In what could have national implications, a federal appeals court has ruled that Delta-8 THC derived from hemp is “lawful” and eligible for trademark protection.
The 9th Circuit Court of Appeals said in its ruling Thursday that because Congress legalized not just hemp but its “derivatives” and “extracts” in the 2018 Farm Bill, delta-8 THC is legal if it is derived from a hemp extract – in this case, CBD.
The ruling gives delta-8 vape maker AK Futures another opportunity to block fellow California company Boyd Street Distro from allegedly selling counterfeit versions of AK Futures’ “Cake” vapes containing delta-8 THC, according to MJ Biz Daily.
The three-judge appeals panel sided with AK Futures and said that delta-8 THC is not a controlled substance under federal law if it comes from hemp.
“Regardless of the wisdom of legalizing delta-8 THC products, this court will not substitute its own policy judgment for that of Congress,” Judge D. Michael Fisher wrote.
However, the ruling does not address the legality of selling consumable delta-8 THC products.
Though Congress legalized hemp derivatives such as delta-8 THC, it also directed the U.S. Food and Drug Administration to oversee how those products could be sold.
So far, the FDA has declined to authorize any cannabinoid products without a prescription, and the agency issued a consumer alert last September warning saying that delta-8 THC “may have potentially harmful by-products (contaminants) due to the chemicals used in the process.”
22nd Century Group has acquired GVB Biopharma. As a contract development and manufacturing organization, GVB is believed to be one of the largest providers of hemp-derived active ingredients for the pharmaceutical and consumer goods industries worldwide based on total tonnage.
GVB’s strengths complement 22nd Century’s existing upstream and downstream value chains, which includes expertise in cannabinoid receptor science with CannaMetrix, plant research and proprietary genetics through its KeyGene partnership, breeding expertise with Extractas, and cultivation capabilities at Needle Rock Farms.
GVB expects 2022 revenue of approximately $48 million, a 58 percent increase year-over-year, gross margin in excess of 44 percent and positive cash flow. Upon closing, the transaction is expected to more than double 22nd Century’s revenue, be immediately accretive to adjusted EBITDA, and generate positive cash flow from the acquired assets in the near term.
“GVB represents a transformational acquisition for 22nd Century that will enable us to rapidly grow our hemp/cannabis franchise,” said James A. Mish, chief executive officer of 22nd Century Group, in a statement.
“GVB is one of the largest CBD suppliers globally, possessing innovative, vertically integrated cannabinoid product manufacturing technologies driving industry leading scale and cost efficiency. In addition to immediately expanding our hemp/cannabis franchise capabilities, GVB represents an opportunity to double our revenue and internalize a comprehensive contract manufacturing and extraction platform which can be used to directly and exclusively monetize our differentiated and proprietary hemp/cannabis plant genetics and intellectual property. We are enthusiastic to begin working with the highly regarded and very experienced management team at GVB.”
“We are excited to combine with 22nd Century group, pairing our production and manufacturing capabilities together with the best hemp/cannabis plant science in the world,” said Phillip Swindells, chief executive officer at GVB. “Since 2017, we have built a loyal customer base and continue to add new, rapidly growing customers as demand in our industry accelerates. We sold more than five billion doses of CBD in 2021, and we look forward to further scaling our business as a part of 22nd Century’s comprehensive platform.”
GVB operates three U.S. manufacturing facilities in Oregon and Nevada, including a 30,000-square-feet hemp ingredient manufacturing facility in Central Oregon, a 40,000 square-feet white-label, finished product manufacturing facility in Las Vegas, and an industrial-scale hemp extraction facility in Prineville, Oregon.
While there are three bills in Congress competing to legalize marijuana, there are also many obstacles.
By Timothy S. Donahue
For the second time, the U.S. House of Representatives passed the Marijuana Opportunity Reinvestment and Expungement (MORE) Act (HR 3617), a bill that would end the federal prohibition on cannabis by removing it from the list of banned controlled substances. The MORE bill that passed the House with 220 “yea” votes to 204 “nay” votes would end the federal ban but leave legalization up to the states. The last time the House passed the MORE Act, the Senate did not take it up for a vote.
The current MORE bill is also expected to face strong headwinds in the Senate. This is partly because there are currently three bills floating through Congress competing to legalize marijuana on the federal level. The second bill, the States Reform Act (SRA), was introduced last year by Representative Nancy Mace. The SRA is the first comprehensive Republican version of legislation to end cannabis prohibition. It’s expected to have its own hearing in April (but had not at press time). Mace voted no on the MORE Act.
Mace’s legalization bill is primarily aimed at having the federal government treat marijuana in a similar manner to alcohol, and cannabis would be removed from the Controlled Substances Act, with retroactive effects for people previously punished. Prior federal cannabis convictions would need to be expunged within one year.
The third marijuana legalization bill is out of the Senate. Senate Majority Leader Chuck Schumer, Senate Finance Committee Chairman Ron Wyden and Senator Cory Booker introduced the Cannabis Administration and Opportunity Act in 2019. It was read twice and has been in committee ever since. The main features of the legislation largely align with what advocates and stakeholders expected. The bill (S. 1552) would federally deschedule cannabis, expunge prior convictions, allow people to petition for resentencing and maintain the authority of states to set their own marijuana policies.
While all the action marijuana legalization bills are receiving lately is exciting, it doesn’t mean that the U.S. is close to decriminalizing delta-9 THC. Rod Kight, founder and principal of Kight Law Office and a prominent global expert in marijuana law and legislation, said that he doesn’t expect any of the legalization bills to pass this year. Currently, cannabis is legal for adult use in 19 states and for medical use in 36 states. The legal marijuana industry generated $25 billion in sales last year, a 43 percent increase over 2020, and is expected to hit $65 billion in 2030, according to Forbes.
In an interview with Vapor Voice, Kight shared his insights into the various bills.
Vapor Voice: Do you think the MORE Act has a chance to get passed in the Senate?
Rod Kight
Kight: I think it has almost no chance whatsoever in the Senate for a couple of reasons. One is that there are competing bills. I think we may have some political showmanship as to which bill can get passed. Additionally, the Senate doesn’t get a whole lot done to begin with. It’s become an “obstructionist” legislative body, but that’s a topic for another day. So, with respect to the MORE Act, I would call this a symbolic vote by the House that, disappointingly, is almost certainly not going to pass in the Senate or even come close.
If you thought one bill had a best chance to pass, which one would you choose?
If a decent bill came from the Senate to the House, then it may have a good chance. In that scenario there, a bill is much more likely to pass than one coming from the House to the Senate. I think the hurdles the Schumer/Booker bill are going to face are that it’s competing with a Republican bill in [the] House. Additionally, it’s also just still competing with old-school prohibitionists. This is important since it will need 60 votes. I’m not sure that Schumer even has the full Democratic caucus, much less Republicans, who would either presumably say no and vote against it to continue prohibitionist policies or to vote for the Republican bill sponsored by Mace.
We talked about two of the bills; what is your opinion of Mace’s legislation?
She says she has bipartisan support. This would again have to come out of the House, though, and go into the Senate. As I said earlier, that’s a more difficult route given the way our legislative system works. That being said, it’s really hard to predict how the Mace bill will do because on the one hand, a lot of Democrats want to pass cannabis reform at almost any cost, including by voting for a Republican-sponsored bill. And so, here’s a bill sponsored by Republicans that may actually be able to get through because of presumptive Republican support and some Democratic members of Congress who will vote for it in order to legalize marijuana. All of this is to say that the Mace bill could have some traction simply because it’s sponsored by a Republican.
On the other hand, it’s not as comprehensive or thorough of a bill and doesn’t address a lot of issues that Democrats want. And then also, it’s sort of … a pride issue … for the Republicans to sponsor and pass a cannabis bill, which forever has always been a Democratic issue. I think that would be a pretty hard pill for the Democrats to swallow.
If we really look at the Mace and the Schumer/Booker Senate bills, the more that the MORE Act seems DOA [dead on arrival]. The Schumer/Booker bill is probably unlikely to pass as it stands as well. It will probably get blocked by Senate Republicans.
If you were writing the legislation, what would Rod Kight’s bill look like?
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The most straightforward thing to do would be to just, literally, have a very, very short bill that simply removed all forms of cannabis from the Controlled Substances Act altogether. Done deal, and then it’s up to the states to regulate it, which is de facto happening now anyway. Under that scenario, it would be regulated in a similar manner to other products, such as alcohol, tobacco, kratom, etc., that are typically regulated by the states. And then the FDA [U.S. Food and Drug Administration] and other federal agencies would regulate to the extent that the various products that flow from cannabis fall within their respective jurisdictions.
That being said, and as simple as that may sound, it’s unlikely to happen. “Cannabis” comes loaded with meaning these days, from financial gain to personal liberty to health to tax benefits to social and racial equity, etc. So any cannabis law will ultimately incorporate some, and perhaps all, of these cannabis-related issues and more. So there is ultimately an opportunity for each of the different parties and many interest groups to get something that they want. Democrats want social equity, they want racial equity, they want expungement, all of which are really important and speak to a bigger set of values related to cannabis so that when it is finally legalized, we’re not just allowing big corporate interest to come in and scoop this whole thing up after prosecuting people for almost 100 years, primarily people of color. This is a major concern in a controversial medical marijuana bill in my home state of North Carolina.
On the other hand, the Republicans tend to focus more on making this thing really work for business.
For my part, and given both the history and the current state of affairs with cannabis, I favor a bill that fully removes it from the Controlled Substances Act and also addresses social and racial equity while creating a place for small businesses to thrive.
If you had a crystal ball, will a federal legalization bill pass this year? Next year?
I don’t see any advancement this year. I think the best we can hope for is some banking and potentially some tax reform as those things relate to marijuana. I don’t see any kind of legalization at the federal level. As far as when we can expect to see it, I think, at the very best, it would be next year. However, I’m starting to kind of get my head around the fact that the best opportunity is probably in a post-Biden administration setting. Biden is simply not a supporter. I think without strong support and even leadership from the executive side, [it’s] ultimately difficult to get anything through of this magnitude.
What kind of social and economic benefits would legalization bring, such as taxes, fewer people in prison, etc.? Could more money go to treating the addiction of harder drugs?
I don’t have any specific numbers, but I will say that this reform is not only good for the physical and mental health of American citizens but also for the fiscal health of the country. Taxing the products and using those taxes to fund socially beneficial programs, including expungement of marijuana convictions, while also lowering the prison population will be huge. Of course, adding an entire new industry to the market will have a huge financial impact. Finally, liberating cannabis for use by people instead of medicating with pharmaceuticals will also help. With respect to addiction and mental health opportunities, I think cannabis can play an enormous role. I think that it could help reestablish the U.S. as a leader in the world economy as well. We’re seeing Latin America beginning to legalize; we’re seeing Germany and Spain making moves to legalize. And so, if the United States gets out ahead of that slightly, then I think the U.S. retains control of what promises to be a huge sector of the economy, whereas if we allow Europe to take the lead on this, then it will be impossible for the U.S. to recover. I don’t think the U.S. could ever really gain it back.
What about on a state level—is legalization becoming more active?
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As it stands, the states continue to be the place where all the action is happening. It’s really fundamentally important to pay attention to all the various bills regarding cannabis across the board. You know, recreational marijuana, medical marijuana, hemp, hemp derivatives, all those types of things. Watch what’s happening at the state level. I think that’s really where we’re seeing some essential changes.
Will we eventually see all 50 states with legal marijuana?
I think it is unlikely but possible that we could have some form of legal marijuana in all 50 states while it is still illegal at the federal level. This would be unprecedented. In fact, it’s probably unprecedented where we are at right now. What other issue in the history of the U.S. has been like this, where you have more than a majority, maybe even a supermajority of states that have legalized something that the feds deem to be illegal or vice versa?
Just to take things to another perspective, consider that now with respect to hemp derivatives—you have THC that’s being lawfully marketed throughout the country, and in most states, it’s legal. At what point do we even really—from a policy level, not necessarily a statutory definitional level—just consider that cannabis is, in fact, lawful throughout most of the U.S. in the sense that there are all of the active compounds in marijuana, including THC, being marketed throughout the country legally through hemp. At what point do we just say cannabis is legal in this country, either de facto or otherwise?
Times are changing. You had marijuana, which was considered the “THC world.” And then you had hemp, which was considered to be the “CBD world.” Those worlds have blended. You have interesting things that the states are doing. Ultimately, what’s happening is [that] the overall tide of cannabis legalization is continuing to move forward. We may see a situation where almost every state has legalization of marijuana. Yet, marijuana is still, quote, unquote, illegal at the federal level. That’ll be a very strange state of events, but that’s how it could play out.
Last question: Is there unity between the hemp and marijuana producers? Unlike other industries, are the segments banding together to fight potential regulations?
No, I think there’s unfortunately a lot of dissension. I think there’s dissension between the marijuana industry and the hemp industry and within each of those sectors of the industry. Then I think at the level of the farmers, the farmers are the front lines, and they’re the ones that really are often not heard. They’re the ones that struggle with massive price fluctuations and the bottom dropping out and then the mass demands. Then they ramp up for demand, and then it goes away. The farmers may be the most important factor in this equation.
A key U.S. House of Representatives committee on Wednesday formally advanced a bill to federally legalize marijuana to the floor, making in order a number of amendments and blocking others as part of a final rule. A full chamber vote is expected on Friday.
The House Rules Committee took up the Marijuana Opportunity, Reinvestment and Expungement (MORE) Act, discussing proposed revisions, mostly from GOP lawmakers seeking to insert additional restrictions into the reform measure, according to Marijuana Moments.
This the second time the MORE Act has made it to floor. Last year, the bill made it to the floor but was sent back for committee review.
The MORE Act, sponsored by House Judiciary Committee Chairman Jerrold Nadler, would remove marijuana from the list of federally controlled substances, promote equity in the industry and impose a federal tax on marijuana products to fund various initiatives.
At the start of Wednesday’s hearing, Rules Committee Chairman Jim McGovern said that the legislation would “address our nation’s failed approach to the war on drugs” and “put racial justice at the heart of our nation’s federal cannabis policy.”
He noted racial disparities in marijuana enforcement, emphasizing that “none of us should be OK with a system that treats people differently based on the color of their skin” and “no life should be destroyed by decades of failed policy.”
“It’s past time that we show the moral courage to do something about it,” McGovern said.
The flavor ban bill introduced in Illinois would also ban flavored THC vaping devices. Senate Bill 3854, introduced in January, is currently in committee. Any flavored flavored vaping product, including heat-not-burn systems and tobacco chew, would be banned.
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The bill provides “that (1) “tobacco product” includes products containing tetrahydrocannabinol and products containing a mixture of tetrahydrocannabinol and nicotine, and (2) “tobacco retailer” includes dispensing organizations and dispensing organization agents, as those terms are defined in the Cannabis Regulation and Tax Act. Creates a presumption that a tobacco product, related tobacco product, alternative nicotine product, or solution or substance intended for use with electronic cigarettes is a banned product, solution, or substance intended for use with electronic cigarettes if it has or produces a characterizing flavor.”
A consumer advocacy group says the measure could do more harm than good. Elizabeth Hicks, U.S. Affairs analyst with the Consumer Choice Center, said enacting a flavor ban for vaping products will push adult consumers to switch back to smoking combustible tobacco at a time when smoking cigarettes has been trending down in Illinois, according to KPVI.
“About 12% of adults in 2020 reported smoking, however, if this bill passes, we can certainly expect that number to increase,” Hicks said. “This ultimately will lead to increases in smoking-related healthcare costs, which are already costing Illinois taxpayers over $1.9 billion annually,” Hicks said.
The state of Illinois passed two laws last year aimed at making it harder for minors to access vaping products. The first law (Senate Bill 512) prohibits the use of cartoon characters, video game characters, and popular children’s media from advertisements for e-cigarettes. It also makes it harder to buy vaping products online. Buyers will now have to use a credit card or check in the buyer’s name.
The second law (Senate Bill 555) amends the Substance Use Disorder Act to include vape shops. Adding vape shops allows the Illinois Department of Human Services to do compliance checks on the sale of e-cigarettes according to the minimum purchasing age of 21.
Pennsylvania regulators recalled hundreds of medical marijuana vape products because the state says they contain ingredients unapproved for inhalation. The state health department released a list of more than 500 cannabis vape products with ingredients not approved by the U.S. Food and Drug Administration.
“Although some of these added ingredients may be considered safe in other non-inhaled products, patient safety is the top priority of the Medical Marijuana Program,” the state wrote in an email announcing the recall, according to the Pittsburgh City Paper (PCP), as reported by MJBiz Daily.
Credit: Promesa Art Studio
The PCP stated that the agency did not respond to a request for more information. The FDA has not approved any cannabis product for marketing. The agency does not have the authority to approve the marketing for or the regulation of any cannabis products, unless a company makes health claims.
The recall comes after a months-long process in which Pennsylvania officials reviewed medical marijuana vaping products. In November, state regulators gave licensed grower/processors two weeks to resubmit vaporized cannabis products that contain additives, including flavors or terpenes, for approval.
A growing number of countries are considering embracing legalized marijuana to boost their economies.
By Timothy S. Donahue
Marijuana is a moneymaker. To help combat slowing economies caused by the Covid-19 pandemic, many countries are considering legalizing marijuana. Currently, only Canada, Georgia, Mexico, South Africa and Uruguay, plus 18 U.S. states, two U.S. territories, the District of Columbia and the Australian Capital Territory in Australia have some form of legal marijuana. More recently, Germany, Luxembourg, Costa Rica and the U.S. are working to legalize marijuana on a national level.
In November, the leaders of Germany’s incoming governing parties announced that they had reached a formal agreement to legalize recreational marijuana and “promote broader drug policy harm reduction measures” when they take power. “We are introducing the controlled supply of cannabis to adults for consumption in licensed stores,” the parties said in a 118-page agreement. “This controls the quality [of marijuana], prevents the transfer of contaminated substances and guarantees the protection of minors.”
Currently, the personal possession of marijuana is decriminalized in Germany, and there is a medical cannabis program for residents. However, this proposal seeks to establish a regulated market for adult-use marijuana. The joint government will also review the social impact of legalization four years after implementation, according to the agreement.
“When it comes to alcohol and nicotine prevention, we rely on increased education with a special focus on children, adolescents and pregnant women,” the agreement states. “We are tightening the regulations for marketing and sponsoring for alcohol, nicotine and cannabis. We constantly measure regulations against new scientific findings and use them to align health protection measures.”
Competing with Germany to be first to legalize in Europe is its neighbor Luxembourg. The country’s ministers of justice and homeland security in October unveiled a legalization proposal, which will still require a vote in Parliament but is expected to pass, according to Marijuana Moment. Luxembourg’s rules focus on legalization within a home setting. Parliament is expected to vote on the proposal in early 2022, and the ruling parties are friendly to the reform.
In Mexico, medicinal use of cannabis products became legal in June 2021. World-renowned cannabis attorney Rod Kight says that Mexico is moving along rapidly in the implementation and understanding of the new rules, though a bit chaotically. He said that he expects to see more movement on marijuana laws in the country during its next legislative session.
“Medical cannabis is lawful in Mexico, and regulations were published earlier this year,” he said. “With respect to adult-use cannabis, the Supreme Court ruled that laws prohibiting the personal use and consumption of cannabis are unconstitutional. However, it remains unlawful to engage in commercial cannabis transactions. We anticipate that an adult-use bill will be passed in 2022.”
A top Mexican senator says that there’s agreement among key legislative leaders of multiple parties to prioritize marijuana legalization legislation this session, according to Marijuana Moment. Senate Majority Leader Ricardo Monreal Avila of the ruling MORENA party made the comments following a meeting of the Political Coordination Board. He said that the panel “agreed to prioritize cannabis laws” among other issues like cybersecurity, according to a translation.
During a recent trip to Costa Rica, Vapor Voice visited several stores that sold marijuana components, such as pipes and grinders, but no one was selling the product itself. This is because the rules in Costa Rica are confusing. While technically marijuana is illegal, there are no statutory penalties for the possession and use of marijuana. Selling marijuana, however, is illegal and punishable by up to 10 years in prison and/or fines.
To help combat this confusion and truly embrace the growing number of global marijuana tourists, like Mexico, Costa Rica is considering legalizing recreational marijuana. This would allow marijuana to be purchased in stores and allow the country to tax the product. Last year, Costa Rica’s Congress approved the legalization of marijuana for medicinal purposes despite opposition from conservative groups and President Carlos Alvarado.
Instead of taking up the required second debate, lawmakers sent the bill to the Constitutional Chamber of the Supreme Court for legal review, similar to the route Mexico took toward legalization as well. The second debate is expected early next year and would still require a signature from Alvarado.
The Costa Rican law only allows for the production and processing of cannabis but does not regulate its recreational use. However, the vote represents the most concrete action Costa Rica has taken toward legalizing cannabis products while noting the “significant economic potential” of legalizing the sale of cannabis. “It is a market of billions of dollars, and Costa Rica could be part of it,” said lawmaker Zoila Rosa Volio, who introduced the bill. He said Costa Rica was in a prime position to reap the “benefits of growing and exporting hemp and marijuana plants.”
Kight said that the developments in Costa Rica are encouraging. The approved bill authorizes the production, industrialization and commercialization of medicinal cannabis and hemp. “Under the bill, low-THC hemp and nonintoxicating hemp products are lawful generally, and high-THC cannabis will be approved for medical use,” Kight explains. “President Carlos Alvarado approves of hemp but is an opponent of high-THC cannabis. His office controls the legislative agenda, which means that a final vote on the law may not occur in the short term.”
In the United States, federal regulation of marijuana has been introduced numerous times and always failed. As more states legalize marijuana, however, the federal government is under pressure to decriminalize marijuana and remove it from its listing as a Schedule I drug, which are considered “substances or chemicals [that] are defined as drugs with no currently accepted medical use and a high potential for abuse.” While a large swath of the U.S. has legalized marijuana, it is still a highly debated argument at the federal level.
The most recent attempt to decriminalize marijuana is the States Reform Act, which would deschedule, regulate and tax cannabis products with a novel federal excise tax design—based on quantities and predefined categories, not dissimilar from how the federal government taxes alcohol and tobacco.
Introduced by Representative Nancy Mace, the bill would impose a tax of 3 percent on the removal price (cost when leaving the manufacturer or a bonded warehouse) of cannabis products. That’s significantly lower than the rates suggested in the other bills introduced this year to deschedule and tax cannabis: the MORE Act (8 percent rate) and the Cannabis Administration and Opportunity Act (CAOA, 25 percent rate), according to Ulrik Boesen, an analyst with the Tax Foundation.
“Arguably, the biggest impact on existing cannabis businesses would not be a new federal tax. Today, due to its Schedule I status, cannabis products cannot cross state borders, and as a result, all products must be grown, processed, sold and consumed within state borders,” states Boesen. “Descheduling would create a national market where products grown in Oregon can be processed in Colorado and sold in New York. This would revolutionize markets in states, which, given the federal prohibition, are currently able to discriminate against interstate commerce. Descheduling would mean that state laws can no longer do so as it would violate the Dormant Commerce Clause of the U.S. Constitution.”
Mace’s bill establishes six taxable categories and instructs that the secretary of the treasury can create more if needed:
cannabis flower (454 grams);
cannabis pre-rolls (100 grams);
cannabis extracts (20 grams);
cannabis vape cartridges (10 grams);
edibles (20 units); and
topicals and cosmetic products (20 units).
In a blog post, Boesen states that the creation of categories avoids some larger issues associated with price-based taxation as it guarantees that comparable products are taxed at the same rate regardless of price. “Under a pure price-based tax design, an expensive THC-containing chocolate bar would be taxed at a higher rate than a cheap THC-containing chocolate bar—even if they contain the exact same amount and quality of THC,” he writes. “Taxing the value of the product is not an excise tax’s job—capturing value should be left to sales and income taxes.”
Michelle Minton, a senior fellow at the Competitive Enterprise Institute, said that while it certainly has room for improvement, Mace’s bill is a solid starting point for “truly bipartisan legislation” that could finally end America’s prohibition of marijuana products. The MORE Act, introduced in House in May by Rep. Jerrold Nadler, would also decriminalize marijuana.
Specifically, the MORE Act also removes marijuana from the list of scheduled substances under the Controlled Substances Act and eliminates criminal penalties for an individual who manufactures, distributes or possesses marijuana. However, Minton says that Mace’s bill, unlike the MORE Act, would set a national minimum age for cannabis purchasing at 21.
“This would be enforced in the same way as the national minimum age for buying alcohol: by withholding federal transportation funds to states with a lower minimum age than the federal standard,” she writes in a blog post. “However, Mace’s proposal includes an exemption for states that allow minors to access medicinal cannabis for therapeutic purposes. The SRA bill would also grandfather in state medical cannabis products, allowing them to be sold in interstate commerce without prior federal approval.”
The dangling carrot for countries seeking to legalize marijuana is the amount of potential tax revenue the sales of marijuana can bring. For example, sales of marijuana in Colorado, one of the first U.S. states to legalize recreational marijuana, has resulted in buoyant tax revenues, according to media reports. In 2019, Colorado collected more than $302 million in taxes and fees on medical and recreational marijuana. Sales in the state totaled over $1.7 billion.
Nationwide, marijuana sales in the U.S. were $12.2 billion in 2019 and are projected to increase to $31.1 billion by 2024, according to a report from Arcview Market Research and BDS Analytics. Should marijuana become legal on a federal level, the benefits to the economy could be exceptional: A report from cannabis analytics company New Frontier suggests that federally legalizing marijuana could generate an additional $105.6 billion in aggregate federal tax revenue by 2025. It also predicts the impact of federally legal marijuana at the federal level could generate 1 million jobs by 2025.
Legalizing cannabis could bring Germany annual tax revenues and cost savings of about €4.7 billion ($5.34 billion) and create 27,000 new jobs, according to a survey by the Institute for Competition Economics at the Heinrich Heine University in Duesseldorf and commissioned by the German hemp association. The European market is projected to grow to €3.2 billion by 2025, up from €403 million at the end of 2021, according to the European Cannabis Report by the research firm Prohibition Partners.
Kight says legalization just makes sense. Whether in a large country like the U.S. or smaller countries such as Costa Rica and Mexico, the economic boost that legalized marijuana could bring is an economic gamechanger. “We seem to be at a tipping point for cannabis legalization, which appears inevitable in the U.S., most of Europe, much of Latin America and other parts of the world. The only real questions are when and what the various regulatory regimes will look like,” Kight says. “Countries that legislate quickly and thoughtfully should reap the benefits of increased tax revenue and lower crime rates.”
While nicotine vaping by youth takes the headlines, teen vaping of marijuana more than doubled between 2013 and 2020, according to a new study. Youth use of nicotine vaping products, however, dropped the past two years. The results may indicate that young people may be swapping out joints, pipes or bongs for vape pens, according to a new study.
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Researchers also found that adolescents who say they vaped cannabis within the last 30 days increased 7-fold — from 1.6% to 8.4% — during the same period. The report was published in JAMA Pediatrics on Monday by researchers who analyzed 17 studies involving nearly 200,000 adolescents in the U.S. and Canada.
Overall, they say, the cumulative data points to what may be a shift in preference from dried herb to cannabis oil products, which is how marijuana is ingested via vaping, according to NPR. This may be due to the more intense high that can be achieved by cannabis oils, which contain higher levels of THC, the psychoactive ingredient in marijuana, and the “misconception” that vaping devices are safer than smoking.
“Regular use of high THC products could increase the risk of dependence, other substance use and many other health, social and behavioral problems later in life,” study author Carmen Lim, a doctoral candidate in health and behavioral sciences at the University of Queensland in Australia, told NPR.
The Monitoring the Future survey — a large U.S. survey on drug and alcohol use related attitudes in adolescents — is one of the 17 studies included in the new meta-analysis. Although it showed that marijuana use has remained relatively stable among 12th graders in the last few years, hovering around the 35 percent mark, the growing popularity of electronic pot vaping devices is alarming, Lim said.
The U.S. House Judiciary Committee approved a bill Thursday that would decriminalize and deschedule marijuana by a vote of 26-15. The move ended a two-day markup period in which the panel also approved a series of bipartisan measures designed to lower drug prices.
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The measure, sponsored by Judiciary Chairman Jerrold Nadler, passed the chamber last year but stalled in the GOP-controlled Senate, according to rollcall.com. Senate Majority Leader Charles E. Schumer proposed a similar measure in July, sparking hopes among advocates that the legislation would finally make it into law.
The bill would decriminalize and deschedule cannabis, and implement a federal tax on marijuana products to fund grants for communities hardest hit by the nation’s war on drugs. The bill would also allow most individuals convicted of nonviolent cannabis offenses to expunge their records, with the exception of those considered to be “kingpins,” or those who helped oversee a criminal drug ring.
The outlook for final passage is still uncertain. Schumer and co-sponsors, including Sen. Cory Booker, have not yet formally introduced their draft bill, and Congress is currently consumed by a debate to pass trillions of dollars in spending on infrastructure and social programs, including a first-ever e-cigarette tax.
International cannabis attorney Rod Kight discusses minor cannabinoids and the growing cannabis market.
By Timothy S. Donahue
The questions kept coming. When Vapor Voice published an article on Delta-8 THC and other minor THC products in its last issue (see “High Expectations,” Vapor Voice, issue 3, 2021), it seems readers had more questions concerning newly marketed cannabinoids than the story answered. To gain more insight into the state of the current overall global cannabis market, we went to one of the best resources in the business.
In the cannabis industry, there may be no attorney more renowned than Rod Kight. While his firm is based in Asheville, North Carolina, USA, Kight currently spends much of his time in Mexico. His experiences with marijuana started when he used it during chemotherapy treatments in 2011. It had such a positive impact on his recovery that he decided he was going to focus on cannabis law. He wanted others to have the access that offered him such a profound experience.
“It’s kind of funny because I was practicing in North Carolina, which is a prohibition state. I got licensed in Oregon and kind of dove head-in to the laws regarding cannabis. It was right around the time that the 2014 Farm Bill came out that legalized, at the federal level, cannabis for the first time in almost a century,” Kight said. “We started getting calls about CBD. And like any good lawyer, I thought I would do some research and see what the laws and regulations were concerning CBD.”
He did not find much. He said he found nothing on CBD derived from hemp. The only federal restrictions on cannabinoids were centered on the source of the product. If the cannabinoids are derived from marijuana, then they are illegal controlled substances because marijuana is defined as the plant and all its parts. The legal definition is so broad that technically speaking, chlorophyll from a marijuana plant is a controlled substance.
Anything derived from a hemp plant, however, is legal, provided it has less than 0.3 percent Delta-9 THC. “All of the hemp plant’s parts are legal. So, if you get CBD or another cannabinoid from hemp, then it is not a controlled substance. I carved that out and began writing about it,” Kight explained. “We started to get more and more calls, more and more clients … things just went from there. That’s now called the Source Rule, and that was the first thing that kind of put me and the law firm on the map.”
Credit: Rod Kight
When Congress wrote the 2014 Farm Bill, lawmakers specifically stated that hemp is a cannabis plant with no more than 0.3 percent Delta-9 THC. Kight says the law could have easily been written as 0.3 percent of “any” THC. There are 30 known THC isomers. “They singled out that one cannabinoid and had to have some reason for doing so. We don’t know what reason that is. It could be good, bad or otherwise. But it took a special effort to say ‘Delta-9’ and call that out versus just ‘THC,’” says Kight. “The result is that all forms of THC with the exception of Delta-9—no more than 0.3 percent—have been removed from the controlled substances list.”
Another concern is that the U.S. Drug Enforcement Agency (DEA) views Delta-8 as a synthetic form of THC, which is illegal. Kight says the agency is correct in saying synthetic THC is illegal; however, he explained that it is not entirely clear whether Delta-8 produced from CBD qualifies as a “synthetic” form of THC under U.S. law since no generally accepted legal definition of the term “synthetic” exists.
“To be clear, there’s not a special listing for ‘synthetic’ THC. It just says that THC is a controlled substance and that includes synthetic forms of THC … it’s totally accurate. However, the Farm Bill provides an exception. It specifically removed hemp from the controlled substances list, including all of its cannabinoids, extracts, derivatives and isomers. That more specific and recent law trumps the general older law, which is the Controlled Substance Act (CSA).” Legally speaking, this is referred to as the doctrine of “lex specialis,” which means that “the more specific controls over the general. In other words, the Farm Bill exempts hemp-derived Delta-8 THC from the CSA.”
Delta-8 THC and its cousins are not like the synthetic cannabinoids, such as K-12 and Spice, that pushed the DEA to ban synthetic THC, according to Kight. He says that those K-12/Spice synthetics are not anything like the THC molecule. In fact, technically speaking, they are not synthetic forms of THC. Rather, they are best understood as analogs of THC. These fall under the Analogue Act, a section of the CSA passed in 1986. It allowed any chemical “substantially similar” to a controlled substance listed in Schedule I or II to be treated as if it were listed in Schedule I, but only if it is intended for human consumption and has a stimulant, depressant or hallucinogenic effect on the central nervous system that is substantially similar to or greater than the controlled substance.
Delta-8 does not have the same effect on the body as Delta-9 THC. “Synthetics are typically very strong and potent, whereas Delta-8 is up to 10 times less potent than Delta-9 THC,” he said. “That’s a long way of saying that those are compounds that are created in a laboratory. They don’t resemble THC. Delta-8 is a natural compound that the cannabis plant produces and is much less potent than Delta-9 THC.”
Preventing precedent
Another question that arose following our previous article centered on the recent arrests of some Georgia vape shop owners for selling Delta-8 products. The Newnan Times-Herald reports that county authorities were tipped off that a store was illegally selling THC products. An undercover officer bought gummies from the store, and law enforcement tested the product for THC. They tested positive for THC. However, the tests the officers used in the field cannot differentiate between Delta-8, Delta-9 or any other THC, or if the products contained more than 0.3 percent of THC.
While several states have laws, regulations or official agency-level legal positions banning Delta-8 THC, Georgia does not. “Could this case set a precedent for other vape shop owners if they are found guilty?” a reader asked.
Kight says one only needs to look to the state statute for an answer. If the state’s hemp laws mirror the federal law, like (the laws of) many states do, then Delta-8 is a legal product. “If a judge were to be persuaded that it was illegal, however, that could create precedent,” said Kight. “Other states could look to Georgia’s ruling, and that could be very detrimental if the prosecution wins.”
The bigger problem with the Georgia case is the testing protocols, according to Kight. Most state crime labs don’t test to differentiate between different types of THC. To convict someone, you have to prove beyond reasonable doubt that they have committed a crime. The best a crime lab can usually do is identify THC. Depending on the particulars of the case, this may not be sufficient.
“There’s all sorts of forms of THC that are lawful. So, meeting its burden of proof to convict is much more difficult for a prosecutor now that hemp is lawful,” explains Kight. “A related issue is when crime labs test products using heat, which is known as gas chromatography. Since THCA [the acid form of the THC molecule] transforms into Delta-9 THC when heated in a process called decarboxylation, this is problematic. THCA in cannabis begins to decarboxylate at approximately 220 degrees Fahrenheit after around 30 [minutes] to 45 minutes of exposure. That amounts to evidence tampering, namely, converting one piece of evidence into another. … I hope that criminal lawyers will address this issue when it arises.”
Banning cannabinoids is not the way to regulate them, according to Kight. He says lawmakers need to understand that prohibition is a failed concept. Not only does it waste resources, it also drives products that are desired by the public into the underground black market, which results in additional problems, according to Kight. Banning a product means regulators lose the ability to regulate the safety of these products. “They are washing their hands on the ability to regulate them and collect taxes,” Kight says. “Prohibition also incentivizes people who would otherwise operate legitimate legal businesses to participate in an illegal black market.”
Businesses need to understand the laws surrounding cannabis products because they are consistently evolving. There are a lot of U.S. Food and Drug Administration regulations regarding labeling and the manufacturing processes. Importantly, no one should be making medical claims about their products. “You need to understand the laws,” Kight said. “Secondly, you need to be willing to dig in and understand the science so that when you look at a certificate of analysis and an ingredient list, you know what that means so that you’re not pumping out products to the public that may be dangerous.”
Kight said that he expects the FDA to start regulating CBD products in the next 12 months to 18 months. He isn’t sure if those regulations will encompass all cannabinoid products. Currently, several bills dealing with regulating CBD are floating through Congress. For example, the Hemp and Hemp-Derived CBD Consumer Protection and Market Stabilization Act of 2021 has been in the Subcommittee for Health since early February.
This bill would allow the use of “hemp, cannabidiol (i.e., CBD) derived from hemp, or any other ingredient derived from hemp” in a dietary supplement, provided that the supplement meets other applicable requirements. Currently, the FDA’s position is that CBD products may not be marketed as dietary supplements.
Credit: Jose
Kight said that he also expects the market to consolidate as federal regulators enact rules for the industry. This will be good for some businesses and bad for others. “Companies that are attractive to the bigger companies will either enter into joint ventures or be acquired. Additionally, smaller companies that fill a niche that some of these larger conglomerates cannot fill will fare well,” said Kight. “But for companies that don’t fill a specific niche and also are not going to be appealing as a merger acquisition target, they’re going to struggle once a lot of consolidation occurs.”
Marijuana markets
Marijuana is growing globally. Numerous nations have or are considering legalizing cannabis products. Kight says that global markets are a “moving target” and changes typically do not happen overnight. In December 2020, the United Nations’ drug policymaking body recognized the medicinal and therapeutic potential of marijuana. Following a 2019 World Health Organization recommendation, the U.N. Commission on Narcotic Drugs removed cannabis from the strictest drug tier, Schedule IV, of the 1961 Convention—where it had resided alongside heroin for decades.
The U.S. currently has bills in both the House and the Senate aimed at national legalization for Delta-9 THC products. The Cannabis Administration and Opportunity Act (CAOA) aims to withdraw laws and federal penalties on marijuana. If passed, the legislation would also expunge nonviolent federal cannabis-related criminal records and let states make their own marijuana laws.
The CAOA proposal builds upon the recent Marijuana Opportunity Reinvestment and Expungement (MORE) Act passed by the U.S. House of Representatives. The CAOA expands beyond the MORE Act by proposing a “moon-shot effort to address drugged driving and multi-substance impairment, establishing strong cannabis health and safety standards” under the FDA, and leveraging the expertise of the Alcohol and Tobacco Tax and Trade Bureau within the Department of Treasury to regulate industry practices.
The U.S. cannabis industry grew 32 percent in 2020; and by 2025, it is estimated that the industry could have nearly $45.9 billion in annual sales, according to Grandview Research. Kight says legalization is probably closer at the federal level than many realize, most likely within the first term of the Biden administration.
“Whether that’s 12 [months] or 36 months from now … I think we’re going to see it during that time period,” he said. “We don’t know what form it’ll take, but it’s probably going to either be removing marijuana and THC from the controlled substances list altogether, which is really what should happen, or they’re going to be scheduled in a different way. Most likely, we will continue to have state-by-state regulation within the paradigm of federal legalization; some states will be really liberal, and some states will be really conservative.”
Internationally, Uruguay and Canada were the first countries to legalize marijuana. Several other countries are attempting to follow suit. However, many nations have signed onto treaties that make marijuana and THC illegal. Hemp is also defined differently from country to country, especially in the EU. In Switzerland, it is a 1 percent THC cap, whereas some other countries in the EU have a 0.2 percent cap, according to Kight. Countries have recently been more open to legalizing hemp, and that trend is expected to continue.
“We’re beginning to see producers in certain countries where hemp can be grown inexpensively being shipped to other countries where it can’t be produced inexpensively but where there’s a higher market price and demand. For instance, South America is known for being able to cultivate large tracts of hemp, especially in countries like Uruguay and Colombia, he says. “They want to deliver it to the EU where it’s a lot more expensive, there’s a large demand and people willing to pay more.”
In France, a court case made the decision for the country to legalize CBD products. France’s highest court ruled that CBD—including CBD flower—are legal in the country. The decision referenced last year’s KanaVape judgement in which a European court ruled that the French authorities had acted unlawfully in prosecuting two businessmen who imported CBD flowers from the Czech Republic in 2014, citing that CBD is “not a narcotic.”
The European court said France cannot ban any CBD that’s produced lawfully in the EU. If a product is produced lawfully in one EU country, it must be allowed in all EU countries. “France is changing its laws right now. Spain has got to change,” said Kight. “We are going to see this happen across Europe. These countries are working toward or just coming into compliance.”
One of the biggest stories currently in cannabis reform is Mexico. In late June, Mexico’s Supreme Court declared unconstitutional the prohibition of personal marijuana use in the country, clearing a path to legalization. Mexico’s lower house passed a legalization bill in March, but it is still awaiting legislative approval in a gridlocked Senate.
The Supreme Court of Mexico determined that the laws in Mexico prohibiting the personal use of cannabis is unconstitutional, according to Kight. Mexico has a “really important clause that the U.S. doesn’t have” called The Right to Free Development of Personality. The Mexican constitution protects the individual’s right to be unique and independent.
In several cases, marijuana advocates argued that the state cannot infringe upon that right when the consequences of marijuana consumption—be they positive or negative—only affect the individual who chooses to use the drug. “The Mexican Supreme Court agreed and determined that laws prohibiting cannabis use for personal use violated that constitutional provision,” Kight said.
Under Mexican law, its Supreme Court must rule on an issue five separate times (separate cases) for a decision to have precedence or value. The same process was how same-sex marriage was legalized in Mexico in 2014. The first cannabis case was brought by four members of the Mexican Society for Responsible and Tolerant Consumption in 2015. After the fifth separate marijuana decision was handed down in 2020, the court ordered the Mexican Congress to change the criminal laws prohibiting the use of cannabis.
Mexican lawmakers then failed to meet the Supreme Court’s April 2021 deadline to end marijuana prohibition after spending months going back and forth on a legalization bill that passed both chambers of Congress in differing forms. “There was an expectation that the Senate would again ask the court for an extension, but that did not take place. The Supreme Court of Mexico then entered a ruling that nullified the Mexican laws prohibiting cannabis use, and so we’re kind of in the Wild, Wild West now,” Kight explains. “That’s never happened for any subject under Mexican law, much less cannabis. Now the Congress is under the gun to enact laws and regulations.”
Credit: Stock Photo Pro
Future focus
Overall, cannabis markets are expected to continue to grow globally. According to Market Watch, the global cannabis market size is expected to reach $118.9 billion by 2027 and is valued at approximately $20.6 billion in 2020. It is anticipated to grow with a healthy rate of more than 28.5 percent from 2020 to 2027. Regulation is coming, and many countries will likely regulate cannabis similar to the way tobacco products are regulated.
To help secure the future of the industry, businesses currently selling or manufacturing products using minor cannabinoids need to regulate themselves and produce and/or market only high-quality products using legitimately sourced and tested ingredients, says Kight, adding that one bad product can reverberate through the industry. Business owners should also be actively engaged with regulators.
“There are a lot of cannabis products out there that are not regulated. They might have contaminants in them that harm people, and we don’t want that,” he says. “I think it’s really important that industry players make sure they’re only dealing in high-quality, safe products. And they need to let their representatives in government know how important hemp is to them, including all of its cannabinoids.”
