U.S. Court of Appeals Weighs in on Hemp-Derived Delta-8 THC Classification Cannabis Practice Update

Date: May 25, 2022

Key Notes:

  • The Ninth Circuit found that Delta-8 THC products are federally legal under the plain meaning of the definition of “hemp” set by the 2018 Farm Bill, making it the first Circuit to find such products lawful.
  • The Ninth Circuit affirmed a preliminary injunction in favor of the trademark holder on a Delta-8 THC product, finding that because the products were federally legal, they constituted “lawful use” in commerce for trademark purposes.
  • Relying on the plain language of the statute, the Ninth Circuit rejected arguments that Delta-8 THC was synthetic and illegal under DEA’s interpretation, or that substances legalized under the 2018 Farm Bill had to be for industrial use and not human consumption.

The U.S. Court of Appeals for the Ninth Circuit has weighed in on the legal gray area that hemp-derived Delta-8 THC has inhabited since the 2018 Agriculture Improvement Act (“2018 Farm Bill”) legalized hemp nationwide. The Court’s conclusion is likely to inspire cautious optimism across the hemp and hemp-products industry, and contrasts with the increasing number of states that are prohibiting or regulating Delta-8 THC products at the state level.

On May 19, 2022, a three-judge panel upheld a preliminary injunction issued by the United States District Court for the Central District of California against Boyd Street Distro, LLC, which stands accused of infringing AK Futures’ trademark on “Cake”-branded Delta-8 THC vapor products. On appeal, Boyd Street Distro, LLC argued that AK Futures did not have a protectable trademark for its “Cake” products because Delta-8 THC is illegal under federal law.

Affirming the grant of the preliminary injunction, the Ninth Circuit held that the Delta-8 THC in AK Futures’ vapor products “fit comfortably within the statutory definition of ‘hemp.’” The Ninth Circuit reasoned that the plain meaning of the 2018 Farm Bill’s definition of “hemp” only required that there be less than 0.3 percent Delta-9 THC, and that this “seemingly extends to downstream products and substances, so long as their delta-9 THC concentration does not exceed the statutory threshold” and are a derivative or extract of hemp. Because AK Futures attested that its products were hemp-derived and contained less than 0.3 percent Delta-9 THC, the Ninth Circuit found that they were lawful and that the preliminary injunction was merited. The Court noted that its decision was “necessarily tentative given the nature of preliminary relief.” In other words, “it is entirely possible that AK Futures may ultimately fail to show that its products stay within the acceptable delta-9 THC limitations,” but for now AK Futures’ declaration was sufficient to obtain an injunction.

In reaching this conclusion, the Ninth Circuit notably rejected two common arguments, raised by Boyd, against hemp-derived Delta-8 THC’s legal status. The first argument was that according to the DEA, Delta-8 remains a schedule I substance because its method of manufacture is “synthetically-derived.” The Court explained that while the Farm Bill’s definition of hemp is broad, it is “unambiguous and precludes a distinction based on manufacturing method.” In other words, any contrary agency language is overridden by clear statutory text. The Court noted that a recent DEA letter clarified that “synthetic” Delta-8 THC is produced “from non-cannabis materials,” indicating that the Court and the DEA agree that “the source of the product—not the method of manufacture—is the dispositive factor for ascertaining whether a product is synthetic.” Put simply, regardless of its method of manufacture, if Delta-8 THC is derived from the Cannabis sativa L. plant, it is not synthetic.

The Court also rejected Boyd’s argument that the substances legalized by the Farm Bill must be for an industrial purpose rather than for human consumption. In response, the Court simply refused to recognize a distinction that Congress did not write into the Farm Bill. The Court explained that “[r]egardless of the wisdom of legalizing Delta-8 THC products, [it would] not substitute its own policy judgment for that of Congress. If Boyd Street is correct, and Congress inadvertently created a loophole legalizing vaping products containing delta-8 THC, then it is for Congress to fix its mistake.”

While this case offers an encouraging glimpse into a potentially brighter future for hemp-derived Delta-8 THC products, it is important to note that this is just one Circuit’s interpretation. Other courts may disagree, and individual states may still prohibit the sale or possession of Delta-8 THC products, and other hemp-derived products, within their borders. Therefore, unless Congress says differently, businesses selling hemp-derived Delta-8 THC products should continue to abide by individual state rules. Thompson Hine LLP is available to assist vapor businesses with their compliance needs.

FOR MORE INFORMATION

For more information, please contact:

Eric N. Heyer
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Joe Smith
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Michelle Li
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Carrie A. Shufflebarger
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Jessica Gayle Tierney
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Anna Stressenger
202.973.2779
Anna.Stressenger@ThompsonHine.com

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