Is CBD Legal?

NOTE: This article was written in 2015. Its substantive points remain valid; however, I also encourage you to read a more recent article on this same topic I wrote for the September 2017 edition of the Cannabis Law Journal. You can read that article by clicking here. I also encourage you to visit my cannabis business law website: cannabusiness.law. –Rod Kight, January 24, 2018

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Is CBD legal?

It depends.

As a hemp lawyer the single most misunderstood issue I see is the legal status of CBD. Informal legal opinions abound and positions about the issue cover the spectrum from “CBD is totally legal” to “CBD is totally illegal.” As with most things, the truth lies somewhere in between.

On one end of the spectrum is the view espoused by some CBD companies that CBD is “legal in all 50 states.” As I’ll describe in this article, this view is accurate only within a very limited, and mostly unhelpful, context. The proponents of the “CBD is completely legal” position primarily base their position on the fact that CBD is not listed as a scheduled (ie, illegal) substance in the Federal Controlled Substances Act. This particular view is patently wrong. If it weren’t, then there would be no need for individual states to enact medical CBD laws, which many have done. It also takes an overly simplistic view of the Federal definition of cannabis, which includes its component parts. CBD is a component part of cannabis.

On the other end of the spectrum is the opinion, espoused by the DEA, that all CBD is illegal. This view is based primarily on what I just mentioned, namely, that CBD is a component part of cannabis and is thus necessarily prohibited since cannabis is an illegal schedule I drug. This view is plainly overbroad and incorrect. There is a patchwork of statutory and case law that clearly carves out exceptions to the illegality of cannabis. These exceptions, though narrow, are real and allow for CBD to be produced and sold under certain circumstances.

In this blog article I will attempt to clarify the legal status of CBD and it’s cousin in-law, hemp.

Many of my clients know that I recently wrote a book on cannabis business law and that I have a particular interest in the cannabis plant and industry that is rapidly springing up around us. This is the first article on the issue that I have posted to my law firm’s website. It’s an important issue because the NC General Assembly just passed a comprehensive industrial hemp bill that is expected to become law within a matter of days. If you are interested in hemp and cannabis law I recommend that you check out my blog, Kight on Cannabis. You can visit my blog and, if you’re interested, buy my book by clicking HERE.

I’ll start by introducing CBD. For those who are new to the subject, CBD stands for cannabidiol. It is one of over 85 active cannabinoids in the cannabis plant. Commonly referred to as “the medical” part of the plant, CBD is non-psychoactive (as opposed to tetrahydrocannabinol “THC”) and has a number of properties that are getting noticed by the medical community, including, but not limited to: pain relief, assistance with reducing seizures, anxiety relief, inhibition of tumors, anti-inflammation, and many other properties which are currently being researched. Although it is certainly not the only cannabinoid with medical properties (THC, despite it’s notoriety as the “get you high” component of cannabis, has a number of well documented medical benefits), CBD rightfully reigns supreme as the leader of the medical marijuana (“MMJ”) movement.

So, is CBD legal to use? To manufacture? To ship across state lines? These are all good questions with complicated answers.

Let’s start with the basics. CBD comes from Cannabis Sativa L (“cannabis”), which is illegal under the Federal Controlled Substances Act (“CSA”). 21 USC § 801 et seq. Cannabis is a Schedule I drug, which means that it has “no currently accepted medical use and a high potential for abuse.” Crazy? Yes. Wrong? Absolutely. But it’s the law.

Importantly, the following parts of cannabis are not included in the CSA definition:

“[T]he mature stalks of such plant, fiber produced from such stalks, oil or cake made from the seeds of such plant, any other compound, manufacture, salt, derivative, mixture, or preparation of such mature stalks (except the resin extracted therefrom), fiber, oil, or cake, or the sterilized seed of such plant which is incapable of germination.” 21 USC § 802(16)

CBD produced from any parts of the cannabis plant in the above list of exceptions is legal. That sounds good, right? Wrong. From a practical perspective the exceptions aren’t much help at all. Cannabis seeds do not contain any CBD and the mature stalks contain very little. CBD is produced by the cannabis plant’s trichomes, which are glandular hairs. Cannabis seeds have no such hairs and the stalks contain relatively few compared to the plant’s flowers (also known as “buds”) and leaves. So, although it is technically legal to extract and sell CBD from mature cannabis stalks the stalks don’t produce much CBD and are thus a poor source for it. Additionally, and more importantly, there are several methods to extract CBD from the stalks. Many of these methods use chemical processes that leave residual solvents in the CBD paste that are unfit for human consumption. This obviously undermines using CBD products derived in this manner for their health benefits.

Aside from the limited quantity of CBD in the stalks and the problematic extraction issue I just discussed, the primary obstacle to obtaining CBD from mature cannabis stalks is that, with one exception (which I’ll address below when I discuss industrial hemp), it is illegal under Federal law to grow cannabis. Even though the mature stalks are legal to possess, in order to become “mature” they must first go through a phase in which they are not fully developed and contain THC levels which are in violation of the CSA. Companies that are willing and able to extract CBD from the stalks have, until very recently, had to do so outside the United States to circumvent this problem.

Hemp that contains little to no THC and its products are legal to import and sell in the US. This is due to a 2003 Federal court case called Hemp Industries Association, et al, v. Drug Enforcement Administration, 333 F.3d 1082 (9th Cir. 2003) (“Hemp Indus.”) The Hemp Indus. case involved a dispute between manufacturers of hemp products and the Drug Enforcement Agency (“DEA”) over three DEA rules regarding hemp and THC. The primary rule at issue for our purposes was the first one, which purported to interpret both the CSA and the DEA regulations to ban all naturally-occurring THC, including the THC found in hemp seed and oil, on Schedule I. 66 Fed. Reg. 51,530 (October 9, 2001) This rule would have made it illegal for hemp manufacturers to produce and sell their products, even ones that contained only trace amounts of THC.

The 9th Circuit Court of Appeals found that the DEA had exceeded its authority in enacting this rule and struck it down. Although the Hemp Indus. case is really a case about regulatory procedure and what constitutes an “interpretive rule” which requires one set of procedures to enact versus a “legislative rule” which requires different and more cumbersome procedures to enact, the practical effect of the case was to strike down the DEA’s rule banning hemp products that contain only trace amounts of naturally occurring THC. This opened the door for companies to import hemp and products derived from hemp (such as CBD and hemp oil) from countries that allow it and to sell them throughout the US.

I should note at this point that the DEA has the authority to issue permits to grow hemp. As you might imagine, these licenses are rarely issued.

So, to recap before moving on, what I’ve discussed so far is that hemp is the same plant species as cannabis. As such, it is only legal to grow under Federal law with a DEA permit, which is rarely given, or pursuant to state laws that comply with the 2014 US Farm Bill, which I’ll discuss in a moment. It is legal to import and then sell industrial hemp and CBD products made from the mature stalks of the cannabis plant if they contain little to no naturally occurring THC. The problem with importing CBD products made from hemp stalks is that the stalks contain very little CBD (seeds contain none) and therefore the extraction methods often involve the use of chemicals and industrial solvents that are harmful for human consumption.

Moving forward, the next key legal piece involving CBD is The Agricultural Act of 2014, commonly referred to as the “2014 Farm Bill”, enacted by the US Congress in 2014. For our purposes I want to discuss a section of the 2014 Farm Bill called “Legitimacy of Industrial Hemp Research.” 7 USC § 7606. In this section, Congress carved out an exception to the CSA’s definition of cannabis for what it calls “industrial hemp”, which it defines as “the plant Cannabis sativa L. and any part of such plant, whether growing or not, with a delta-9 tetrahydrocannabinol concentration of not more than 0.3 percent on a dry weight basis.” 7 USC § 7606(b)(2).

According to the 2014 Farm Bill, a State department of agriculture may grow or cultivate industrial hemp if it satisfies two key elements. First, the industrial hemp must be grown or cultivated “for purposes of research conducted under an agricultural pilot program or other agricultural or academic research.” Second,the growing or cultivating of industrial hemp must be “allowed under the laws of the State in which such institution of higher education or State department of agriculture is located and such research occurs.” 7 USC § 7606(a). As of this writing, at least 23 states have taken the plunge and enacted laws relating to industrial hemp. Generally speaking, these states have taken 3 approaches: (1) They have established commercial industrial hemp programs; or (2) They have established industrial hemp research programs; or (3) They have enacted studies of industrial hemp or the industrial hemp industry.

For our purposes the most important of these three approaches is the first one, in which states have established commercial industrial hemp programs. At first glance this approach may appear to conflict with the 2014 Farm Bill since it requires any hemp cultivation or growth to be for purposes of research conducted under an agricultural research pilot program. However, since the 2014 Farm Bill does not dictate or otherwise specify the manner in which the states may carry out their pilot or other hemp related agricultural research programs, some have taken the view that a state may comply with the 2014 Farm Bill’s provisions by enacting laws that allow the private commercial sector to grow and cultivate hemp. Indeed, if a state is conducting research on, say, the economic impact of a hemp industry within its borders it only makes sense to involve the private sector in order to obtain real facts and figures rather than speculative ones based on academic models.

The states that have established commercial industrial hemp programs include: California, Colorado, Indiana, Kentucky, Maine, Montana, North Dakota, Oregon, South Carolina, Tennessee, Vermont, Virginia, and West Virginia. Additionally, I should note that the General Assembly of North Carolina, my home state, has also passed a bill establishing a commercial industrial hemp program. The NC bill should become law within a couple weeks of this writing, if not sooner.

The practical impact of state-based commercial hemp programs on CBD cannot be overstated. What this means, in essence, is that individuals and businesses can now legally obtain CBD from within the US. More importantly, they can extract it from the cannabis flower and leaves instead of the stalk. This should allow for better quality CBD than what can be obtained overseas from industrial stalks and from offshore companies that manufacture CBD as an afterthought or byproduct of other markets for industrial hemp, such as fabrics and construction materials. Additionally, because the Federal law allows the growth and cultivation of cannabis plants with up to 0.3% THC instead of trace amounts or less, US businesses can access a wider range of cannabis plants, including those specifically bred to have high concentrations of CBD.

This is all good news for CBD. However, it does not mean that homegrown CBD is now legal throughout the US. In fact, it means just the opposite. CBD extracted in the US is only legal in the states that allow it. It cannot be extracted, manufactured, bought, sold, or possessed by anyone in a state in which it is not legal. (An exception is CBD which is extracted solely from the mature stalk of the plant, which is already legal as I’ve discussed above.) Importantly, it cannot be shipped or transported from one state to another state, not even to another state in which it is legal. So, if you live in a state which has not enacted a hemp law pursuant to the 2014 Farm Bill then you may not legally possess American made CBD.

And, of course, in the larger picture, the laws related to CBD remain overly restrictive, even in states that allow it. The most important difficulty is the 0.3% cap on THC. To start with, this is an arbitrary figure. The 0.3% THC ceiling, which is the current world-standard, is based on the work of Canadian scientist Ernst Small, who conducted research on cannabis and published “The Species Problem with Cannabis” in 1971. In his book, Small stated that there isn’t a natural point at which the cannabinoid content could be used to distinguish strains of “hemp” from cannabis. Despite this he drew an arbitrary line on the continuum of cannabis types, and simply decided that 0.3 percent THC was the proper line. The line has held. And because the priority in growing hemp plants must be to keep THC levels low due to our restrictive laws, research and development of new strains is necessarily hampered and business is dampened. The 2014 Farm Bill ensures that it’s a much better strategy to focus on staying well below the line than to branch out to create better CBD strains and, in so doing, flirt with surpassing the legal THC limits. For the same reason, it also limits the development of new seed varieties.

CBD laws are complex and have important but subtle nuances. CBD derived solely from mature hemp stalks, whether from a state which has legalized hemp growth and cultivation or from overseas, is legal throughout the US. But, for the most part this kind of CBD tends to be low quality due to its scarcity in the stalk and the methods necessary to extract it. CBD extracted from the flowers and leaves, which tends to be more abundant and easier to extract using non-toxic methods, is only legal if produced, sold, and possessed in a state which has enacted hemp laws pursuant to the 2014 Farm Bill.

Please do not hesitate to contact me if you have questions about CBD or hemp law.