Between the patchwork of state regulations — and limited federal oversight that’s spread across multiple agencies — it’s difficult to successfully navigate the legal aspects of the cannabis industry.
Justin J. Prochnow, shareholder, Greenberg, Traurig, LLP, and Steve Schain, senior attorney, Hoban Law Group, presented insights into the hemp (CBD) and cannabis (THC) sides of the industry, respectively, during Cannabis Products Exchange, hosted virtually July 30-31.
Schain, who has a background in representing banks, says the banking industry is highly regulated and its members are required to report information clearly and accurately. Given the cannabis industry’s roots in the black market, coming to terms with these requirements has been a process.
“It’s just an evolving thing in cannabis,” he says.
Schain pointed to the dissonance between federal approaches to cannabis and its constituents, noting marijuana is classified as a Schedule I controlled substance under the Controlled Substances Act (CSA), but the U.S. Food and Drug Administration has approved Epidiolex, a CBD-based drug, to treat rare forms of pediatric epilepsy.
“We have a split in federal organizations,” he says. “The legislature says it has no medical application. Another organ of the federal government says it helps out kids, so it’s very confusing.”
According to the U.S. Constitution’s Supremacy Law, federal regulations will supersede any state regulations that are in conflict with them. So what’s stopping the federal government from “kicking in the doors,” as Schain says, of the states that have legalized cannabis use?
Schain cited the Cole Memo of 2013, which notes cannabis remains illegal under the CSA, but the Justice Department would focus its resources on the most significant threats in the most effective, consistent and rational way.”
Schain said the Justice Department has eight enforcement priorities, which include:
- Distribution of marijuana to minors
- Revenue from marijuana sales going to criminal enterprises
- Diversion of marijuana from states where it’s legal in some form to other states
- State-authorized marijuana activity being used as a cover or pretext for other illegal activity
- Violence and use of firearms in marijuana cultivation and distribution
- Drugged driving and exacerbation of other adverse public health consequences associated with marijuana use
- Growing of marijuana on public lands
- Marijuana possession or use on federal property.
The Rohrabacher-Blumenauer Amendment, passed as an attachment to the Commerce, Justice, and Science Appropriations bill in 2014, also prohibits the Justice Department from using federal funds to prosecute for use, distribution, possession or cultivation of medical marijuana.
Currently, no protection has been extended to adult-use cannabis, but Schain said it is proposed to have it covered under the amendment. However, the 2018 Sessions “Marijuana Enforcement” Memorandum said U.S. attorneys must find a “substantial federal interest” to prosecute.
So far, that doesn’t seem to have happened, Schain says.
“I have heard of virtually no prosecutions whatsoever because I don’t think the federal government wishes to spend their money doing it,” he says. “I think if someone’s doing something vastly illegal they will.”
Additionally, Prochnow discussed the evolution of hemp regulation in the United States. Before the end of 2018, all parts of the Cannabis sativa plant, except for ungerminated seeds and mature stocks, were considered marijuana under the CSA.
However, with the passage of the 2018 Farm Bill, hemp is now defined as any part of the Cannabis sativa L. that has a delta-9 tetrahydrocannabinol (THC) concentration of 0.3 percent or less on a dry weight basis. The bill also prohibits interference with interstate transports of legal hemp.
“This is obviously a huge deal for companies because it essentially took the DEA (Drug Enforcement Administration) out of the equation when companies were evaluating whether this was an industry they wanted to get into,” Prochnow says.
Prochnow noted the U.S. Department of Agriculture must review and approve plans for any state or tribal land hemp-growing programs. Farmers must also be licensed under these programs.
Meanwhile, the Federal Trade Commission (FTC) covers all advertising, which must be truthful and not misleading, fair and substantiated. The FTC has issued joint warning letters with the U.S. Food and Drug Administration (FDA) to companies selling products with CBD and hemp, asserting the companies were not making substantiated claims.
Of the more than 50 warning letters the FDA has issued, the majority of them take issue with claims related to treatment of diseases, Prochnow says.
“Don’t sell your product to treat cancer, to treat arthritis, to treat Alzheimer’s, and it’s not likely the FDA is going to be looking to take action against you,” he says.
While there is no law regulating the use of CBD in FDA-regulated products, the agency has taken the position it can’t be used in food since it’s already been approved as the drug Epidiolex.
However, there is discussion on whether a 97-98 percent CBD isolate used in Epidiolex can be considered the same as a full-spectrum hemp extract with 20-80 percent CBD.
“The industry’s perspective is that no, those certainly aren’t the same thing,” Prochnow says. “While there might be an argument from the FDA that a CBD isolate is excluded from being used, that’s just not the same thing as a broad-spectrum or full-spectrum hemp extract with some lesser amount of CBD.”
Though the FDA hosted a public hearing last May and has formed a task force to further investigate how to regulate CBD, there has been little movement since the onset of the COVID-19 pandemic in March.
“Marijuana has always been ‘hurry up and wait,’” Schain said earlier in the presentation, “so we’ll see what happens next.”