Two emerging issues related to commercial cannabis are taking center stage for industry stake holders in Ohio:

  1. Current legal status of hemp and cannabidiol (CBD) based products under state law
  2. How intellectual property rights will be protected

We will walk through both the background and current status related to these issues in this two part series.

Background: Hemp and CBD legal status in Ohio

Until recently, federal law did not differentiate hemp from marijuana meaning both were considered “marihuana” (the law dates back decades and uses an older spelling of the word marijuana) and outlawed as a Schedule I Controlled Substance. Late last year, Congress passed the Agriculture Improvement Act of 2018, otherwise known as the “Farm Bill”. The Farm Bill removed hemp from the definition of “marihuana,” effectively removing it from the Controlled Substances Act and paving the way for legalized hemp cultivation and sale.

What the Farm Bill does

The Farm Bill generally paved the way for legal hemp and certain hemp-derived CBD products. There are, however, several major qualifiers. First, to be considered legal, hemp must not contain more than 0.3% tetrahydrocannabinol (THC)—the part of the cannabis plant that produces a “high”.

Second, hemp must be produced in a manner consistent with the Farm Bill as well as with associated state and federal regulations. The Farm Bill created a joint federal-state regulatory regime requiring states to take certain steps before hemp can be considered legal. Section 10113 of the Farm Bill provides that state departments of agriculture, in consultation with the state’s governor and attorney general, must devise and submit to the United State Department of Agriculture (USDA) a plan regulating hemp. The USDA must approve the state’s plan before hemp can be legally produced and sold. Notably, if a state chooses not to establish such a system, the USDA will create and enforce a plan for that state.

Third, the Farm Bill provides that certain activities such as cultivating hemp without a license under an approved plan or producing hemp with more than 0.3% THC are unlawful. The legislation outlines various penalties, including felonies, for failure to comply with these restrictions.

What the Farm Bill does not do

A common misconception is that the Farm Bill legalized hemp and CBD everywhere in the United States. In fact, the Farm Bill only narrowly legalized certain types of CBD derived from hemp. All other CBD remains a Schedule I Controlled Substance that is illegal under federal law.

The Farm Bill also did nothing to legalize state-level cannabis programs, meaning that marijuana remains illegal as a Schedule I Controlled Substance under federal law even in states that have legalized marijuana in some manner. Notably, states rely on narrow protections such as the Rohrabacher-Blumenauer budget rider (Section 537 of the Consolidated Appropriations Act, 2019) which prohibits the Department of Justice from expending funds to prosecute individuals involved in medical marijuana operations that are legal under state law.

When is CBD Legal?

CBD based products are legal if and only if:

  1. The CBD is derived from hemp
  2. The hemp does not contain more than 0.3% THC
  3. The hemp is grown by a person or entity that is licensed pursuant to a state’s USDA approved plan or a USDA imposed system regulating hemp.

Any CBD derived from hemp that is sold outside these parameters is not only illegal, but remains a Schedule I Controlled Substance under federal law.

What is the status of Ohio’s plan to regulate hemp?

Ohio is one of the few states that did not legalize hemp under the 2014 Farm Bill, which allowed states to establish hemp regulatory pilot programs and remains the current program under which states can operate until the USDA promulgates regulations (expected in late 2019) governing the state plan submission process for the 2018 Farm Bill.

Ohio has also failed to legalize hemp at the state level and thus is not currently in a position to submit a plan to the USDA for regulating hemp. But that could soon change. On March 28, 2019, the Ohio Senate passed Senate Bill 57 which would decriminalize hemp, legalize its production, and regulate producers and sellers. That bill has now gone to the Ohio house where, on June 4, 2019, a stricter subversion of the bill was voted out of the Agriculture and Rural Development Committee to the House Floor by an 11-1 vote.

So are hemp and CBD legal in Ohio?

Certain types of hemp and CBD derived from hemp are technically legal in Ohio, but not in the way or for the reasons you might think. Anyone growing or selling hemp or CBD in Ohio is not protected by the Farm Bill since Ohio has not established a pilot program under the 2014 Farm Bill, and no state level plan has (or can) be approved under the 2018 Farm Bill until regulations governing such a plan submission process are finalized.

However, Ohio’s Department of Pharmacy has stated that hemp and CBD can be sold in Ohio provided the sales are made by licensed medical marijuana dispensaries (Ohio law does not distinguish hemp or CBD from marijuana). Effectively, this means that hemp and CBD products are legal in Ohio only if they are sold within the confines of Ohio’s existing Medical Marijuana Control Program (MMCP).

Why does this distinction between legal under the Farm Bill vs. legal under Ohio’s MMCP matter? Because hemp and CBD are only legal in Ohio under Ohio’s marijuana control program; a program that remains illegal under federal law. Moreover, any attempt to cultivate or sell hemp or CBD outside of Ohio’s MMCP is illegal under state and federal law. And the Rohrabacher-Blumenauer budget rider would not prevent the Department of Justice from prosecuting individuals cultivating or selling hemp or CBD if such activities are undertaken outside of Ohio’s MMCP.

With the regulations surrounding marijuana, hemp, and CBD products in such disarray, it’s no wonder that Ohio’s Senate passed the bill that would legalize and regulate hemp and hemp-derived CBD by a vote of 30-0.

Stay tuned for par 2 of Status of CBD products under Ohio law; Emerging issues in intellectual property related to cannabis business.