Husch Blackwell: That Ninth Circuit Delta-8 Opinion and What’s Followed – It’s Not a Green Light for Intoxicating Hemp

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The debate surrounding delta-8 THC and the proper regulation of intoxicating hemp products has accelerated greatly over the last several months, fueled by multiple court decisions, federal policy actions, and new state laws. Not least of which is last May’s decision in AK Futures LLC v. Boyd St. Distro, LLC, No. 21-56133, 2022 WL 1574222 (9th Cir. May 19, 2022).

This case provides a great deal of clarity for many seeking to enforce trademark protections for hemp products. It is a major win for intoxicating hemp maximalists, and in hindsight, it feels like the start of many that came this summer. However, it would be unwise to see these developments as a final green light to produce and sell delta-8, delta-10, hemp-derived delta-9, and other intoxicating hemp products across the country.

In the next three blog posts, we’ll catch you up on the details of AK Futures and what it means, but more importantly, we’ll discuss why this case, and other similar activity, is likely more of a blip than a landmark. Finally, we will discuss intoxicating hemp issues that long-term operators in the hemp (and regulated marijuana) markets need to be considering.

AK Futures

In AK Futures, the Ninth Circuit held that products containing hemp-derived delta-8 tetrahydrocannabinol may be lawfully used in commerce and eligible for trademark protection under the Lanham Act. Significantly, the court decided that downstream hemp-derived delta-8 THC products can fit within the legal definition of “hemp” under the Agricultural Improvement Act of 2018 (most call it the 2018 Farm Bill) so long as they consist of less than 0.3% delta-9 THC and are derived from hemp itself consisting of less than 0.3% delta-9 THC.

The Ninth Circuit Finds That the Definition of Hemp Turns on Delta-9 THC Concentration.

The court first delved into the statutory definitions of hemp and marijuana. Under the Controlled Substances Act and the 2018 Farm Bill, any part of the Cannabis Sativa L. plant, including any cannabinoid, extract, or derivative, is either federally-prohibited marijuana (0.3% or higher delta-9 THC) or federally-legal hemp (less than 0.3% delta-9 THC).

The Ninth Circuit emphasized that the distinction between hemp and marijuana under the 2018 Fam Bill rests solely upon the 0.3% THC threshold, not upon any other distinction such as flavor, concentration, manufacturing method, or how the DEA or any agency interprets the 2018 Farm Bill.  Furthermore, the court found that the Farm Bill is unambiguous in its definition.

The Definition of Hemp Expands to All Downstream Products Derived from Hemp.

The statutory definition of hemp contains a list of downstream hemp products (“derivatives, extracts, and cannabinoids”) included in the carveout from the definition of marijuana. Instead of parsing out which of those three categories delta-8 vaporizers should fall into, the Ninth Circuit decided that the differences between the terms “do not impose meaningful constraints.”

Instead, the court established that all three terms address a broad range of chemical products, citing dictionary definitions. This breadth and the statute’s use of “all” before those terms create a sweeping reach for the term hemp. That reach extends to hemp-derived delta-8 THC products so long as they contain less than 0.3% delta-9 THC and are derived from the hemp plant.

The Original Source of the Product, Not the Manufacturing Method of the Final Product, Determines Whether a Product Is Synthetic.

The counterargument provided in AK Futures was that the DEA deemed delta-8 products synthetic – or a chemically produced analog of delta-9 – therefore making them illegal. Not only did the court disagree with this characterization of the DEA’s interpretation, but it also found that the agency’s interpretation carried no weight in the face of an unambiguous statute.

In support of its position, the Ninth Circuit pointed out that the Farm Bill’s definition of hemp does not refer to any manufacturing method, rather “[T]he source of the product—not the method of manufacture—is the dispositive factor for ascertaining whether a product is synthetic. … ‘synthetic’ delta-8 THC is produced ‘from non-cannabis materials’ and thus remains banned.” Therefore, the arguments that AK Futures’ products were flavored, concentrated, and created using a chemical process to alter naturally occurring cannabinoids were deemed irrelevant.

Notably, the court’s vague reference to “non-cannabis materials” set no meaningful guidelines for what qualifies as synthetic. That term could be interpreted to include chemical reagents (which are frequently used to catalyze CBD into delta-8 THC) present in the final product. There was no definition given by the court as to what proportion of the final product must be originally derived from hemp, or what amount of reagent presence is acceptable. Instead, the court held that whether the final product was originally derived from hemp with less than 0.3% delta-9 THC determines whether a final product is synthetic, not its method of manufacturing.

While this may seem to be a momentous decision unleashing the potential of the delta-8 market, precedent tells us that the floodgates will likely not stay open for long. More likely, the regulation of any cannabis-related intoxicants will ramp up, as we will explain in parts 2 and 3 of this series.

Contact Us

Husch Blackwell has experience working with companies on how to market and protect hemp-derived products with an eye toward more intense forthcoming regulation. Our Cannabis and Intellectual Property lawyers have the expertise to assist companies considering marketing Delta-8 THC or cannabis-containing products. Contact Steve LevineMarshall Custer, or your Husch Blackwell attorney.

Written by Braden O’Brien, a summer associate in the Husch Blackwell LLP Denver, Colorado office, with assistance from Marshall Custer.

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