Hemp Laws

This information was last updated November 2018. Hemp and marijuana laws are rapidly changing. The materials available at this web site are for informational purposes only and not for the purpose of providing legal advice. You should contact your attorney to obtain advice with respect to any particular issue or problem.

There are some concerns and conflicting information about hemp and CBD legality in the wake of widespread marijuana regulation and legalization. While hemp is regulated separately from marijuana, the close relationship between the two makes careful distinction and understanding of the corresponding laws important. This letter examines the federal laws, Colorado statues, and policies regarding hemp and CBD.

The Controlled Substances Act (CSA)

The first question is whether hemp and CBD are federally illegal. The CSA is the primary federal code regulating and criminalizing drugs in the United States. Under the CSA, both marijuana and synthetic THC are classified as a Schedule 1 drugs. Schedule 1 drugs are those that have been determined to have a high potential for abuse with no medically accepted uses.

Though there have been many efforts to change the classification of marijuana, the DEA confirmed their position that marijuana is a schedule 1 drug in a paper published July 2016.[1] The nationwide trend seems to be towards decriminalization of marijuana. But, marijuana is likely to remain illegal federally for the short term. Fortunately for hemp manufacturers and processors, industrial hemp has been excluded from the CSA’s prohibition on marijuana and THC.

Federal Case Law

In Hemp Indus. Ass’n v. DEA, the Ninth Circuit Appellate Court held that the DEA only has the authority to make rules for marijuana or synthetic THC, but not for THC naturally occurring in non-marijuana, i.e., hemp. 357 F.3d 1012, 2013 (9th Cir. 2004). “[I]n accordance with Schedule I, the DEA’s relevant rules and regulations may be enforced only insofar as they ban the presence of marijuana or synthetic THC.” Id. The CSA defines marijuana as:

“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. (Emphasis added).”

With the CSA definition alone, it is unclear whether hemp would be classified as “marijuana.” The Ninth Circuit Appellate Court in Hemp Indus. Ass’n determined that hemp is like “poppy seeds commonly consumed on bagels and exempted from the CSA, that come from the non-drug variety of, but the same species as, the opium poppy… non psychoactive hemp seed products do not contain any controlled substance as defined by the CSA.” As such, naturally occurring cannabinoids in industrial hemp are federally legal according to the Ninth Circuit.

Federal Hemp Legislation: The Farm Bill

The Agricultural Act of 2014 (the Farm Bill), is a large bill concerning many elements of American agriculture. Of importance here is Sec. 7606, titled “Legitimacy of Industrial Hemp Research.” A copy of this Sec. 7606 is attached hereto. This section clarifies that, in spite of the CSA and other federal laws, institutions of higher education and State departments of agriculture can cultivate industrial hemp.

More importantly, the section defines “industrial hemp” as “the plant Cannabis sativa L. and any part of such plant, whether growing or not, with a delta-9 tetrahydrocannabinol concentration of not more than 0.3 percent on a dry weight basis.” Colorado hemp laws ensure that all hemp produced is 0.3 percent or less THC and falls within the definition of industrial hemp in the Farm Bill and therefore arguably excluded from the definition of marijuana under the CSA. The introduction to the section makes clear that this definition is in spite of other laws and controls when the laws conflict:

“Notwithstanding the Controlled Substances Act (21 U.S.C. 801 et seq.), the Safe and Drug-Free Schools and Communities Act (20 U.S.C. 7101 et seq.), chapter 81 of title 41, United States Code, or any other Federal law, an institution of higher education (as defined in section 101 of the Higher Education Act of 1965 (20 U.S.C. 1001)) or a State department of agriculture may grow or cultivate industrial hemp. (Emphasis added).”

Since the Farm Bill makes the entire plant legal when properly sourced, the extracts (CBD) from the plant are also arguably legal under the CSA. Industrial hemp manufacturers must be careful that the THC limit of 0.3% is met in order for the Farm Bill’s protections to apply. Still, cultivation in the United States may only occur through pilot programs with the State’s Department of Agriculture, as is the case here in Colorado.

To give “teeth” to the Farm Bill, Congress de-funded the Department of Justice with regards to hemp enforcement. Congress accomplished this using the Consolidated Appropriations Act, passed most recently in March 2018[2]. The Act states that “[n]one of the funds made available by this Act or any other Act may be used in contravention of section 7606 of the Agricultural Act of 2014; or to prohibit the transportation, processing, sale, or use of industrial hemp that is grown or cultivated in accordance with subsection section 7606 of the Agricultural Act of 2014.”

DEA Marijuana Extract Definition and Policy Statements

On December 14, 2016 the DEA released a Final Rule creating a new definition of marijuana extract which many people interpreted to include and criminalize CBD extract. The definition includes: “an extract containing one or more cannabinoids that has been derived from any plant of the genus Cannabis, other than the separated resin (whether crude or purified) obtained from the plant.” The Final Rule goes on to explain that marijuana extract will continue to be treated as Schedule 1 substances under the CSA. Since CBD is a cannabinoid extracted from marijuana or hemp plants (both in the Cannabis genus), many thought CBD oils would fit into this definition and be treated as a Schedule 1 drug. This rule has been subsequently clarified to retract the speculative illegality of hemp-derived CBD.

Specifically, the DEA clarified that the Final Rule was intended to simply create a new Code Number for marijuana extract for the DEA to track extract separately from marijuana, not criminalize CBD. The definition was likely the byproduct of poor drafting. Following outrage in the hemp community and Congress, the DEA released a new statement to clarify the rule.[3] The comment explains that:

“The new drug code established in the Final Rule does not include materials or products that are excluded from the definition of marijuana set forth in the Controlled Substances Act (CSA).The new drug code includes only those extracts that fall within the CSA definition of marijuana. If a product consisted solely of parts of the cannabis plant excluded from the CSA definition of marijuana, such product would not be included in the new drug code or in the drug code for marijuana.”

This explanation means that CBD extracted from sources that are federally legal will stay legal, and only extracts from federally illegal marijuana will be classified under the Rule. Those hemp processors operating under the Farm Bill, as is the case in Colorado, are therefore in compliance with this rule and federal law despite a first reading of the Final Rule.

Congressional Letter to the DEA, FDA, and U.S. Department of Agriculture

In an October 27, 2016 letter signed by Senator Rand Paul, Rep. Jared Polis, and seventeen other congresspersons to federal government agencies, Congress emphasized that executive agencies should not be creating their own definitions for industrial hemp. The letter asked the agencies to remove the definition in guidance that is issued, and to rely on the definition contained in the Farm Bill instead. “With such a narrow definition [referencing the definition by the agencies], limiting application of industrial purposes to fiber and seed, researchers will be prohibited from studying other parts of the hemp plan, which are vital to understanding the entire plant and all of its potential uses. For instance, over half of Kentucky’s hemp acres are being used to research cannabidiol (CBD), an oil, which could be prohibited under the guidance’s definition.”

The letter is very clear that Congress intended to allow research and pilot programs for industrial hemp and CBD processed from the hemp:

“Congress prohibits the federal government from interfering with the transportation and sale of industrial hemp grown in accordance with a pilot program, while leaving it up to the states to regulate industrial hemp within their borders.”

The letter goes on to explain that the federal agencies cannot regulate whether a state allows industrial hemp or not, since it is solely up to the states under the Farm Bill. The tone of the letter is stern, reprimanding the federal agencies for tinkering in hemp regulation outside of their powers under the Farm Bill.

Senator’s Letter to the Attorney General Regarding Banking

On June 30, 2017 several senators wrote a letter to Attorney General Jeff Sessions. The letter was to help convey concern over the industrial hemp industry’s access to banking. Since the status of hemp’s legality has fluctuated and legality is dependent on several overlapping laws, banks and financial institutions have closed hemp accounts. The letter asks for assurances that the Department of Justice will follow the Consolidated Appropriations Act cited above and not take any actions against legal industrial hemp businesses. Attorney General Sessions has not issued a formal response to the letter, but it still served as a reminder that the Department of Justice is not permitted to pursue any industrial hemp businesses that comply with the Farm Bill.

2018 CBD Development

The DEA’s December 2016 Final Rule regarding marijuana extract was recently challenged and clarified in an April 30, 2018 decision by the 9th Circuit Court of Appeals in Hemp Industries Assoc. v. U.S. Drug Enforcement Administration, No. 17-70162, 2018 U.S. App. LEXIS 11005 (9th Cir. Apr. 30, 2018).  In this case, the Hemp Industries Association (HIA) argued (1) that the DEA overstepped its authority in making the rule; and (2) that because CBD can be extracted from hemp flower, and industrial hemp with less than 0.3% THC is lawful, CBD production is protected by the 2014 Farm Bill. In the opinion, the 9th Circuit judges dismissed the HIA’s claim on a technicality, stating that because the HIA failed to actively participate in the DEA’s rule-making process they lacked standing to the bring the current challenge. The court, though, did clarify that the DEA’s “marijuana extract rule” does not apply to hemp or hemp-derived products produced in compliance with the Farm Bill. Therefore, hemp producers may continue to extract and sell CBD where it is permitted under state law.

In May 2018, following the 9th Circuit Court’s ruling in Hemp Industries Assoc. v. U.S. Drug Enforcement Administration, the DEA issued a new clarification to the extract rule, which reads, in part:

“Products and materials that are made from the cannabis plant and which fall outside the CSA definition of marijuana (such as sterilized seeds, oil or cake made from the seeds, and mature stalks) are not controlled under the CSA. Such products may accordingly be sold and otherwise distributed throughout the United States without restriction under the CSA or its implementing regulations. The mere presence of cannabinoids is not itself dispositive as to whether a substance is within the scope of the CSA; the dispositive question is whether the substance falls within the CSA definition of marijuana.”[4]

This clarification leads to the understanding that CBD production and the DEA rule can coexist where hemp is grown and processed pursuant to the Farm Bill.

However, outside of this interpretation, no formal legal protections have been afforded to CBD and hemp production. The circuitous path of legal precedent surrounding CBD and hemp products raises concerns as to the questionable legality of hemp and CBD. Producers should be cautious and remain vigilant of new developments in this area of the law.

Colorado Hemp Statutes

Hemp cultivation is legal in Colorado under C.R.S. 35-61-102:

“Notwithstanding any other provision of law to the contrary, a person who holds a registration issued pursuant to section 35-61-104 may: Engage in industrial hemp cultivation for commercial purposes; or Grow industrial hemp for research and development purposes. Notwithstanding any other provision of law, a person registered pursuant to section 35-61-104 is not subject to any civil or criminal actions for engaging in the activities described in subsection (1) of this section if the person is acting in compliance with this article.”

That section makes it clear that Colorado does not prohibit the cultivation of industrial hemp under the Farm Bill, but that a separated registration process is required with the state.

Hemp processing is similarly legal in Colorado under C.R.S. 35-61-108(2):

“A person engaged in processing, selling, transporting, possessing, or otherwise distributing industrial hemp cultivated by a person registered under this article, or selling industrial hemp products produced therefrom, is not subject to any civil or criminal actions under Colorado law.”

That section protects hemp cultivated in Colorado under the pilot programs, and does not regulate imported hemp. A facility that complies with this section is compliant with the law in Colorado as long as there are not issues with local land use and zoning.

To give regulatory effect to the statutes, The Colorado Department of Agriculture has implemented an industrial hemp pilot program to allow some cultivation of hemp in Colorado.[5] This program is a requirement for anyone seeking to enter hemp cultivation in Colorado. The Department of Agriculture is specific however when it states:

“The Industrial Hemp Program does not regulate the processing of industrial hemp and cannot answer questions about rules and regulations regarding the processing of industrial hemp. The CDA receives many calls about processing rules and regulations. You will need to research what government agency, if any, regulates the type of processing that you are interested in. Industrial Hemp registrations are for the cultivation (growing) of industrial hemp only, not the processing of industrial hemp.”

Colorado Removal of Hemp Definition from Constitution

In November, 2018, Colorado voters voted 60.65% in favor of removing the definition of hemp from Colorado’s constitution. Proponents of the change cited greater flexibility as a primary driving factor. With this amendment, Colorado will be able to change its definition of industrial hemp through the legislature to match any changes in federal law. Opponents were concerned that this made hemp’s legal position more tenuous since its legality is controlled by the whim of the legislature. While this seems like a minor change, even small changes to the definition of industrial hemp can greatly impact its legality and regulation.

The amendment has little impact on the industry immediately. The definition of industrial hemp is now found in C.R.S. 35-61-101(7): “’Industrial hemp’ means a plant of the genus cannabis and any part of the plant, whether growing or not, containing a delta-9 tetrahydrocannabinol concentration of no more than three-tenths of one percent on a dry weight basis.” This definition is very similar to that previously in the Colorado constitution, so there have not been any immediate changes and existing hemp businesses will be able to continue operating as they have before. The bigger impact will be seen in the coming years as federal legislation around the issue changes.

Conclusion

While hemp and CBD have garnered some federal support, producers still bear the risk that federal approval may be short-lived.  Recent efforts to ensure the future legality of hemp and CBD extractions include the Hemp Farming Act of 2018. Passage of this law would permanently remove hemp and hemp products from the umbrella of the CSA. However, until that time the future of hemp and CBD production remains uncertain.

If you have any questions regarding hemp extraction or CBD production, or would like to learn more about how to enter the hemp and CBD industry, please do not hesitate to contact our office.

[1] https://www.deadiversion.usdoj.gov/schedules/marijuana/Maintaining%20Marijuana%20in%20Schedule%20I%20

of%20the%20Controlled%20Substances%20Act.pdf.

[2] Pub. L. No. 115-141, (Sec. 729)

[3] https://www.deadiversion.usdoj.gov/schedules/marijuana/m_extract_7350.html

[4] https://www.deadiversion.usdoj.gov/schedules/marijuana/dea_internal_directive_cannabinoids_05222018.html

[5] https://www.colorado.gov/pacific/agplants/industrial-hemp-quick-facts

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