Ninth Circuit Says Intoxicating Delta 8 Hemp Products Are Legal
But don't read too far past this holding
Yesterday, the Ninth Circuit handed down an opinion that delta-8 derived from hemp is legal. This is an important ruling. As far as I know, this is the first appellate court to weigh in on what “hemp” means under the 2018 Farm Bill by looking at its language.
The headliner is obvious: federal court says delta-8 THC is legal. That isn’t much different from what DEA guided in September. The discussion is what does the court say about other matters.
For starters, it is important to note what courts do. They resolve cases or controversies. And in so doing, they only answer the question put in front of them. Here, the Ninth Circuit was ruling on the question presented to it: whether the possession and sale of delta-8 THC is permitted legal under the CSA.1
The case is an appeal from a preliminary injunction in a trademark dispute. Preliminary injunctions are preliminary rulings entered by federal district courts to preserve the status quo. They do not, necessarily, apply for the entire case. Importantly, unlike other preliminary rulings, the federal rules allow parties to appeal preliminary injunctions immediately, which are reviewed by appeals courts for an “abuse of discretion” — a highly deferential standard of review. But on questions of law, appeals courts review questions de novo or, without any deference. And on these questions of law, appeals court rulings carry authoritative weight.
This is such a case. Boyd Street (defendant) appealed a ruling on a preliminary injunction. And the issue of whether AK Futures could show a “likelihood of success on the merits” turned on one such question of law—specifically, the legality of the trademark at issue and delta-8. In the case, AK Futures argued that delta-8 falls under the definition of hemp, which was legalized by the 2018 Farm Act. Boyd urged a different interpretation of the Act based on an (erroneous) read of DEA documents and congressional intent. AK Futures won: “the plain and unambiguous text of the Farm Act compels the conclusion that the delta-8 THC products before us are lawful.”
Strictly speaking, the court makes no broader proclamation in the case. But to reach that holding, it had to do some statutory interpretation and interpret 7 U.S.C. § 1639o. The bottom line interpretation is the following sentence on page 14:
A straightforward reading of § 1639o yields a definition of hemp applicable to all products that are sourced from the cannabis plant, contain no more than 0.3 percent delta-9 THC, and can be called a derivative, extract, cannabinoid, or one of the other enumerated terms
A few lines later, the court explains that the definition “seemingly extends to downstream products and substances, so long as their delta-9 THC concentration does not exceed the statutory threshold.”
Contrary to what some may take away from this statement, I don’t view it as an endorsement of either the source rule or all hemp-derived finished products containing more than .3% THC (such as gummies). Far from it. If anything, it appears to refute the broader notion of “hemp-derived” product legality.
To qualify for the 2018 Farm Bill carve-out, per the court, a finished cannabis product must be able to be called a derivative, extract, cannabinoid, or any of the other enumerated terms. Hence, on page 15 the statement that “[c]ertainly, a substance must be a derivative, extract, cannabinoid, or one of the other enumerated terms to fall within the Farm Act’s statutory definition.” The court explains that these terms “do not impose meaningful constraints” and cites definitions of each:
Derivative: “[A] chemical substance related structurally to another substance and theoretically derivable from it[.]”
Extract: “The substance extracted[.]”
Cannabinoid: “Any of a group of substances including cannabinol, cannabidiol, and other structurally related compounds of natural and synthetic origin.”
On the record before it, the court held that delta-8 THC in AK Futures’ e-cigarette liquid fit comfortably within the statutory definition of “hemp.” The exact statement by the court bears emphasis: “the delta-8 THC in the e-cigarette liquid is properly understood as a derivative, extract, or cannabinoid originating from the cannabis plant and containing ‘not more than 0.3 percent’ delta-9 THC.” This is consistent with what I argued six months ago. Note what the court did not say. It did not say that the e-cigarette liquid itself is properly understood as the derivative, extract, or cannabinoid originating from thecannabis plant. It focused on the “delta-8 THC in the e-cigarette liquid.”
Now ask: does a delta-9 gummy or other intoxicating delta-9 finished product resemble any of these definitions listed above? No. And now replace the Ninth Circuit’s analysis of the delta-8 THC liquid with delta-9 THC. Is the “delta- THC in the [gummy] is properly understood as a derivative, extract, or cannabinoid originating from the cannabis plant”? Certainly, yes. But does that component contain “not more than 0.3 percent delta-9 THC”? Absolutely not. Thus, transposing the Ninth Circuit’s precise reasoning to delta-9 THC does not endorse a source rule or just look at the “finished product” theory to legality in any way. You have to look at the component that can be characterized as the “derivative, extract, or cannabinoid.” But again, strictly speaking, this isn’t the holding of the case.
Boyd Street made two arguments, neither of which trumped the plain meaning of the statute.
First, Boyd Street argued that DEA interpreted the Farm Bill carve-out not to apply to delta-8 “because of its method of manufacture,” pointing to the Interim Final Rule that Shane and I are challenging on behalf of Hemp Industries Association and RE Botanicals. Boyd argued that delta-8 is “synthetically derived” because it must be extracted from the cannabis plant and refined through a manufacturing process—such as being concentrated and flavored.
This argument (correctly) fell flat. The Farm Act’s definition of hemp does not limit its application according to the manner by which “derivatives, extracts, [and] cannabinoids” are produced. Also, the court explained, even if the relevant portions of the Farm Act were ambiguous, DEA did not appear to agree that the delta-8 before the court was synthetic. Instead, per the court, DEA explained “that the source of the product—not the method of manufacture—is the dispositive factor for ascertaining whether a product is synthetic.”
Now let’s be clear. This statement is not an endorsement of the “source rule” as we have known it, i.e., the source of a cannabinoid (hemp vs. marijuana) determines legality. This is a very different source rule. This is the Ninth Circuit, summarizing DEA’s position, stating that the source of delta-8 determines its legality. If the source is cannabis (with no distinction between marijuana or hemp) then the delta-8 is legal. If the source is something other than cannabis (i.e., synthetic), it is not legal. This is a cannabis vs. non-cannabis source rule for tetrahydrocannabinols other than THC.
Next, Boyd Street made the “Congressional Intent” argument. “Congress intended the Farm Act to legalize only industrial hemp, not a potentially psychoactive substance like delta-8 THC.” But in accordance with what as Shane, I, and many others (such as Rod Kight) have argued, “this limitation appears neither in hemp’s definition, nor in its exemption from the Controlled Substances Act.” Intoxication is not relevant to statutory interpretation of the 2018 Farm Bill. Courts start with text, not vague, speculative, and disputed notions of purpose not reflected in any part of the text.
While exactly what other parts of the opinion mean may be up for reasonable debate, in my view, this portion of the opinion is a slam dunk:
Regardless of the wisdom of legalizing delta-8 THC products, this Court will not substitute its own policy judgment for that of Congress. If Boyd Street is correct, and Congress inadvertently created a loophole legalizing vaping products containing delta-8 THC, then it is for Congress to fix its mistake. Boyd Street’s intent-based argument is thus unsuccessful.
Importantly, the Ninth Circuit made no determination on whether delta-8 products sold for human consumption in interstate commerce would be legal under the FDCA. There is a distinction between whether delta-8 is “legal” versus “legal for human consumption in interstate commerce.” Nor does it address potential Analogue Act issues.