Due to some interesting developments in health science, the future of the industrial hemp industry may be in the hands of the DEA once again.

For the first time ever, the FDA approved a drug derived from marijuana. The active ingredient in Epidolex, which in clinical trials reduced the frequency of seizures in people with certain forms of epilepsy, is cannabis-derived cannabidiol. Cannabidiol, commonly known as CBD, is used to (questionably?) treat a host of conditions, including anxiety, insomnia, chronic pain, and various neurological disorders such as seizures. Now, following a successful clinical trial, anecdotal claims of CBD’s efficacy, at least as they relate to epilepsy, have been given some scientific substance. While Epidolex is not the first approved drug based on compounds found in cannabis, the others (Marinol, Syndros, and Cesamet) contain synthetic versions of cannabinoids or cannabinoid analogues, whereas Epidolex is made from Cannabis Sativa L. itself.

The FDA’s blessing puts the DEA in an interesting position. CBD — along with every other compound extracted from the naughty parts of Cannabis Sativa L. — sits on Schedule I of the Controlled Substances Act, due in part to the DEA’s determination and Schedule I requirement that it has “no currently accepted medical use in treatment.” In response to the FDA’s determination that CBD does, in fact, have medical uses, the DEA is expected to reschedule CBD within the next 90 days.

That rustling sound you hear is industrial hemp growers shifting uneasily in their seats. Over the past few months, we’ve written about the growing legitimacy of the industrial hemp industry. Current internal DEA guidance differentiates cannabinoids sourced from marijuana and cannabinoids from industrial hemp, and there is active and increasing congressional support for the industrial hemp industry.  Interest in industrial hemp is driven in large part by the fact that some industrial hemp-derived CBD is not currently (at least not clearly) restricted by the CSA, and thus can be sold freely in the United States except in those few states with explicit prohibitions. If the DEA reschedules only cannabis-derived CBD, hopefully they will acknowledge that the reason for such limited release is that industrial hemp-derived CBD is already exempted by the 2014 Farm Bill. Otherwise, the DEA will disrupt a market and continue to obfuscate the law to promote political objectives.  (See this great Leafly article for more info on the topic.) We will be monitoring the DEA’s actions closely, and will post updates here when further information is available.

Photo of Justin E. HobsonJustin E. Hobson

Justin is Co-Chair of Lane Powell’s Cannabis Team. His practice includes all aspects of business taxation. He has particular experience counseling clients on a variety of cross-border tax matters, including global restructuring, cross-border transactions, entity formation, tax treaties, accounting for income taxes, transfer pricing, import and export taxes, customs duties, and value-added taxes.

Ben Pirie

Ben Pirie counsels cannabis businesses on a wide range of corporate needs. He is passionate about building long-lasting relationships with clients as they reach toward their goals in one of the most dynamic and fraught industries in the world.  Ben brings his experience as in-house counsel to a Fortune 1000 company in Portland to bear on Oregon’s emerging cannabis industry, where he advises clients on business transactions, contracts, entity formation and management, securities compliance, corporate governance, intellectual property, mergers and acquisitions, state and local administrative law, and employment matters.