Moving the Goalposts: State Regulation of Hemp-Derived Cannabinoids

Updated Aug. 4, 1:46 p.m. to include mention of an executive order issued Aug. 1 by Missouri Governor Michael Parson, banning the sale of intoxicating consumer cannabis products manufactured outside the regulated adult-use market.

By excluding hemp from the definition of “marijuana” under the Controlled Substances Act (CSA), the 2018 Farm Bill legalized “hemp” as well as its “derivatives, extracts, cannabinoids, isomers, acids, salts, and salts of isomers, whether growing or not, with a delta-9 tetrahydrocannabinol concentration of not more than 0.3 percent on a dry weight basis.” In the wake of the Farm Bill, intoxicating hemp products began appearing in the marketplace and have exploded in popularity in recent years. In the absence of federal guidelines, states have taken different approaches to regulating intoxicating hemp-derived cannabinoid products.  For example, we recently reviewed the federal and state regulatory landscape of one derivative, delta-9 THC. States continue to face numerous challenges in regulating the hemp market—an overall market (including non-cannabinoid hemp) valued at an estimated $1.6 billion in 2023—and the effectiveness and enforceability of these laws remains up for debate.

Intoxicating Hemp-Derived Cannabinoids on The Market
While there are more than 100 cannabinoids naturally occurring in the Cannabis sativa L. plant (the most common of which are delta-9 THC and cannabidiol (CBD)), federally legal hemp has lower amounts of THC, and higher amounts of CBD, than federally illegal “marijuana.” But scientists have long known that naturally occurring compounds in hemp, like CBD, can be converted to THC, and this is one of the factors that has led to the proliferation of intoxicating hemp-derived products we see in the marketplace today. At least one study has found that there are no less than 26 different intoxicating compounds in hemp-derived cannabis products readily available on the market. Besides delta-8 THC, delta-9 THC, and CBD, other common cannabinoids and cannabinoid derivatives that have appeared on the consumer market include naturally-occurring cannabinoids like CBG and CBN, and synthetically manufactured isomers such as delta-8-THCO, delta-9-THCO, and delta-10 THC.

The U.S. Drug Enforcement Administration (DEA) has stated that cannabinoids that do not occur naturally in the cannabis plant and can only be obtained synthetically (specifically, delta-8-THCO and delta-9-THCO), do not fall under the legal definition of hemp and are therefore illegal controlled substances under the CSA. In contrast, products containing delta-8 THC, which does naturally occur in hemp plants, are not considered controlled substances as long as they are only extracted naturally from the hemp plant.

States are all over the map on the issue of regulating intoxicating hemp-derived products. Here is a look at the landscape in the U.S.

Challenges of Regulating Hemp-Derived Cannabinoids
States have adopted a wide range of standards to regulate hemp-derived cannabinoid products in the marketplace, from regulating hemp like cannabis, to banning only synthesized cannabinoids, to restricting dosage content. (States that have banned intoxicating hemp products, namely delta-8 THC, include Alaska, Colorado, Delaware, Hawaii, Idaho, Massachusetts, Mississippi, Montana, Nevada, New York, North Dakota, Oregon, Rhode Island, Utah, Vermont, Washington, and West Virginia; while states like Iowa, Kansas, Louisiana, Michigan, Minnesota, New Hampshire, and Virginia restrict all THCs by weight per serving.) Yet state regulations may or may not extend to all intoxicating cannabinoid-derived products available on the market.

Outright bans of intoxicating hemp products, regardless of which cannabinoid causes the intoxicating effects, do not appear to be effective. Even states that do take enforcement actions against intoxicating hemp-derived cannabinoids appear to do so unevenly, with many products still being readily available. For example, one study found that in states with bans on delta-8 THC, like Mississippi and West Virginia, retailers still self-reported selling delta-8 THC. The same study found that the landscape of hemp-derived cannabinoid products offered and sold has reflected the industry’s response to state regulations, with the industry often developing new products to work around new regulations. Hexahydrocannabinol (HHC), for example, is an isomer of THC that produces similar psychoactive effects as THC, but is largely unregulated in most states and readily available to consumers.

Some states, such as California, are working to crack down on the sale and distribution of intoxicating hemp-derived products, and Vermont just passed a bill to establish more safeguards around access to cannabis, while also creating pathways for retailers to sell hemp-derived products with higher THC levels than allowed under potency caps.

However, some of the winds have been shifting in unpredictable directions. New York issued new rules imposing a mandatory ratio of CBD to THC in hemp-based products and instituting a maximum THC cap, drastically limiting the hemp-derived products available for market (and triggering lawsuits brought by state-licensed hemp companies against the Office of Cannabis Management). Florida Governor Ron DeSantis recently vetoed a bill that would have, among other things, effectively outlawed many hemp-derived products in the state.

RELATED: Class Action Suit Calls New York City’s Crackdown on ‘Illegal’ Cannabis Shops Unconstitutional

Other states have taken a more hands off approach—at least for now. In Missouri, for example, there is no current framework for regulating intoxicating hemp-derived products, and the products are widely available in the Show Me State. Missouri’s regulatory gap is the result of a unique conundrum. The state’s food safety operations are administered by the Department of Health & Senior Services (DHSS), which is largely funded by the DEA and must align its operations with federal law. But even though the FDA’s position is that it is unlawful for THC or CBD to be added to a food or marketed as a dietary supplement, Missouri’s laws prohibit DHSS from finding that a food is adulterated solely because it contains industrial hemp, or an industrial hemp commodity or product. The state constitution further excludes from its regulation of cannabis and cannabis-derived compounds all commodities made from hemp—meaning Missouri’s DHSS does not have regulatory authority over products containing only hemp or hemp-derived compounds.  Lawmakers recently proposed legislation to allow DHSS to regulate these products.

(Update: On Aug. 1, Missouri Governor Mike Parson announced the state would ban the sale of intoxicating consumer cannabis products manufactured outside the regulated adult-use market, to go into effect September 1, 2024.) 

States to watch will include Texas, where the Senate Committee on State Affairs held a public hearing in May to discuss a potential statewide ban on delta-8 and delta-9 products, despite an estimated 73 percent of Texans supporting either full legalization or decriminalization of cannabis. The New Jersey legislature recently passed legislation limiting total THC levels of hemp-derived products to 0.5 mg per serving and 2.5 mg per package. It is unclear, as of this writing, whether New Jersey Governor Phil Murphy will sign this legislation into law.

RELATED: Texas Hemp Business Council Tells Texas Lawmakers ‘Don’t Mess With Hemp’ 

Is Uniformity Coming?
The 2018 Farm Bill that largely created the intoxicating hemp industry was set to expire at the end of 2023. But Congress extended that deadline, and a new farm bill is in the works that may bring federal uniformity to regulating intoxicating hemp-derived products. Under one proposed amendment to the current draft farm bill, these products would be largely banned. But other approaches remain possible, including a uniform federal approach to regulating these types of products. Given the widely divergent state approaches discussed above, many in the industry would welcome a more uniform approach that offers common sense regulations without any outright bans. 

Jennifer Fisher is a partner in Goodwin’s Complex Litigation & Dispute Resolution practice, and a co-chair of the firm’s Cannabis practice. Brett Schuman is a partner and the co-chair of Goodwin’s Intellectual Property Litigation practice, and a co-chair of the firm’s Cannabis practice. Adam J. Horowitz is an associate in Goodwin’s Intellectual Property Litigation practice and a member of the firm’s Cannabis practice. Jessica Huang is an associate in Goodwin’s Complex Litigation & Dispute Resolution practice and a member of the firm’s Cannabis practice.