Here at Pipeline, we aim to keep our readers up to date on developments in the law that affect the cannabis industry. In that vein, we share two interesting articles from the venerable New York Times and wonder how Jeff Sessions might react to these business developments.

First, is the re-imagination of a pothouse — or rather the use of hemp in construction.

Could AG Sessions try to huff and puff and blow this house down? It is hard to imagine how anyone — at least anyone other than the highest law enforcement official in our country — would try to use the law to prevent the use of hemp as a construction material, especially given the remote risk of ingestion.

The Controlled Substance Act contains a very broad definition of “Marihuana”:

“The term ‘marihuana’ means all parts of the plant Cannabis sativa L., whether growing or not; the seeds thereof; the resin extracted from any part of such plant; and every compound, manufacture, salt, derivative, mixture, or preparation of such plant, its seeds or resin. Such term does not include the mature stalks of such plant, fiber produced from such stalks, oil or cake made from the seeds of such plant, any other compound, manufacture, salt, derivative, mixture, or preparation of such mature stalks (except the resin extracted therefrom), fiber, oil, or cake, or the sterilized seed of such plant which is incapable of germination.” 21 U.S.C. § 802(16). [Emphasis supplied].

The underscored exception, although it seems straightforward, has never clearly applied to hemp. Section 7606 of the Agricultural Act of 2014 (aka the “Farm Bill”) authorizes only institutions of higher education (e.g., universities) and state Departments of Agriculture to grow and cultivate “industrial hemp,”[1] and then only for agricultural research purposes where permitted under state law. The clear implication is that growing hemp for construction purposes could be viewed by the federal government as equivalent to trafficking in a schedule I drug. Does anyone care to predict where our Attorney General’s fear of cannabis begins and ends?

While it is unclear if industrial hemp is included within the Controlled Substance Act’s definition of “marihuana,” it is still arguably a Schedule I substance if it includes THC in any concentration (even below 0.3% ). This is because a material, compound, mixture or preparation that contains any quantity of THC is defined as a Schedule I controlled substance. However, cannabis contains a number of other cannabinoids, including cannabidiol (CBD), many of which have beneficial effects on human health and no psychoactivity. Most sources of industrial hemp, and the CBD derived therefrom, are likely to contain at least trace amounts of THC.

Second, we found this article of interest and wonder how the federal government’s views toward CBD might morph into concern that these beauty products could become a gateway drug for your grandmother. You might reasonably ask, “How could AG Sessions possibly object to use of CBD as pain relief or cosmetics, again not designed or labeled for ingestion?” Although, we have learned that some people ingest creams and lubricants containing high THC to circumvent adult-use dosing limits, or potentially when desperate times call for desperate measures. Risky click of the day goes to this Vice article describing what happens when you drink an entire bottle of THC infused personal lubricant.

We begin by reminding our readers that, about a year ago the DEA clarified that they consider CBD a Schedule I substance — allegedly for the purpose of tracking it separately from THC on research matters. The DEA made real “progress” in that tracking effort in the spring and summer of this year — see this The Cannabist article for an English language explanation or the DEA’s explanation here.

Needless to say, not everyone agrees that the DEA has authority to treat CBD as Schedule I. Most objections rely on the Farm Bill, which allowed growth and cultivation of industrial hemp from which (we thought at least) much CBD is derived. However, the DEA maintains that reliance on the Farm Bill is misplaced, arguing that it authorized the growth and cultivation of industrial hemp and that legislation did not permit the production of “non-FDA-approved drug products made from cannabis.” This fight was hot and heavy in Indiana last year where the state AG attempted to remove CBD oils from the market. Somewhat surprisingly, the DEA itself has apparently told Indiana to chill out.

Bottom line: the DEA considers at least some CBD as a Schedule I substance and it is probably too early to predict how it will shake out.

Second, CBD companies need to consider the FDA. On November 1, 2017, the FDA issued a news release regarding CBD products. The news release notes that the FDA issued “warning” letters to four companies “illegally selling products online that claim to prevent, diagnose, treat, or cure cancer without evidence to support” such claims.

Third, trying to convince an IRS agent that CBD should not be subject to IRC section 280E could prove a challenge in light of recent DEA pronouncements. Section 280E applies to anyone trafficking a Schedule I substance. The DEA pronouncement gives the IRS ammunition to audit and propose adjustments to any CBD business not applying 280E on their tax returns.

So, is your CBD product a Schedule I substance? The answer could well depend on how the CBD was produced. If the single chemical entity CBD comes from the flowers of any cannabis plant (including Cannabis ruderalis aka industrial hemp), where CBD is abundant and not the excepted parts noted above, it is probably treated as a Schedule I substance because it will have at least trace amounts of THC and thus illegal to possess in the U.S.

On the other hand, there are good arguments that synthetic CBD is legal if it is created by chemosynthesis or biosynthesis and contains no other cannabinoids. Similarly, there are good arguments that natural CBD from the exempted parts of marihuana are legal. These types of CBD are expensive (which is what you get when you derive CBD from material where you are least likely to find it), but is readily available from companies like Isodiol.

Here’s an article from last month about a company claiming to synthesize CBD (a soluble in hydroethanol) from hops, a plant related to cannabis. Not everyone believes them.

In sum, anyone trafficking in CBD and hemp should be thinking about these issues and consider them carefully.