemp-legalization provision, and the Hemp Farming Act could also fail to pass, the trend is pushing for industrial hemp and CBD to be fully legalized in the United States, in one way or another, very soon.