Beginning with the passage of the first Farm Bill in 1933, Congress has passed an updated version roughly every five years, with the most recent passing in 2018. Farm Bills not only create and amend laws, they also allocate funding for many of the programs the food and agricultural sectors rely upon for their wellbeing. The 2018 Farm Bill achieved widespread fame in the cannabis industry because it saw Congress remove hemp from the Controlled Substances Act, where it had previously been classified as a Schedule I controlled substance.
Specifically, under the 2018 Farm Bill, hemp was, and continues to be, defined as: “The plant Cannabis sativa L. and any part of that plant, including the seeds thereof and all derivatives, extracts, cannabinoids, isomers, acids, salts, and salts of isomers, whether growing or not, with a delta-9 tetrahydrocannabinol concentration of not more than 0.3 percent on a dry weight basis.”
Thus, the 2018 Farm Bill distinguished “hemp” from “marijuana/marihuana,” thereby permitting American farmers to begin hemp cultivation for commercial use under certain conditions. Despite the 2018 Farm Bill expiring in September 2023 and needing to be replaced by the passage of a new Farm Bill, Congress failed to do so in 2023, an alarming result because major agricultural issues needing attention went unaddressed, and agricultural programs were placed at risk of losing federal funds they rely upon to survive. Fortunately, in late November, Congress extended the 2018 Farm Bill through September 2024, giving Congress additional time to pass a replacement.
Congress’ delays have left the cannabis industry in suspense, namely because the 2018 Farm Bill resulted in many unintended consequences in the industry due to the legalization of hemp, such as the rise of psychoactive hemp derivatives — consequences lawmakers have debated vigorously and indicated must be addressed in the next Farm Bill. As detailed below, how, when, and — given Congress’ inability to pass a timely replacement — if a new Farm Bill is passed, will have a profound impact on the cannabis industry.
The Unintended Consequences of Hemp Legalization
The 2018 Farm Bill’s legalization of hemp had profound and unintended consequences for the cannabis industry. Most significantly, hemp legalization resulted in the prevalence of hemp-derived compounds throughout the country with little to no federal regulation. Why? The imprecise language used in the 2018 Farm Bill, which failed somewhat spectacularly at precluding all psychoactive substances derived from hemp from its definition thereof. Specifically, when Congress sought to differentiate between marijuana and hemp, it differentiated between the two based on dry weight percent of delta-9 THC — a cannabis plant that contains more than 0.3% delta-9 THC by dry weight is classified as marijuana, a Schedule I controlled substance. If that same plant has less than 0.3% delta-9 THC by dry weight, then it’s hemp — a federally legal crop.
Simple enough, right? But what happens when one produces federally legal hemp and then synthesizes delta-8 THC therefrom (delta-8 is an isomer of delta-9 THC that has similar psychoactive effects), and makes delta-8 infused products? How about delta-10 or THC-O, two other psychoactive compounds that can be produced from hemp? The list goes on. Hannah Doctor-Loeb, in her article, A Guide to All the (Technically) Legal Cannabinoids You Can Buy Right Now, lays out nine different cannabinoids that can be extracted from hemp, each with varying psychoactive qualities.
While cannabinoids like delta-8 and delta-10 are psychoactive and the types of cannabinoids Congress likely intended to relegate to Schedule I status, a plain reading of the 2018 Farm Bill strongly supports the legality of delta-8, delta-10, and any similar hemp-derived cannabinoid other than delta-9, particularly absent supplemental guidance from the federal government. This interpretation was confirmed by the Ninth Circuit Court of Appeals in 2022, when it stated that the delta-8 products at issue were considered legal under the 2018 Farm Bill because Congress did not make clear its intent to exclude all “potentially psychoactive substance[s]” derived from hemp: just delta-9 THC (AK Futures LLC v. Boyd St. Distro, LLC). As the court stated, “the only statutory metric for distinguishing controlled marijuana from legal hemp is the delta-9 THC concentration level,” which “extends beyond just the plant to all derivatives, extracts, [and] cannabinoids.”
The result: the presence of largely unregulated, sometimes psychoactive compounds being placed into the stream of commerce on the argument that they fall within the scope of the 2018 Farm Bill’s definition for hemp. In 2022, this industry had an estimated $28.4 billion in sales in the United States alone — “greater than the total legal sales of medical and adult-use cannabis” in that same year. To put this in perspective, the American craft beer industry put up nearly identical sales numbers during that time.
Is the aforementioned and burgeoning “loophole industry” problematic? Yes, for several reasons. Most notably, the lack of regulation of products such as delta-8 at the federal level has significant implications for consumers, particularly in states that have yet to legalize adult-use marijuana. No federal oversight means that there are no federal guidelines on how to safely prepare, synthesize, and extract loophole compounds like delta-8 because, among numerous public health concerns, there are a) no testing requirements; b) no shelf-life limitations; c) no limitations on where the products can be sold; d) no restrictions on how said products can be marketed or advertised; and e) no accepted methods for verifying the dosages of the products. These concerns are not theoretical. For example, in a recent study involving the analysis of 27 delta-8 vape pens (from 10 different brands), researchers found that each product contained “unlabeled adulterants,” “unintended byproducts of chemical synthesis,” “heavy metals,” or some combination of the three (See Novel Δ8-Tetrahydrocannabinol Vaporizers Contain Unlabeled Adulterants, Unintended Byproducts of Chemical Synthesis, and Heavy Metals, by Jiries Meehan-Atrash and Irfan Rahman, published in the January 2022 issue of Chemical Research in Toxicology). Perhaps it’s no surprise then that as of October 31, 2023, American poison control centers have fielded more than 550 calls regarding synthetic cannabinoids in 2023 alone.
The foregoing, unregulated “loophole” market is the antithesis of what states require for the production, testing, and labeling of delta-9 THC cannabis products produced by state-licensed manufacturers and cultivators. For example, in Colorado, home to a mature legal cannabis industry, cannabis products are subjected to mandatory testing for “potency or contaminants which may include, but [are] not be limited to, pesticide, microbials, mycotoxin, molds, metals, residual solvents, biological contaminants, and chemical contaminants.” These robust regulations go a step further and apply to labeling and packaging, all to ensure that consumers are ingesting safe products that have been rigorously vetted before they enter the stream of commerce — and, more importantly, consumer’s bodies.
What Can Be Done in the Next Farm Bill?
There is significant pressure on Congress to address the issue discussed above and others, such as raising the THC threshold for distinguishing hemp from marijuana from 0.3% to 1%, in the forthcoming Farm Bill. Given the varying interests vying for influence in the hemp market, the legislative process presents a logical arena for change — especially in light of the multi-sector approach taken in the Farm Bill. While the specifics of the next Farm Bill remain to be seen due to Congressional delay and extension of the 2018 Farm Bill, there is no doubt there will be significant debate over the future and scope of the hemp industry created by the 2018 Farm Bill. Some of the more popular proposals that have been discussed with respect to hemp and the next Farm Bill include:
– Clarifying the FDA’s role in the regulation of hemp and hemp-derived products with clearly delineated policies and enforcement procedures;
– Raising the delta-9 THC threshold in hemp from 0.3% to 1% (and potentially enlarging the scope of the threshold to include any delta-9 THC isomers, such as delta-8);
– Explicitly identifying at what stage hemp-derived products must be measured with regard to the THC limits, and differentiating between plant matter and consumer products;
– Reworking the statutory definition of hemp to close the loopholes allowing certain intoxicating hemp-derived products into the market;
– Creating a bifurcated regulatory framework that treats hemp grown for traditional crop use differently from hemp produced for the extraction of chemical compounds;
– Accounting for the Department of Health and Human Services’ recommendation to reschedule marijuana from a Schedule I controlled substance to a Schedule III controlled substance;
– Removing the background check requirement for hemp farmers; and
– The easing of bank regulations for the hemp and cannabis industries writ large, such as discontinuing the application of Tax Code IRC Section 280E to state-legal cannabis businesses.
It remains to be seen which of these suggestions will be incorporated into the next Farm Bill, and we will continue to monitor Congress’ deliberations and provide an updated analysis when we have a concrete bill before us.
One thing is certain, the next Farm Bill promises to have profound consequences for the cannabis industry.