Post-AK Futures: what lies ahead for hemp-derived psychoactive cannabinoid products?

Nicole Phillis
Davis Wright Tremaine, Los Angeles, California
nicolephillis@dwt.com

On 19 May 2022, the Ninth Circuit Court of Appeal issued its ruling in AK Futures LLC v Boyd Street Distro, LLC.^[1] The underlying dispute concerned whether the manufacturer of certain hemp vaporiser cartridges containing delta-8 tetrahydrocannabinol (THC) derived from industrial hemp could hold a valid trademark under the Lanham Act. Delta-8 THC has been recognised as the ‘close cousin’ of delta-9 THC and shares many, if not all, of the same properties as delta-9 THC, including its ability to get consumers high. On appeal, the Ninth Circuit affirmed Judge James Selna’s decision in the district court that products containing Delta-8 THC are not unlawful under the 2018 Farm Bill, given that even though they can get consumers high, they still meet the statutory definition of industrial hemp.

The Ninth Circuit held that ‘the delta-8 THC in AK Futures' e-cigarette liquid appears to fit comfortably within the statutory definition of ‘hemp’ because ‘the delta-8 THC in the e-cigarette liquid is properly understood as a derivative, extract, or cannabinoid originating from the cannabis plant and containing ‘not more than 0.3 per cent’ delta-9 THC’.^[2]

AK Futures is significant in being the first time that any federal court has held explicitly that a psychoactive cannabinoid derived from industrial hemp – the same genus and species of plant as traditional ‘marijuana’, namely, Cannabis sativa L. – is lawful under the Farm Bill. Though never explicitly stated, most industry stakeholders understood the intent of the Farm Bill to be grounded in the assumption that industrial hemp had such low amounts of delta-9 THC that hemp cannabinoid products could not get a consumer ‘high’ and therefore could be fairly distinguished from cannabis.

As operators became more sophisticated in their manufacturing and extraction processes, however, it became clear that psychoactive cannabinoids could be manufactured through extraction processes for industrial hemp, including delta-8 THC.  These hemp-derived psychoactive cannabinoid products, particularly in the form of edibles, are now being legalised (sometimes inadvertently) in other jurisdictions, including Minnesota and North Carolina. 

Many cannabis industry stakeholders have thus sounded the alarm on products containing delta-8 THC derived from industrial hemp, given that those products directly compete with psychoactive cannabinoid products produced by state-licenced cannabis operators, which are subject to significantly more testing and laboratory scrutiny, labelling and packaging requirements, and track-and-trace protocols. Furthermore, products from licenced cannabis operators typically are offered at higher price points due to the externalities of operating in the highly regulated market and are subject to significant retail and tax restrictions that further increase the total cost of licensed cannabis products to consumers. Thus, many cannabis operators are very concerned about being undercut by purveyors of psychoactive hemp products, which are simply subject to less restrictions, testing, and scrutiny than their cannabis-based cousins.

This inequitable treatment of psychoactive cannabinoids derived from industrial hemp versus psychoactive cannabinoids derived from cannabis further begs the question: if delta-8 THC is truly so similar to delta-9 THC, why did the AK Futures decision fail to address the implications of the federal Analogue Act?^[3] Notably, the act in question treats any substance ‘which has a stimulant, depressant, or hallucinogenic effect on the central nervous system that is substantially similar to or greater than the stimulant, depressant, or hallucinogenic effect on the central nervous system of a controlled substance in Schedule I or II’ as a Schedule I substance. Moreover, given that industrial hemp contains only trace amounts of naturally occurring delta-8 THC, and must therefore be synthesised to generate larger quantities of delta-8 THC, do state laws prohibiting synthetic cannabinoids operate to prohibit the sale of products containing delta-8 THC? Indeed, many statutes have already started to implement delta-8 THC bans precisely to avoid this problem.

While it is difficult to predict how the federal government will ultimately treat delta-8 THC in the long term, the saga of delta-8 and industrial hemp further reminds industry stakeholders and regulators alike that the regulation of both industrial hemp and cannabis needs an opportunity to catch up with the latest cannabinoid science in order to strike an appropriate balance between access and consumer safety.