In a letter to Congress, 20 state Attorney Generals urge steps be taken in the upcoming Farm Bill to correct the loophole in the 2018 Farm Bill’s definition of hemp that has been exploited by those producing and distributing products chemically synthesized from hemp that are just as intoxicating, if not more so, than the cannabis sold under state-regulated cannabis programs. Noting the public health and safety concerns of such hemp-synthesized intoxicants (HSIs), and the fact that their legalization was not intended by way of the 2018 Farm Bill, the AGs suggest the Farm Bill expected this year explicitly reserve for the states the power to regulate HSIs.
Public health and safety concerns about delta-8 THC appear to be on the rise. A study published by JAMA this week showed that approximately 11% of all 12th graders in the US reported using products containing D-8 THC, with a higher prevalence in states that do not have existing D-8 THC regulations., and a related JAMA editorial, entitled “The Public Health Challenge of Δ8-THC and Derived Psychoactive Cannabis Products,” noted that D-8 THC products pose a risk to public health and safety because they are largely unregulated, in contrast to state-regulated medical and adult use marijuana. As the authors of that editorial explain:
“The weak regulatory infrastructure for Δ8-THC has led to manufacturing, advertising, and sales practices that are inconsistent with public health and safety.Δ8-THChas been marketed to consumers as a low-risk medicinal cannabinoid product despite limited evidence for effectiveness. It has also been sold directly to minors through brick-and-mortar and online vendors, some of which do not restrict sales based on age. Inaccurate content labeling and potentially harmful adulterants are serious problems in the unregulated cannabinoid market. Products sold under the Δ8-THC designation vary considerably with regard to dosing and constituent ingredients.13 In an analysis of 20 commercial products marketed as Δ8-THC, authors observed that 5% of the products did not contain Δ8-THC and, among samples that did contain Δ8-THC, the quantities in each product varied markedly from advertised values.13 There is also evidence that products sold as Δ8-THC contain unlabeled constituents that may be dangerous for consumers.14 It is not known whether the constituents were added during manufacturing processes or whether they were added intentionally or because of poor quality control procedures.”
The editorial’s authors note the need for more rigorous manufacturing, advertising, and sales standards for D8-THC and other intoxicating cannabis-related products, and encourage federal legislators to use the next Farm Bill to address the loophole in the 2018 Farm Bill that has resulted in the proliferation of D8-THC and other intoxicating substances chemically synthesized from hemp:
“Given the potential harms posed by the widespread availability of Δ8-THC and other derived psychoactive cannabis products, more rigorous standards for manufacturing, advertising, and sales are warranted. The 2018 Agriculture Improvement Act is set to expire in September 2024, and legislators may take the opportunity to strengthen the regulatory infrastructure for derived psychoactive cannabis products or exclude certain derivative products from the statutory definition of hemp.”
Citing the facts that Pennsylvania (i) is bordered almost entirely by states that have legalized cannabis for adult use; (ii) loses millions to the black market for cannabis annually; and (iii) projects hundreds of millions in annual revenue gains, in his budget address for 2024 Pennsylvania Governor Josh Shapiro called on Pennsylvania’s legislature to deliver by July 1, 2024, legislation that would legalize cannabis for adult-use in Pennsylvania:
“Well, last year, 57 percent of voters in Ohio supported an initiative to legalize recreational marijuana. And now, Ohio, New York, New Jersey, Delaware, and Maryland – practically all of our neighbors – have legalized marijuana. We’re losing out on an industry that, once fully implemented, would bring in more than 250 million dollars in annual revenue. And our failure to legalize and regulate this only fuels the black market and drains much needed resources for law enforcement. It’s time to catch up. I ask you to come together and send to my desk a bill that legalizes marijuana. But that bill should ensure the industry is regulated and taxed responsibly. That we create jobs and build wealth here in Pennsylvania, especially in the communities that have been disproportionately harmed by criminalization. And that those who have been convicted for nonviolent possession of small amounts of marijuana have their records expunged. Let’s stop hamstringing ourselves and start competing.”
Governor Shapiro’s urgency is not surprising. Pennsylvania should have been leading the way in legalizing cannabis for adult-use, given its successful medical marijuana program, but instead other states have spring-boarded ahead of Pennsylvania. Those states are now enjoying the revenues, job growth and overall economic benefits of legal cannabis, including even profiting from Pennsylvania residents crossing the border to buy their cannabis. It truly is time for Pennsylvania “to catch up” and “start competing” in the legal cannabis market for the good of all Pennsylvanians.
On December 5, 2023, FDA issued a warning letter to a manufacturer (Hemp XR) of food products, such as gummies, cookies, etc., that contain delta-8 THC. The warning letter notes that delta-8 THC has not been generally recognized as safe (GRAS) for use in food, and has not received pre-market approval to be used as a food ingredient, which requires data demonstrating safety. As a result, FDA warns that the interstate marketing of the food products at issue violates the Food, Drugs and Cosmetics Act. The warning letter makes similar assertions with respect to the manufacturer’s food products containing CBD.
FDA notes that its concerns with respect to delta-8 THC include: “1) Delta-8 THC products have not been evaluated or approved by FDA for safe use and may be marketed in ways that put the public health at risk; 2) FDA has received adverse event reports involving Delta-8 THC containing products; 3) Delta-8 THC has psychoactive and intoxicating effects; 4) FDA is concerned about the processes used to create the concentrations of Delta-8 THC claimed in the marketplace; and 5) FDA is concerned about Delta-8 THC products that may be consumed by children, as some packaging and labeling may appeal to children.”
As I have previously written, manufacturers of products containing delta-8 THC are exploiting an ambiguity in the definition of hemp under the 2018 Farm Bill that they assert legalized chemical substances converted from hemp cannabinoids through chemical processes on the notion that such substances were “derived” from hemp.
A California Superior Court recently granted class certification relative to a class of hundreds of employees against a group of dispensary defendants where the Plaintiffs presented sufficient evidence that the off-the-clock work claims, meal and rest period claims, and reimbursement of necessary business expenses claims predominated over individual inquiries and were typical of the class. The Court did not rule on the merits of the integrated enterprise, alter ego, or joint employer arguments, nor did the Court agree with the Defendant’s arguments that the claims were not typical because the Plaintiffs were not employed by each Defendant. Nonetheless, the ruling is important for employers in general and cannabis dispensaries in particular.
Another lawsuit challenging state regulations that attempt to curb the use of hemp-synthesized intoxicants (HSI) in consumer products was commenced last week.
In a complaint filed in federal court in Alaska on November 2, 2023, AK Industrial Hemp Assoc. et al. v. Alaska Department of Natural Resources, et al, the plaintiffs challenge the constitutionality of Alaska regulations that prohibit the sale in Alakska of hemp products for human consumption that contain delta-9 THC or synthetic cannabidiol.
There are now more than half a dozen lawsuits challenging state regulations that target HSIs, which further demonstrates the need for Congress to make clarifying changes to the definition of hemp in the 2023/24 Farm Bill to correct the loophole that has resulted in the proliferation of these intoxicating and potentially unsafe substances.
This restriction, referred to as a “Total THC Standard,” is intended to prevent the sale to consumers of ingestible, smokable, and otherwise consumable products that contain intoxicants derived from federally lawful hemp that are the functional equivalent of the delta-9 THC in federally unlawful marijuana. Such products have proliferated since the 2018 Farm Bill because chemical processes can be used to convert the chemicals in hemp into intoxicating compounds like delta-8 THC.
The Court in No. VA Hemp determined that the plaintiffs were unlikely to succeed on the merits of their claims because, among other things, the 2018 Farm Bill did not preempt states from regulating hemp products sold in their states.
The Nebraska Attorney General and the California Attorney General have filed lawsuits recently under their states’ consumer protection statutes targeting the manufacturers of hemp products containing Delta-8 THC, noting the health and safety risk to consumers of these products. Such products, known as “hemp synthesized intoxicants” or “HSIs” are often just as intoxicating as the Delta-9 THC in state-legal adult-use and medical marijuana, but may not be subject to the same types of licensure, testing, and packaging/labeling requirements imposed under state cannabis programs.
Opponents of HSIs argue that hemp was legalized as an agricultural commodity, and the 2018 Farm Bill was focused on the production (cultivation) of hemp, not consumer finished products that could be manufactured using its constituents. They posit that Congress did not intend for the chemicals in hemp to be converted into a host of compounds just as intoxicating as Delta-9 THC.
State AG consumer protection lawsuits against manufacturers of products containing HSIs are an attempt to curb their proliferation. Congress may address the perceived loophole that is being exploited to manufacturer HSIs in the forthcoming Farm Bill.
Just ahead of the Senate Banking Committee’s vote on the Secure and Fair Enforcement (SAFE) Banking Act, the Financial Crimes Enforcement Network (FinCEN) has reported that a total of 812 banks and credit unions filed reports in the 2d quarter 2023 indicating they are actively providing banking services to cannabis industry participants, referred to by FinCEN as Marijuana Related Businesses, which is the highest number since FinCEN began reporting on cannabis banking activity in 2014. However, those 800 or so banks are just a fraction of the thousands of FDIC banks that could be providing banking services to the cannabis industry. Even with the increase in banks providing their services to the cannabis industry since 2014, the industry remains burdened by a dearth of banking. Cannabis companies, employees, and consumers are not able to access traditional financing, payroll services, credit cards, ACH, and debit services, which are the lifeblood of other consumer packaged goods industries. Meanwhile, banks are routinely analyzing entering the cannabis space, but deciding against it because of the cost of compliance, among other reasons. SAFE Banking would provide access to critical banking services.
