One-Hit Wonders

The Cannabis Paradox: Clarifying the Confusing Legality of Delta-8, THC-O, THCV, and Synthetically Derived THC

Published

2 years ago

March 9, 2023

admin

Both marijuana and hemp belong to the genus plant cannabis sativa and are slightly different “breeds” of the same “species.” While both marijuana and hemp plants contain more than 100 cannabinoids (distinct chemicals found in the cannabis plant), the discerning difference between the two is that marijuana typically has abundant levels of the psychoactive compound delta-9 THC (delta-9-tetrahydrocannabinol), whereas hemp contains high amounts of CBD (cannabidiol). Prior to 2019, both marijuana and hemp were lumped together as “marihuana/marijuana” and classified as a federally prohibited Schedule 1 drug under the Controlled Substances Act (“CSA”).

That changed with the passage of the 2018 Agricultural Improvement Act (the “Farm Bill”), which effectively removed “hemp” from the definition of “marijuana” in the CSA. The Farm Bill defined “hemp” as “the plant Cannabis sativa L. and any part of that plant, including the seeds thereof and all derivatives, extracts, cannabinoids, isomers, acids, salts, and salts of isomers, whether growing or not, with a delta-9 [THC] concentration of not more than 0.3 percent on a dry weight basis.” See 7 U.S.C. § 1639o(1). Therefore, the difference between federally-illegal marijuana and federally-legal hemp is the THC content, with the threshold divider being 0.3% THC potency. Thus, while Schedule 1 prohibits “tetrahydrocannabinols [THC],” it provides an exception for “tetrahydrocannabinols in hemp.” See 21 U.S.C. § 812 sched. I(c)(17). Furthermore, the DEA has recognized that “any material, compound, mixture, or preparation that falls within the definition of hemp set forth in 7 U.S.C. [§] 1639o” is exempt from federal prohibition. See 21 C.F.R. § 1308.11(d)(31)(ii); see also 21 C.F.R. § 1308.11(d)(58) (defining “Marihuana Extract” to include only cannabinoid extracts with greater than 0.3 percent delta-9 THC).

Simply put, any extracts or derivatives derived from hemp that contain no more than 0.3% delta-9 THC are federally permissible. Enter delta-8 THC. Delta-8 THC is one of the cannabinoids naturally occurring in the cannabis plant but is not found in significant amounts; it can nevertheless be manufactured in concentrated amounts from CBD. CBD can be converted to delta-8 in a lab through a relatively simple isomerization process involving reacting CBD with solvent-acid solutions at high heat. Despite the simplicity (or as a result of), not all delta-8 THC is equal, and attention to solvents, acids, cleaning agents, and retention of residual chemicals is paramount in creating a clean, unadulterated product. Lack of regulation, oversight, and standards results in many finished delta-8 products containing potentially harmful chemicals such as acetic acid and residual metals. Moreover, it has been reported that many products sold as delta-8 do not actually contain pure delta-8 THC and are filled with various cannabinoids, such as delta-9 THC and delta-10 THC as well as “unknown” compounds (source).

Delta-8 is said to have a milder psychoactive “high” effect than delta-9, and some people report experiencing a euphoric feeling without the paranoia sometimes associated with delta-9 THC consumption. Others, especially those who consumed delta-8-infused edibles (gummies, brownies, beverages, etc.), reported heightened levels of anxiety, hallucinations, insomnia, confusion, dizziness, and generally unpleasant experiences.

Despite many unknowns and uncertainties about delta-8, it remains federally legal yet unregulated. Several courts confronted with the issue have confirmed that as long as a delta-8 product is derived from hemp and contains less than 0.3% delta-9 THC it is allowed per the Farm Bill. See AK Futures Ltd. Liab. Co. v. Boyd St. Distro, Ltd. Liab. Co., 35 F.4th 682, 695 (9th Cir. 2022) (finding plaintiff’s “delta-8 THC products are lawful under the plain text of the Farm Act and may receive trademark protection”); Ky. Hemp Ass’n v. Quarles, 2022 Ky. Cir. LEXIS 7, *25 (August 3, 2022) (concluding that “Delta-8 tetrahydrocannabinol, as a derivative of Hemp, and any products that contain Delta-8 tetrahydrocannabinol are legally compliant Hemp pursuant to KRS 260.850(5) and 7 U.S.C. 1639o(1) so long as the same contain a delta-9 tetrahydrocannabinol concentration of not more than 0.3 percent on a dry weight basis”).

Now the paradox: delta-9 THC remains federally illegal as many states continue instituting laws to legalize and regulate medicinal and recreational marijuana products; and while delta-8 THC is federally legal, many states are enacting laws and regulations prohibiting and restricting the manufacture, sale, and use of delta-8 products. Some prominent states to ban delta-8 include Arizona, Colorado, Nevada, New York, Oregon, and Washington. Other states like Virginia and Michigan decided to regulate delta-8 like marijuana and require producers obtain a state license before being allowed to produce and sell delta-8 products.

Recently, other hemp-derived isolates and derivatives, such as delta-9 THC, THC-O acetate, and THCV, have been hitting the market. Astute cannabis entrepreneurs have figured out how to exploit the less than 0.3 percent THC loophole to legally produce and sell delta-9 THC-infused products. The Farm Bill authorizes hemp-derived products containing less than 0.3% THC on a dry weight basis, which means for edible and gummy products, up to 0.3% of the product’s dry weight can consist of THC. For example, a bag of gummies that weighs 110 grams can legally contain 100 mg of THC (think 20 gummies containing 5 mg of THC per serving). And thus, the influx of delta-9 THC edible products available for purchase at gas stations, kiosks, and e-commerce websites.

THCV (delta-9 tetrahydrocannabivarin) is still being studied, but early reports suggest it may reduce appetite, suppress nausea and anxiety, and increase alertness. Moreover, THCV has been reported to reduce negative effects associated with THC, such as increased heart rate, paranoia, and verbal recall issues. Compared to THC, THCV imparts less of a psychoactive effect on the user and moderates the intoxicating effect of delta-9 or delta-8 when used together.

THC-0, an ester of THC, is synthesized from delta-8 THC using acetic anhydride, a volatile and flammable chemical, and is said to be three times as potent as THC. Very little is known about how THC-O consumption affects the body across various modalities and whether it poses any long-term risks.

While naturally occurring cannabinoids (biologically existing in the cannabis plant) such as THC and THCV are federally permissible if derived from hemp, the DEA has recently declared synthetic isomers delta-8-THCO (delta-8-THC acetate ester) and delta-9-THC-O (delta-9-THC acetate ester) federally prohibited substances irrespective of whether they come from hemp. The DEA determined that because THC-O does not occur naturally in the cannabis plant and can only be created synthetically, it does not fall under the definition of hemp and is a non-exempt synthetic tetrahydrocannabinol prohibited by Schedule I. 21 U.S.C. § 812, Schedule I(c)(17); 21 CFR 1308.11(d)(31). To say cannabis legality is a grey area would be an understatement. One thing is certain – the industry and consumers would indelibly benefit from federal regulation, standardization, and testing criteria to bring uniformity, consistency, and reliability to an evolving market while reducing risks and hazards inherent in the unregulated unknown.

Source link

One-Hit Wonders

Federal Appeals Court: Pay That Man His Money, Unless That Money Is Illegal Marijuana Money

Published

1 week ago

September 12, 2024

admin

Good news, bad news if you’re a cannabis operator that owes money to a creditor. But probably bad news for the rule of law.

A federal appellate court has ruled that a cannabis operator is obligated to repay his debts to an ex-business partner, but it raised questions about whether the money used to repay the debt could violate federal marijuana laws.

What does this mean for a cannabis operator and potential investors?

The Facts

As usual, our friends at Law360 set the stage:

A Tenth Circuit panel has rejected a cannabis entrepreneur’s attempt to undo a $6.4 million judgment in a dispute with an ex-business partner, but it ordered a district court to revisit an enforcement order that could require the entrepreneur to violate federal drug law to pay the damages.

A Maryland federal judge entered a $6.4 million damages award against Mackie A. Barch and his company Trellis Holdings Maryland Inc. for failing to restore David Joshua Bartch’s stake in a Maryland cannabis cultivation and dispensary business, Culta Inc.

When they failed to pay up, Bartch filed suit in the District of Colorado seeking an order that would require Barch and Trellis to sell off their equity in Culta to satisfy the judgment, which the court granted.

Barch and Trellis claimed that their ex-partner lacked standing to seek enforcement of the judgment because the order would require them to engage in conduct in violation of the Controlled Substances Act. Cultivating and selling marijuana is legal under Colorado and Maryland laws, but still prohibited under the federal Controlled Substances Act.

The Ruling

The three-judge panel sided, in a divided decision, against Barch and Trellis. According to the court, Barch and Trellis have no path for relief from the judgment because the law only allows a party to seek such relief for violations of due process.

The rift between the majority and the dissent came down to questions of enforceability and practicality. As Law360 wrote:

The dissent argued that Culta’s business practices – which are illegal under the Controlled Substances Act – should have doomed Bartch’s breach of contract suit from the start. By validating the parties’ contract, the majority has instead decided to “ignore the elephant in the room that is the federally illegitimate business enterprise known as Culta,” Judge Baldock wrote.

“Plaintiff’s cause of action is based entirely upon an illegal contract to establish Culta, notably an enterprise in which federal law recognizes no property interest. I simply do not understand why a federal court would lend legitimacy to any of this,” according to the dissent.

The majority recognized that the trial court’s order could potentially require the violation of federal law but were not willing to overturn the order based on that mere possibility. The majority reasoned that because the order did not specifically require Barch and Trellis to cultivate or sell marijuana, it was at least possible that the debt could be repaid without violating federal law. The case was remanded for further instructions and clarity from the trial court on this point.

The Takeaway

Let’s start with one really obvious point and one just regularly obvious point. First, investors should be extremely cautious when providing funds to marijuana companies. This case illustrates how difficult it can be to recover funds when the source of repayments may largely be the result of federally illegal activity. Second, the marijuana industry is replete with unsavory characters. Sure, many marijuana companies are operated by upstanding businesspeople, but the very nature of the industry and its legal status over the decades make it ripe for those who might not feel compelled to follow the strict letter of the law.

Should you choose to invest in a marijuana company, you should do so with the advice of competent, experienced counsel and you should insist that there are legal methods of recovering your funds should that prove necessary. Doing so may seem a tall task, but with a little diligence you may be able to ensure that your funds are secured by assets that are not subject to the same types of challenges in this case.

And, as with any investment, trust but verify.

Source: https://www.buddingtrendsblog.com/2024/09/federal-appeals-court-pay-that-man-his-money-unless-that-money-is-illegal-marijuana-money/

Source link

One-Hit Wonders

Banking On Buds: The Complex Interplay Between Cannabis And Commerce

Published

2 weeks ago

September 3, 2024

admin

In the ever-evolving landscape of American policy, the story of cannabis legalization unfolds as a testament to societal change and the complexities of governance. This narrative, however, is not without its dissonances, particularly in the realm of financial services.

Introduction

In a nation marked by its pioneering spirit and the relentless pursuit of progress, the cannabis industry emerges as a vibrant tableau of innovation, marred by the shadows of regulatory uncertainty. As states across the Union chart their own courses, legalizing cannabis for medical and recreational use, they weave a patchwork of policies that stand in stark contrast to the federal government’s steadfast classification of the plant. This discord at the heart of cannabis commerce sets the stage for a deeper exploration into an issue that transcends mere legality, touching upon the very fabric of economic integration and societal values.

The Current Legal and Regulatory Landscape

At the federal level, cannabis remains ensnared in the Schedule I category of the Controlled Substances Act, a classification that denotes a high potential for abuse and no accepted medical use. This designation, rooted in the drug policy of yesteryears, casts a long shadow over the burgeoning cannabis industry, constraining its access to essential financial services and stifling its growth potential. Banks and financial institutions, wary of the legal ramifications of servicing cannabis-related businesses (CRBs), find themselves at a crossroads, caught between the promise of a new market and the peril of federal reprisal.

Cannabis Banking and Legislation Timeline

The following timeline weaves together the historical context, pivotal moments, and potential future developments in cannabis banking and legislation, including the critical role of the SAFE Banking Act and the impact of reclassifying marijuana. It serves as a guide through the evolving relationship between the cannabis industry and the financial sector, highlighting the journey towards regulatory clarity and economic integration.

1970 – Controlled Substances Act (CSA) Enacted: Marijuana was classified as a Schedule I drug, indicating a high potential for abuse and no accepted medical use, severely limiting research, and banking capabilities.
1996 – California Legalizes Medical Marijuana: Marks the beginning of state-led initiatives diverging from federal law, creating a patchwork of regulations, and increasing the need for banking solutions for cannabis businesses.
2013 – Cole Memorandum Issued: Although not law, it provides some protection against federal enforcement in states that have legalized marijuana, signaling a slight shift in federal attitude but leaving financial institutions wary of engaging with cannabis businesses.
2014 – 2019 – Incremental Banking Guidance: The Financial Crimes Enforcement Network (FinCEN) issues guidance for banks on serving cannabis businesses in compliance with the Bank Secrecy Act, but the banking challenges persist due to the overarching federal prohibition.
2019 & 2021 – SAFE Banking Act Proposals: The Secure and Fair Enforcement (SAFE) Banking Act was introduced in Congress, aiming to protect financial institutions that service cannabis-related businesses in states where it has been legalized. Despite passing in the House, it stalls in the Senate.
2020 – Present – Growing Bipartisan Support for Cannabis Banking Reform: As more states legalize cannabis for medical or recreational use, there is increased bipartisan support for federal banking reforms, including the SAFE Banking Act, to provide a safe harbor for banks.
2024 (Not So Hypothetical Future) – Marijuana Rescheduled to Schedule III: In a landmark move, marijuana is reclassified as a Schedule III controlled substance, acknowledging its medical use and lowering barriers for banking and research. This hypothetical future event would significantly alter the cannabis industry landscape. This is happening now.
2024 – 2025 (Future Outlook) – Implementation of the SAFE Banking Act: Following the reclassification of marijuana, Congress passes the SAFE Banking Act, easing many of the remaining financial and banking challenges for cannabis businesses. Financial institutions begin openly serving the cannabis industry, supported by clear federal guidelines.
2025 and Beyond – Normalization and Expansion: With the barriers to banking and finance removed, the cannabis industry sees a period of significant growth and normalization. Financial products and services tailored to the cannabis industry become widespread, and cannabis businesses are integrated into the broader economy.

Navigating the Dissonance: The Case for Reform

Amid the thicket of regulatory challenges and banking quandaries, a beacon of consensus emerges from the legislative realms. On May 2, 2024, the National Conference of State Legislatures (NCSL) issued a compelling appeal to the Department of Justice, urging the reconsideration of cannabis’s Schedule I status. “Currently, a total of 47 inclusive of states, the District of Columbia, and all U.S. territories except American Samoa have legalized cannabis for medical and/or adult recreational use,” the NCSL articulated, highlighting the stark contrast between state-led initiatives and federal policy inertia. This plea for reclassification is not merely administrative; it is a clarion call for alignment, seeking to reconcile the federal stance with the lived realities of millions and the operational exigencies of a burgeoning industry.

Discussion Points

This moment of potential transformation invites a broader reflection on the implications of such a shift. The reclassification of cannabis and the enactment of measures like the SAFE Banking Act could herald a new era for not just the cannabis industry but for American society at large. It prompts us to question the role of federalism in drug policy, the dynamics of change in a conservative sector like banking, and the societal values that underpin our approach to regulation and commerce.

Furthermore, the push for reform illuminates the intricate dance between innovation and regulation. As we stand on the precipice of change, it is imperative to consider how financial institutions can navigate this evolving landscape. The integration of cannabis into mainstream commerce offers a unique opportunity to redefine the relationship between the state, the market, and the individual, challenging us to reimagine the boundaries of entrepreneurship, responsibility, and community in the 21st century.

So…Now What?

The conversation surrounding cannabis banking and federal reform is more than a policy debate; it is a reflection of our collective journey toward a more nuanced understanding of progress, governance, and the human experience. As we ponder the path forward, it is clear that the resolution of this dissonance will require not just legislative change but a reevaluation of societal norms and values. In this endeavor, entities like Ankura play a pivotal role, not as advocates for a particular outcome, but as navigators helping to chart a course through uncharted waters, ensuring that regardless of the direction we take, we move forward with insight, integrity, and an unwavering commitment to the common good.

Solutions: A Blueprint for Navigating the Green Wave Together

In the evolving narrative of cannabis legalization and its implications for the financial sector, the role of consultancy firms becomes not just relevant but indispensable. Amidst this backdrop, Ankura emerges not as a mere participant but as a guiding force, navigating the intricate interplay between regulation, commerce, and innovation. This section, far from a sales pitch, is a contemplation on the utility and insight that Ankura brings to a landscape at the cusp of transformation.

The Art of Navigation in Uncharted Waters

In the realm of cannabis banking, where the regulatory environment remains as fluid as the sea, Ankura stands as the seasoned navigator, charting a course through tumultuous waters. The firm’s approach, deeply rooted in expertise and foresight, transcends the conventional consultancy model. Ankura’s role is akin to that of a cartographer mapping the unknown, transforming the complexities of legislation and market dynamics into a navigable blueprint for its clients.

Crafting Compliance Amid Complexity

The crux of Ankura’s value lies in its nuanced understanding of compliance within the cannabis sector—a field where the ground beneath one’s feet shifts with regulatory whims. The firm’s expertise illuminates the path forward for financial institutions entangled in the Gordian knot of federal and state regulations. Through a bespoke blend of strategic advisory, Ankura empowers these institutions to not only meet the current compliance benchmarks but to anticipate and adapt to the regulatory evolutions on the horizon.

Fostering Growth Through Insight

Beyond the minutiae of compliance, the Ankura vision extends to the broader horizons of growth and sustainability for both financial institutions and cannabis-related businesses. The consultancy’s insights into market trends, consumer behavior, and legislative forecasts act as a beacon for clients navigating the competitive landscape of the cannabis industry. In this capacity, Ankura is more than a guide; it is a partner in cultivation, helping to sow the seeds of long-term success in the fertile ground of opportunity.

A Convergence of Expertise and Innovation

At the heart of the Ankura methodology is a commitment to innovation, a principle that resonates deeply within the cannabis sector. The firm leverages cutting-edge technologies and data analytics to provide solutions that are not only effective but forward-thinking. This approach reflects a broader philosophy: that the challenges of today’s cannabis industry are not roadblocks but catalysts for innovation, driving the development of more sophisticated, transparent, and efficient financial services.

And Finally: A Partnership for Progress

Ankura’s role exemplifies the partnership between expertise and ambition. This narrative is an acknowledgment of the critical role that insight, foresight, and strategic guidance play in navigating the complexities of cannabis banking. As cannabis legislation evolves, Ankura’s contributions are a testament to the power of collaboration and knowledge in shaping the future of industries and economies alike.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

Source link

One-Hit Wonders

Driving Under the Influence of Marijuana

Published

8 months ago

January 24, 2024

admin

No national standard exists to determine how long someone should wait to drive after consuming marijuana. However, experts at the Colorado Department of Public Health and Environment recommend waiting at least six hours after smoking less than 35 milligrams of THC and eight hours after eating or drinking something containing less than 18 milligrams.

For reference, a “typical” marijuana cigarette contains at least 60 milligrams of THC, and most edibles contain around 10 milligrams per serving size. A 12-hour wait is safer, as the high (and subsequent drowsiness) from smoking a typical amount lasts far longer.

Source link