The hemp industry says the U.S. Drug Enforcement Administration has defied Congress by reimposing control over extracts from the crop.
However, the question of whether DEA’s hemp extract regulations exceed the agency’s authority may not yet meet the threshold for a review and ruling by the federal courts.
A lawsuit over the extract regulations has landed before the U.S. Court of Appeals for the D.C. Circuit, but recent oral arguments centered on whether there’s even a sufficient legal controversy for the judges to resolve.
While the Hemp Industries Association argues the DEA is violating the 2018 Farm Bill, which legalized the crop, the federal agency maintains there’s no daylight between its regulations and the law.
The DEA further says the hemp industry can’t point to any specific harms from the extract regulations that would justify a federal lawsuit.
“All the DEA was doing is conforming its regulations to the statute,” said Sarah Carroll, the federal government’s attorney.
Hemp and marijuana are both types of cannabis that are differentiated by levels of the psychoactive compound THC, or tetrahydrocannabinol. Marijuana remains illegal under federal law.
Cannabis with less than 0.3% THC is considered hemp, while it’s classified as marijuana at higher concentrations. CBD, or cannabidiol, is a major hemp extract added to a variety of products that was responsible for the crop’s nationwide production boom several years ago.
According to the Hemp Industries Association, the DEA implemented a rule in 2020 that criminalizes extracts from hemp that contain more than 0.3% THC during processing, even if they’re later diluted below that threshold in the final product.
By regulating interim or waste substances containing more than 0.3% THC produced during processing, the DEA is stifling the industry’s growth by effectively threatening criminal sanctions for hemp processing, according to the hemp association.
Such regulations run afoul of legal provisions passed by Congress, which excluded THC in hemp from the DEA’s purview and placed it squarely under the U.S. Department of Agriculture’s jurisdiction, the plaintiff said. The DEA has ignored that directive by “scheduling” extracts as controlled substances.
“The regulation violates the statute because it purports to schedule natural tetrahydrocannabinols,” said Shane Pennington, the association’s attorney.
Because hemp extracts necessarily contain more than 0.3% THC while in concentrated form during processing, the DEA is requiring companies to obtain controlled substance licenses from the agency, said Matthew Zorn, another attorney for the plaintiff.
That interpretation of the law is contrary to the intent of Congress, which meant for USDA to have jurisdiction over every step of hemp cultivation and processing, he said.
“This agency still thinks it has authority over the production of hemp,” Zorn said. “Our claim is even if those are controlled substances, we do not have to register with the DEA.”
The DEA countered that its extract rule actually narrows the agency’s authority by excluding substances from regulation if they meet the definition of hemp, which is cannabis with less than 0.3% THC.
The mere presence of THC no longer causes DEA to assert jurisdiction over a substance, which is consistent with the 2018 Farm Bill, according to DEA.
In the court case, the Drug Enforcement Administration argues the Hemp Industries Association has not provided evidence of how it or its members have been damaged by the regulation and haven’t pointed to a credible threat of prosecution. So the association lacks legal standing to pursue the lawsuit, the DEA said.
Instead, the plaintiff basically wants the appeals court to issue an advisory opinion on how the 2018 Farm Bill should be interpreted, said Carroll, the agency’s attorney.
“That plainly is off-limits,” she said.
According to the hemp association, the DEA’s official position that extracts are controlled substances is “pejorative” and influences state lawmakers and regulators.
“It has already caused us reputational harm,” Pennington said.
The delta-9 type of tetrahydrocannabidol that is regulated under federal law will always be composed of 100% THC, regardless of whether it’s found in marijuana or hemp, which cannot be changed, he said.
“Delta-9 would have to be 0.3% of itself to meet the definition of hemp, which is impossible,” Pennington said.
The hemp industry has already been injured by the DEA’s extract rule due to adverse lending implications for processors, Zorn said.
“Banks do not finance companies that work with controlled substances,” he said.