The Source Rule Is Dead

Proof that marijuana seeds, tissue cultures, and genetic material aren't controlled substances

Contrary to what you may have read in the comment sections of LinkedIn recently, the Source Rule is dead. What do I mean by that? Simply that whether a particular sample of CBD (or any other cannabis-derived material) is a controlled substance doesn’t depend on the sample’s source. Rather, in the wake of the 2018 Farm Bill, the analysis depends entirely on whether the sample contains .3% delta-9 THC or more on a dry weight basis. If so, it’s schedule I “marihuana.” Otherwise, it’s hemp.

As Matt mentioned in passing in his essay on Delta 9 gummies:

This actually leads to some counterintuitive conclusions. For example, seeds or tissue culture sourced from an illegal “marihuana” plant might themselves be uncontrolled “hemp” because the seed or tissue material doesn’t have more than .3% THC by dry weight.

How do we know that’s right? Start with Matt’s flow chart illustrating our reading of 21 U.S.C. 802(16):

The lesson here? When it comes to determining whether a particular cannabis-related substance is federally legal “hemp” or schedule I “marihuana,” it is the substance itself that matters—not its source. If the substance exceeds the .3% threshold (and isn’t a mature stalk, fiber, etc.), it’s schedule I marijuana. Otherwise, it’s hemp and not a controlled substance.

Under that rubric, marijuana seeds, tissue cultures, and genetic materials are hemp because (according to the experts) those materials invariably contain not more than .3% delta-9 THC on a dry weight basis. And yes, that also means delta-8 THC is hemp and not a controlled substance under federal law. (But see this.)

The Source of the Source Rule: Why History Matters

The Source Rule originates with Rod Kight, a lawyer Matt and I respect very much and with whom we work closely. Rod defended the rule about as well as it can possibly be defended here. Succinctly stated, before the enactment of the 2018 Farm Bill, the legality of any particular sample of CBD depended on where it came from: it’s source. When originally conceived, the Source Rule method to determining the legal status of an extract or cannabis part was correct. Because the analysis consisted only of the first two rows of the flow chart above, whether a part of the cannabis plant “came from” the portions excluded from the definition of “marihuana” in the CSA determined its legality. When the 2014 Farm Bill legalized industrial hemp, that too provided an avenue for legal CBD. In short, at that time, source determined legal status.

True, the 2014 Farm Bill’s definition of “industrial hemp” is similar to the 2018 Farm Bill definition of “hemp,” but source remained an issue during the period after the 2014 Farm Bill but before the 2018 Farm Bill because industrial hemp only included cannabis grown under a qualified pilot program. Source still mattered.

In the wake of the 2018 Farm Bill, however, the Source Rule gave way to the .3% threshold as the critical consideration when assessing the legality of any particular sample of cannabis-related material. While the source rule might theoretically come into play if someone were to develop a cannabis plant with mature stalks or fibers with a delta-9 THC concentration exceeding the .3% threshold, we are told that is exceedingly unlikely as a practical matter.

In short, the legality of a cannabis-derived materail no longer depends on its sources. Nor does the 2018 “hemp” exclusion have strings attached to it like the 2014 Farm Bill “industrial hemp” exclusion. The 2018 “hemp” exclusion is based on what the cannabis-based substance is. More than .3% delta-9 THC dry weight? Marihuana. Less than .3% dry weight? Hemp. CBD is hemp. Always.

Although no longer valid, Rod Kight’s development of the Source Rule as a theory remains important. The rule, along with HIA v. DEA III and growing demand for hemp derivatives, may have precipitated its own demise by identifying the impractical way the law functioned. Although legally correct, the Source Rule was commercially impractical. To determine whether CBD was controlled under the Source Rule, one would have to identify the source of the substance, which in some cases could be impossible to know or hard to know without great difficulty. The 2018 Farm Bill addressed that problem by shifting the inquiry to the present: focusing on what a cannabis substance is as opposed to what it was.

Refuting the Main Counter-Argument

The analysis above has triggered just one serious counter-argument. It goes something like this:

1. all parts of the marihuana plant are illegal controlled substances;

2. therefore, to obtain cannabinoids from the marihuana plant, you’d have to possess and process a controlled substance, which is illegal;

3. therefore, the process of obtaining marijuana-derived CBD (and any other marijuana-derived material) violates the law;

4. it therefore follows that all marijuana-derived CBD (and any other marijuana-derived material) is a controlled substance.

There are several problems with this analysis, but I’ll focus on two interrelated issues here. First, this argument assumes that because marijuana is a controlled substance, nobody can possess or process it. That’s demonstrably untrue. The CSA expressly permits DEA to register people to handle marijuana. Indeed, Matt and I won a series of lawsuits that ended the NIDA monopoly and opened the door for DEA to issues several additional marijuana “grow” licenses. The CSA also permits DEA to waive the statute’s requirements for various reasons and under various conditions. See 21 USC 822(d), 872(e). So the premise that it’s impossible to obtain cannabinoids from a marijuana plant without violating the law is simply mistaken.

Second, even if it were impossible to derive CBD from marijuana without violating the CSA, that wouldn’t prove that marijuana-derived CBD is a controlled substance. It would only prove that processing and handling marijuana is illegal—something that, in the absence of a DEA license or waiver, nobody disputes. I could extract water from marijuana, too. Does that mean water is a controlled substance? Obviously not.

If the point of this argument is that it’s practically difficult to obtain anything (CBD, water, etc.) from a marijuana plant without violating federal law, I agree. But the test of whether X is a controlled substance is not whether it is difficult to obtain X. The test is whether it falls within the definitions of substances listed in 21 USC 812 and/or 21 CFR 1308. CBD—a cannabinoid that, by definition, contains not more than .3% delta-9 THC—doesn’t. And because that’s true regardless of where it came from, the source rule is dead.

When Matt, Shane, and DEA’s “Official Determination” Align ….

We’re confident about this. But you don’t need to take our word for it because it also happens to be the official position of DEA:

The screen shot above comes from an “official determination” of the agency. Don’t bother googling it, though. You won’t find it anywhere on the internet or in any public document.

Want to know where it came from? I’ll let you in on a little secret …