What On Earth is Up With CBD Oil and the DEA?

If you were distracted this week by Donye West, you missed a major US DEA action.   Image result for trump kanyeIt appears that the DEA just declared war on hemp-based CBD oil.

Why does that matter?  It is not as big as their refusal to reschedule marijuana to Schedule II, but…

It matters for medical cannabis cancer patients in Kentucky who need to order CBD oil online and have it shipped to them from California or Colorado.

It matters for the families shelling out hundreds of dollars to buy the ubiquitous “Charlotte’s Web.”

It matters to beauty supply giant, Ulta, who has their own line of hemp-seed oil products.

It matters to hundreds (maybe thousands) of gas stations around the country now selling “CBD oil” products on the same shelves they used to sell K2 bathsalts before they were outlawed.

And maybe, just maybe it matters to the dreaded “Big Pharma.”

What Just Happened?

So what the heck did the squirrelly DEA do?  They published a new “Administration Controlled Substances Code Number for “Marihuana Extract,” Effective January 13, 2017.  In their own words of what this is about:

“Because the definition of marihuana in 21 U.S.C. 802(16) includes both derivatives and preparations of marihuana, the DEA until now has used drug code 7360 for extracts of marihuana. This final rule finalizes a July 5, 2011, Notice of Proposed Rulemaking (76 FR 39039) in which the DEA proposed that a new drug code 7350 be used for extracts of marihuana.”

In plain English, this means the DEA is creating a new category for tracking Schedule 1 marijuana extracts and infused products, separate from Schedule 1 marijuana flower.  But why is that news?  Because for the last few years an undercurrent industry of hemp-based CBD oil products have been sold on the internet and across state lines and many thought it was legal.

Why would they ever think that selling marijuana (particularly “no-THC hemp” marijuana) across state lines was legal?  Because of the U.S. Congress.  The U.S. Farm Bill has carved out industrial hemp from the U.S. Controlled Substances Act for the last two years (See Sec. 7606).  To be clear, industrial hemp was defined as marijuana with less than .3 percent THC, and was only permitted for research through state-legal programs (take note: that’s something wholly different than selling CBD oil extracted from hemp in the Emerald Triangle of California and shipping it to my house in Chicago’s suburbs).  This .3% THC cap was seen as the key to circumvent national distribution of CBD oil.  The DEA just stepped up to say “ohhh, no you di’ n’t!!!”

Who Cares?

Who does this effect?  After Jan. 13, it could affect a lot of folks.  To me the biggest impact is on the thousands of people in Southeastern states like Georgia and Alabama that have adopted “CBD oil laws” allowing truly sick and suffering patients to get a “Get out of jail free” card if they are caught with CBD oil that is below small limits of THC.  Those laws don’t allow the patients to grow their own, or buy from a state-licensed grower or dispensary.  Those patients have to somehow get the products out of state, across state lines, which the DEA is now saying triggers a violation under the Controlled Substances Act.

Truth be told this is consistent for the DEA – while Congress continues to chip away at the DEA’s enforcement authority and enforcement funding, the DEA has largely shrugged their shoulders and maintained their authority to crack down on Schedule 1 marijuana – including hemp-based CBD oil.  This rule just formalizes what they’ve always implied.

Other than patients, you have hundreds of businesses extracting oils from domestically- and internationally-grown hemp, and shipping the products across the country.  As you read this they are on the phone with their respective lawyers and investors.

You better believe that Congress cares, with a significant hemp champion found in Senate Majority Leader Mitch McConnell (R-KY).  You also have to wonder how states rights play into all of this when over 80% of the country lives in a state where hemp-based CBD oil or outright medical marijuana is legal.

Keeping Lawyers Employed

So why would the DEA do this?  And why now?  As noted by Vice: “The weed extract CBD doesn’t even get people high — but the DEA continues to treat it like heroin.”

I’ve read a number of legal analyses of this, and there are many theories about what’s going on here.  NC attorney Rod Kight thinks:

“…the DEA has explicitly placed CBD squarely in its crosshairs. Not only does the Rule go to pains to define marijuana extract as an “extract” that “contains cannabinoids”, a category into which CBD unqualifiedly falls, it goes on to address CBD specifically in the Comments section of the Rule. I won’t mince words. The DEA clearly contends that CBD is a Schedule I drug (the most restrictive schedule) under the Controlled Substances Act (“CSA”), regardless of its source or whether it comes in isolate form or in combination with other cannabinoids.

Some experts don’t even think what the DEA did was legal and within their authority.  Colo. cannabis attorney Bob Hoban writes:

“The feeling is that this is an action beyond the DEA’s authority and we believe this is unlawful and we are taking a course of action for our clients. This Final Rule serves to threaten hundreds, if not thousands, of growing businesses, with massive economic and industry expansion opportunities, all of which conduct lawful business in reliance upon the Federal Government also acting pursuant to law, and as ordered by the Ninth Circuit in 2003 and 2004. We will see the Federal Government in court.”

No one is mincing words.  If you want a deeper-dive on the legal side of the ledger (including discussions of Federal law, Federal court cases, and the International Drug treaties, check out those links).  I don’t necessarily agree with all of the arguments, but my final result is the same: this action is likely to be overturned through lawsuits.

Chess Versus Checkers

If the action is so flawed, if Congress is likely to intervene, if the courts are likely to strike this down, if it offends so many state laws and lawmakers, why do this?  Good question.

Anyone reading this blog knows that the DEA has not been an honest broker with regards to this industry, so we have no reason to take them at their word.  Why would they create this new category now, just weeks from a new President, five years after the rule was first proposed?

This was not a benign DEA action, but we don’t know their end game.  Will they start arresting business owners of the biggest hemp-based CBD oil companies?  Maybe.  Will this cause Southeastern states to rethink and expand their low-THC cannabis oil laws?  Ideally.  But who really benefits from this?  Maybe, just maybe, this makes sense in the distorted realities of the cannabis industry.  When you combine the potential FDA approval of GW’s Epidiolex (a “marihuana extract”), and the unenforced proliferation of “CBD oil” knockoffs, perhaps this DEA move is anticipating the next step: FDA-approved marijuana.  Maybe the DEA is looking to shore-up it’s enforcement authority before Congress pushes rescheduling of marijuana.

Maybe the DEA was just going through the motions and a low-level staffer realized that marijuana extracts should have their own DEA code for bureaucratic reasons?  No, no, and no.  This was deliberate, and now we will all wait to see what the DEA’s next move will be.

One thought on “What On Earth is Up With CBD Oil and the DEA?

  1. Reply
    Rod Kight - December 21, 2016

    This is a great analysis, Bob. I believe that we’ll see some court action in the near future.

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