With DEA digging in its heels on 'marijuana extracts,' legality of CBD oil on trial in federal courts

Cannabidiol is a non-psychoactive cannabis compound touted for its medicinal promise — but marijuana- and hemp-derived extracts rich in CBD and low in intoxicating THC are facing a future yet to be determined.

The Cannabist’s special report “CBD, TBD” explores a regulatory and legal landscape pockmarked by federal-state conflicts, and examines national drug policy, pioneering research efforts and disparate avenues toward the compound’s full legalization. This is the third installment in an ongoing series.

Part I – Forbidden medicine: Caught between a doctor’s CBD advice and federal laws

Part II – How advocates are inspiring congressional action on CBD legalization

There are two wildly different views on how the federal government has classified cannabidiol (CBD) with a new drug code for marijuana extracts:

It was a mere administrative maneuver meant to bring the U.S. in line with international drug control treaties and to better track medical research.

It was the opening salvo in a federal offensive against the emerging American hemp industry.

A proposed final rule notice posted to the Federal Register last December by the U.S. Drug Enforcement Administration established a Controlled Substances Code Number for “marihuana extracts.” The rule notice, which was finalized in January, maintained cannabis-derived extracts’ Schedule I status under the Controlled Substances Act (CSA).

What the DEA saw as innocuous, the hemp industry saw as an existential threat.

Overnight, a pall was cast across an industry pumping out products ranging from hemp seed butter to bio-plastics used in automobiles to CBD oil, a non-psychoactive cannabis compound that has been highly touted for its potential medicinal benefits.

Hysteria and confusion swelled after initial reports erroneously asserted that a scheduling action occurred and that CBD was now illegal and in the crosshairs of the government.

Shortly after the rule was announced, DEA officials reiterated to The Cannabist that no scheduling action took place. None was necessary — CBD oil and other extracts derived from marijuana and hemp “have been and will continue to be Schedule I controlled substances,” officials said.

The DEA has not changed its stance.

Hemp industry lawyers claimed the rule instantly subjected what were presumed lawful operations to DEA registration and drug code assignation, effectively treating their products as controlled. The coding also amounted to the DEA acting outside of its authority by attempting to schedule cannabinoids, or even marijuana extracts, which are not explicitly listed in the Controlled Substances Act, attorneys alleged.

A federal lawsuit filed in January by Denver’s Hoban Law Group on behalf of the Hemp Industries Association, Centuria Natural Foods and RMH Holdings LLC was intended to protect an American agricultural revival, attorney Bob Hoban told The Cannabist.

“The entire industry hinges on this,” Hoban said.

Now it’s up to the 9th U.S. Circuit Court of Appeals to make a decision that could chart a new course for the hemp industry.

Uncertain times, booming business

At least 16 states, including Colorado, have laws allowing cultivation of hemp for research and/or commercial purposes, according to the National Conference of State Legislatures.

In 2016, the hemp industry notched an estimated $688 million in U.S. sales, setting a new record, according to an analysis by the Hemp Business Journal. Hemp-derived CBD accounted for an estimated $130 million share of that total, the Denver-based trade publication reported.

However, questions have continuously swirled around the legality of the sourcing, manufacturing processes and distribution of the plant’s products and extracts.

Central to the issue are the parts of the cannabis plant that are refined into products. In the Controlled Substances Act, the government defines marijuana as:

“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. Such term does not include the mature stalks of such plant, fiber produced from such stalks, oil or cake made from the seeds of such plant, any other compound, manufacture, salt, derivative, mixture, or preparation of such mature stalks (except the resin extracted therefrom), fiber, oil, or cake, or the sterilized seed of such plant which is incapable of germination.”

What has been excluded from the CSA definition — mature stalks and unviable seed — is considered to contain only traces of cannabinoids such as psychoactive THC. Foods such as hemp-seed hearts and cooking oil made from seed fall into this category.

DEA officials confirmed to The Cannabist last December that the new code number would have no effect on the slew of hemp products not intended for human consumption that are already exempt from the CSA. That included the likes of lotions, shampoos, solvents, ropes, clothing and bird seed, officials said.

Questions arise when hemp plants that are naturally low in THC are used to make CBD oil.

“The uncertainty, frankly, is what has created this industry,” Hoban said. “Economics and business thrive in uncertainty.”

Surviving in uncertainty, however, is another matter.

Hoban said the industry can’t sit on the sidelines assuming state legalization and existing case law will shield producers, retailers and consumers of hemp-derived products.

He noted how companies in Texas and Kentucky had their CBD products seized by state police. He expressed concern that operations by the U.S. Customs and Border Patrol could lead to seizures of CBD oil and other hemp-derived products under the auspices of the DEA’s marijuana extract coding.

CBD oil’s legality has been questioned in places like Orchard Park, New York, where officials for a state-run special care facility said federal law prohibited them from administering doctor-recommended CBD oil for a patient.

“There’s no black and white about this,” Hoban said, and added that the fight in the courts is critical.

The U.S. Court of Appeals in San Francisco provides a familiar battleground for the DEA and the Hemp Industries Association. Nearly two decades ago, the 9th Circuit set precedents on hemp foods and cannabinoids that play heavily into this year’s case.

In 2003, the court ruled against the DEA’s “Interpretive Rule” banning all naturally occurring THC, including the trace amounts found in hemp seed and oil. In 2004, that same appellate court established bounds on the DEA’s authority related to natural and synthetic THC, according to court records:

The DEA’s Final Rules purport to regulate foodstuffs containing “natural and synthetic THC.” And so they can: in keeping with the definitions of drugs controlled under Schedule I of the CSA, the Final Rules can regulate foodstuffs containing natural THC if it is contained within marijuana, and can regulate synthetic THC of any kind. But they cannot regulate naturally-occurring THC not contained within or derived from marijuana-i.e., non-psychoactive hemp products-because non-psychoactive hemp is not included in Schedule I. The DEA has no authority to regulate drugs that are not scheduled, and it has not followed procedures required to schedule a substance.

A decade later, Congress passed the Agricultural Act of 2014, also known as the Farm Bill, which allowed states to set laws on hemp production. The act defined industrial hemp as “the plant Cannabis sativa L. and any part of such plant, whether growing or not, with a delta-9 tetrahydrocannabinol concentration of not more than 0.3 percent on a dry weight basis.”

Under that legislation, a state department of agriculture or university could produce industrial hemp for research purposes, and others could grow the versatile crop under state-sanctioned pilot programs.

Poking the bear

Past circuit court rulings and hemp-friendly federal legislation have offered legal precedent for producers, retailers and consumers of CBD-rich extracts, but they didn’t necessarily provide security or stability to all.

Some advocates for CBD oil in therapeutic and medical applications said they prefer a clear-cut approach — the stakes are far too high for too many people and businesses to solely rely on the courts.

Paige Figi, a Colorado Springs-area mother, credits CBD oil with drastically reducing her daughter Charlotte’s seizures caused by Dravet syndrome, a type of epilepsy. She founded the nonprofit Coalition for Access Now to lobby for CBD laws.

CBD oil’s legality ultimately needs to be decided in the halls of Congress, Figi said.

Figi and Coalition for Access Now are supporting Congressional efforts to exclude CBD — and plants rich in cannabidiol and low in intoxicating THC — from the definition of marijuana in the Controlled Substances Act.

Beyond the need for full federal legality, Figi said she is concerned that continued court battles could ultimately backfire against the entire industry.

The DEA’s enforcement priorities have been elsewhere, she said, noting that agents have mostly taken a hands-off approach toward producers that adhere to state laws and consumer safety standards.

“When you poke the bear, the DEA can come back and say, ‘It’s scheduled,” and increase enforcement actions, Figi said.

DEA spokesman Russ Baer did not respond to The Cannabist’s requests for interview about the pending lawsuit and the broader debate involving CBD oil.

Last December, Baer told The Cannabist via email that the new rule on extracts would not change the DEA’s enforcement priorities, which are focused in the widely abused areas of heroin, fentanyl, meth and cocaine.

A decision in the 9th Circuit would be legally binding in only a collection of states and territories in the western United States, Hoban said. The 9th Circuit consists of Alaska, Arizona, California, Guam, Hawaii, Idaho, Montana, Nevada, Northern Mariana Islands, Oregon and Washington.

Still, he said, a legal victory in the 9th Circuit would both clarify the DEA’s rule notice in the interim and further set precedent for the future.

“This is the first inning of a very long ballgame,” he said.