DEA Clarifies Marijuana Extract Rule and CBD Legality

Credit: http://marijuanastocks.com/dea-being-asked-to-remove-hemp-from-list-of-controlled-substances/

As many of you are aware, on December 14, 2016 the DEA implemented a rule regarding CBD and marijuana extract called the “Final Rule establishing a new Controlled Substance Code Number (drug code) for marijuana extract” (the Rule). Among other things, the Rule claimed that cannabidiol (CBD) and other cannabinoids were part of the newly established drug code and, consequently, were Schedule 1 substances under the Controlled Substances Act (CSA). Schedule 1 is the most restrictive class of drugs and is reserved for drugs that have “no currently accepted medical treatment use” and a “high potential for abuse.” I wrote about the wrongheadedness of the Rule here and focused my attention on the fact that the DEA purported to make illegal something (ie, CBD) that was never illegal in the first place. CBD has never been listed as a controlled substance on the CSA. Importantly, CBD can be sourced from legal plants. I argued that the DEA had overstepped its authority. For this very reason, the DEA is currently a defendant in a lawsuit filed in the 9th Circuit. We expect that suit to go well.

Today, the DEA backed off of its position somewhat. Importantly, it acknowledged that CBD is legal if it comes from a part of the cannabis plant that is itself legal, such as the mature stalk of the cannabis plant, which is excluded from the CSA’s definition of marijuana. In other words, the DEA finally admitted that CBD is not illegal in and of itself; rather, it is legal (or not) based on its source. I’ve been preaching this for a long time, but I have to admit that it’s strange to be validated in the form of an an official DEA clarification!

Here’s what the DEA said: “The new drug code (7350) established in [the Rule] does not include materials or products that are excluded from the definition of marijuana set forth in the Controlled Substances Act (CSA). The new drug code includes only those extracts that fall within the CSA definition of marijuana. If a product consisted solely of parts of the cannabis plant excluded from the CSA definition of marijuana, such product would not be included in the new drug code (7350) or in the drug code for marijuana (7360).

This is important. It is the first time that the Federal government has explicitly stated that cannabinoids (aside from THC which is separately scheduled) are not in and of themselves illegal substances. Most importantly, the DEA tacitly acknowledged that CBD sourced from industrial hemp cultivated lawfully pursuant to a State’s industrial hemp laws enacted under the 2014 US Farm Bill is legal. This is because “industrial hemp” is itself specifically excluded from the CSA’s definition of marijuana in Section 7606 of the Farm Bill. Since industrial hemp is excluded from the definition of the CSA, and a “product consist[ing] solely of parts of the cannabis plant excluded from the CSA definition of marijuana” is not included in the new drug code, then such product (in our case, CBD) is also excluded from the definition of marijuana under the CSA and is thus legal, at least at the Federal level. (Whether or not CBD can be made illegal at the individual state level is another question altogether which I’ll address in an upcoming post.)

None of this is new. But it is good to get some clarification from the DEA.

Rod Kight is a lawyer based in Asheville, NC. He is licensed in North Carolina and Oregon and represents legal cannabis businesses. You can contact him by clicking here.

Posted 3-14-2017.

 

23 thoughts on “DEA Clarifies Marijuana Extract Rule and CBD Legality

  1. Frank Cheff

    Hi Rod, We appreciate your work and specifically the informative articles.

    What about Crossing state lines? Interstate commerce?
    That is not clarified and makes producers sellers vulnerable.

    Appreciate your response.

    Frank

    Reply
    1. Rod Kight Post author

      Frank- Thank you for reading and commenting on my blog. Interstate commerce of industrial hemp and its products (such as fibers, CBD, seeds, oils, etc.) is a tricky issue. At the Federal level interstate commerce is allowed. The The Omnibus Appropriations Act of 2016 (P.L. 114-113) (“the Funding Act”), passed on December 18, 2015, contains a provision at section 763 that reads:

      “None of the funds made available by this act or any other act may be 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.”

      The problem is that the Congress didn’t explicitly state that interstate commerce was legal. Rather, it simply said that Federal funds could not be used to prohibit it. The effect is the same (ie, the Feds cannot interfere), but the rationale is different. Because of this rationale, it is more difficult to assert that the Federal law preempts contrary state law. Had Congress simply approved interstate commerce outright, without resorting to funding issues, then preemption would apply. (Preemption is, in a nutshell, the doctrine that Federal law trumps conflicting state law.)

      This brings us to the legality of interstate commerce at the state level. Based on the fact that it is difficult to argue preemption, individual states can arguably enforce their own laws regarding hemp/cannabis within their respective borders. So, if cannabis is explicitly illegal under a particular state’s laws, that state makes no legal distinction between cannabis and industrial hemp, and that state does not receive funds under the FUnding Act, then it can prosecute under its laws.

      Reply
      1. deborah hestner

        Rod, amazing work! What about the rules to state that hemp grown in the USA can’t be shipped over state lives? That’s why foreign cheaper hemp is used in cbd hemp oil products.

        i’m in Pennsylvania, can you shed any light on my state? thanks -Deborah Gestner

        Reply
        1. Rod Kight Post author

          Thanks for reading and commenting on my blog, Deborah. The issue of hemp and CBD crossing state lines is reaching a critical mass right now. I’m going to be speaking on this topic in a couple of weeks at http://nocohempexpo.com/hemp-summit-2017/

          The are no specific rules regarding interstate commerce of hemp and hemp-based CBD. The 2014 US Farm Bill, which authorized state pilot programs, appears on its face to restrict hemp (and its products, such as fibers, seeds, and non-THC cannabinoids like CBD) to the state in which the hemp is cultivated. The 2015 Federal Omnibus Spending Bill contains a clause specifically prohibiting Federal funds to be used to interfere with the use, transport, or sale of industrial hemp, even in states that haven’t enacted industrial hemp laws. From a practical standpoint, this means that lawfully cultivated industrial hemp (and its products) are legal at the Federal level in every state. They’re also legal in the states that have passed industrial hemp laws. The sticky subject is whether individual states that have not passed hemp (or medical cannabis) laws can prosecute under their state anti-cannabis laws for industrial hemp and its products. Unless the state uses Federal funds in its drug interdiction programs (in which case the 2015 Omnibus Spending Bill prohibits them from prosecuting) then such states can prosecute under its own laws. I don’t know about the specifics of PA law but would be happy to discuss that issue with you further if you’d like to reach out and schedule a time to talk: rod@kightlaw.com

          Reply
  2. Kelly

    Rod, thank you so much for your work in this area and for helping us understand what is going on. I am based in Oregon and have an online business selling CBD oils and topicals and we sell out of state. In January PayPal and my credit card processor pulled out because of the DEA ruling. In fact I even tried going with BitCoin to enable people to pay online and they rejected me! I am currently in the process of finding a new credit card processor and they are charging an arm and leg to serve me. I hope that this new information will help ease up the tension with these payment processors. I will be sharing your article with everyone I know, keep up the good work!

    Reply
    1. Christopher Swift

      Kelly,

      I feel your pain on this as I’ve been helping cbd vendors get back on track with being able to process and you are right – its not cheap. Eventually it will be more affordable and likely treated as an edible supplement but will still be classified as a higher risk product just like any nutra products.

      Reply
    2. Joe Smokes

      Kelly, did you try POSaBIT for bitcoin acceptance? They don’t do it the same way; they basically sell bitcoins (fully legal) and allow customers who came to buy bitcoins to trade them for your product right at the same transaction. It allows credit cards that way and you don’t have to hoard cash… Best of both worlds, no denials, I believe.

      Reply
  3. Deborah Golden

    Rod, Based upon what you have written and clarified, CBD-Hemp Oil is legal due to its classification under the farm bill? So CBD-Hemp oil grown and processed in the USA is legal. But you’ve clarified that individual states could be more restrictive. correct?

    What is your knowledge about pennsylvania?

    Reply
    1. Rod Kight Post author

      Deborah- Yes, at the Federal level CBD derived from lawfully cultivated industrial hemp is legal throughout the USA. Such CBD may be illegal at the state level in states that have restrictive cannabis laws, have not enacted industrial hemp (or medical cannabis) laws, and do not receive Federal funding for their drug-interdiction programs.

      Reply
  4. Bill Hilliard

    This is great news for our company operating in Kentucky. Can you provide the location or source of this statement? Thanks for your work.

    Reply
      1. Bill Hilliard

        Thank you very much for this information and your professional activities on behalf of the industrial hemp industry.

        Reply
  5. Christopher Swift

    This is great news thanks so much for sharing! I’ve been helping cbd & hemp oil vendors for a few months get back on track as I have access to a few processors who understand that its not a controlled substance. So many processors have unfairly shut people down. This reminds of how things were when ecigs came on the market. The cost to accept credit cards was very high but eventually it came back to earth. Its going to be a long road before banks and processors change their stance but I think this is very important first step to making it easier for cbd merchants to accept credit cards and sell more product.

    Reply
  6. Jennifer Spengler

    Thank you for this information! I’ve been consuming CBD Gummies as a replacement for klonopin here and there since I’m wanting to taper off of the klonopin altogether over the remainder of the year. (Benzos are a tough taper, and I’m going to go easy on myself…) CBD is a must-have since withdrawals from Benzos include chance of seizure. Even though I’m taking it slow, extra precautions can’t hurt!

    Your article is invaluable information. Thank you for the in-depth details that a layperson such as myself can grasp immediately.

    Also nice to know you’re in NC. I was born here and never left. (Some days I wonder why… but I digress…)

    Thanks again for the well-written and informative article.

    ~JenSpen
    (Jennifer)

    Reply
  7. Cindie Schiro

    Thank you Rod for all your information .Not sure I understand it all clearly but what I did get is that Hemp is legal to grow in the states ! The co I’m connected with clearly states that it’s illegal to grow Hemp in the US ! It’s very hard to know who is telling the truth as everyone is on the money wagon to wealth with this product. !
    As a consumer I would like to be able to afford to purchase it ! The net work marketing companies have it priced so high that a person in real need is out of luck unless they are wealthy !
    This is so upsetting to me !
    Do you happen to know the difference in purchasing from so called Europe grown Hemp as compared to US grown Hemp ? As far as purity and potency ?? I would imagine the US Hemp would be much better ???
    I need some clarity
    It difficult to believe the net work marketing people because they all seem to tell you anything just do you sign up !
    Can you help clarity my questions ??
    Thank you so much
    Cindie

    Reply
    1. Rod Kight Post author

      Thank you for reading and commenting on my blog. The legal status of hemp is indeed complicated right now. Let’s hope that Congress (and state legislatures) clear it up soon! The laws governing hemp from abroad vs. hemp grown domestically are different. Cultivating industrial hemp in the USA is lawful if done in compliance with a state’s industrial hemp laws enacted pursuant to the 2014 US Farm Bill. This type of hemp is fully legal to grow. Hemp cultivated in Europe (or anywhere outside the US) is governed by Hemp Indus. v. DEA, a 9th Circuit Federal Court case that clarified the fact that it is lawful to import non-psychoactive industrial hemp containing only trace amounts (or less) of naturally occurring THC. I hope this helps. I’d be more than happy to schedule a time to talk if you want to email me: rod@kightlaw.com

      Reply
  8. deborah golden

    Hi Rod, what restrictions are placed on Industrial CBD HEMP OIL products related to interstate commerce. I’m asking specifically about CBD Hemp grown and manufactured and distributed in the USA. can you comment?

    Reply
    1. Rod Kight Post author

      Hi Deborah. Thanks for reading and commenting. You pose a good and timely question. The law remains “grey” in this area. CBD sourced from lawfully cultivated industrial hemp pursuant to the 2014 Farm Act is legal because its source is legal. As I indicated in this article, the DEA finally confirmed that CBD is lawful if it is sourced from a part of the cannabis plant that is excluded from the definition of marijuana in the controlled substances act. In other words, the DEA stated the CBD is legal if it is derived from a lawful part of the plant. (I’ve been saying that CBD is legal or not based on its source for some time now. It’s good to finally hear it from the DEA.) We wish that the DEA had gone further and clarified that CBD sourced from another lawful source, namely, industrial hemp, is also legal. It is disappointing and frustrating that it didn’t; however, based on the DEA’s clarification the legal logic is now explicitly in place so that we can confidently assert that CBD sourced from industrial hemp is legal because it is sourced from a legal plant. This means that CBD from industrial hemp is legal in the state from which the hemp was cultivated. Additionally, because section 763 of the 2015 Omnibus Spending Bill (which has since been renewed) restricts the use of Federal funds to prohibit the processing, use, transport, or sale of industrial hemp (and, but implication, its component parts such as CBD), even in states that do not have industrial hemp laws, CBD from industrial hemp is lawful- at least at the Federal level- throughout the country. In other words, it can be transported and sold in interstate commerce. The trickiest and “greyest” part of the issue of interstate CBD commerce is the effect of individual state laws. It is unclear whether or not the Federal laws regarding industrial hemp preempt (ie, overrule) contrary state laws. The safest assumption is that they don’t and CBD remains illegal under certain State’s laws. Finally, in the event that a State in which CBD is otherwise illegal receives Federal funding for its drug interdiction programs that State is not allowed to interfere with lawfully sourced CBD. I wish that the answer was clearer; unfortunately, the current state of the law is complicated. I intend to write an upcoming blog post on the intersection of Federal and State laws and delve into the preemption issue. Hopefully, that will further clear up some things.

      Reply
  9. Nicole

    Hi Rod, I’m in NM and just spoke to a woman selling CBD oils in our local grocery store. She said they have a religious exemption to sell legally. But I can’t find any info to confirm this. (I’m trying to help a friend wanting to sell CBD-only therapeutic oils). Thanks so much for pulling this information together.

    Reply
    1. Rod Kight Post author

      Nicole- Thank you for reading and posting on my blog. I am not aware of any religious exemption regarding CBD oil. Most states that have considered the issue of whether cannabis consumption is a sacrament protected by the First Amendment have ruled against the party seeking the exemption. In other words, broadly speaking, cannabis and its products are not generally protected by a religious exemption in the USA. I do not know about NM, but would be wary of anyone asserting a religious exemption for their CBD, or any other cannabis products. This doesn’t mean that CBD is illegal under NM law- I do not know offhand the specifics of NM’s cannabis laws and it may very well be lawful under NM state law-
      but I wouldn’t “hang my hat” on the fact that the shop owner asserted a religious exemption. -Rod

      Reply

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