Indiana Attorney General Misconstrues Federal CBD Laws – A Legal Analysis

The Indiana Attorney General (AG), Curtis Hill, a vocal opponent of cannabis reform, issued a controversial legal opinion (the Opinion) regarding cannabidiol (CBD) on Tuesday. Hill’s opinion, co-written with Chief Counsel Scott Newman, takes the official position that CBD is illegal in Indiana under both state and federal law. “No one in Indiana is authorized to sell cannabidiol under Federal or State law, and therefore, any retail establishment selling anything that contains cannabidiol is in violation of the law.” The opinion concludes with a chilling and deeply flawed conclusion, in which Hill asserts that even individuals in lawful possession of CBD under House Bill 1148, Indiana’s strict epilepsy specific CBD regime, can be prosecuted under Federal law.

There is a lot to unpack. Before wading into the Opinion it is important to keep in mind the fundamental legal concept about CBD: it is legal- or not- based on its source. CBD is not legal or illegal in and of itself. If it is sourced from a prohibited plant (or, a prohibited part of a plant) then it is illegal. On the other hand, if it is sourced from a lawful plant (or a lawful part of an otherwise prohibited plant) then it is lawful. The reason that CBD’s legality is tied to its source is due to the definition of marijuana under both Federal law and the laws of most states, in which “marijuana” includes “all parts of the plant cannabis sativa l”. Since CBD is a naturally occurring part of the marijuana plant it is unlawful if it is derived from marijuana. On the other hand, Federal law and the laws of most states carve out exceptions to the definition of marijuana. For instance, under Federal law the mature stalk of the marijuana plant is lawful. So, too, is the industrial hemp plant, which is defined under Federal law as the entire cannabis sativa l plant grown pursuant to a state pilot hemp program that contains no more than 0.3 percent delta 9 tetrahydrocannabinol (THC). Finally, the 9th Circuit Court of Appeals reiterated in the 2004 Hemp Industries Association v. DEA case that “non-psychoactive hemp” containing no more than trace amounts of THC is lawful to import. CBD lawfully derived from any of these three exceptions- the mature stalk of the marijuana plant, industrial hemp, or non-psychoactive hemp from abroad- is lawful at the federal level and, in some cases, at the state level.

Hill’s opinion appears to be mostly correct regarding Indiana state law, at least with respect to industrial hemp. Although Indiana enacted an industrial hemp pilot research program in 2014 the legislature added a specific hanging paragraph (a term used when a clause in a statute is not specifically numbered and “hangs” at the bottom of a statute) to the section that defines industrial hemp. It states: “the term industrial hemp does not include industrial hemp commodities or products.” Ind. Code § 15-15-13-6 It would be fruitless to our present purposes to delve into what constitutes a “commodity or product” or the absurdity of such a phrase in the context of the industrial hemp law (raw hemp is a commodity). The fact is that this statutory provision seems to eliminate CBD products in the state, at least through the industrial hemp exception.

Hill also addressed Indiana’s limited medical exception that allows CBD for patients with epilepsy, House Enrolled Act 1148, codified at Ind. Code 16-42-28.6 et seq. (Act 1148) Hill’s take on CBD under this Act is that since the legislature has not set up a distribution scheme, “At present, then, no one in Indiana is authorized to commercially distribute or sell CBD or substances containing CBD.” This is an extreme, and probably incorrect, view of the law. Act 1148 specifically sets up a legal defense for the possession of CBD by individuals with treatment resistant epilepsy. (Hill also asserts that even individuals who may lawfully be able to claim this defense under Indiana law could be prosecuted for violation of Federal law, which is patently inaccurate.)

The Opinion seems to rule out, at least for now, CBD in Indiana. I could stop the analysis here if I was solely concerned with Indiana. However, it is Hill’s take on Federal law that is most important for the industry at large to understand. Anyone who deals with CBD knows that most people are woefully undereducated about it. The law is complex. And due to the fact that Hill is the highest law enforcement officer in Indiana the Opinion has the potential to miseducate law enforcement officers throughout Indiana (and even the other 49 states) about Federal law as it relates to CBD. These are the very people who should be the most educated about it. They have enough to keep track of without having to deal with inaccurate opinions by people in positions of authority. I am going to address the Opinion’s primary errors with respect to Federal law in the hope that it will both clarify CBD’s Federal legal status and mitigate the effect of Hill’s take on it.

Because the Opinion is so off with respect to Federal law it’s difficult, even as a lawyer, to know where to start. I don’t say this lightly. The Opinion was either completely botched, or a deliberate attempt to reinforce some of the DEA’s more extreme views expressed to the media and in recent court filings. (It is worth noting that Hill is an outspoken opponent of all cannabis reform, so the latter view- that he is towing the DEA line- is probably the correct one.) The most coherent approach will be for me to address the Opinion’s inaccuracies within the framework of the three circumstances in which CBD is lawful under Federal law.

I. Industrial Hemp under the 2014 Farm Act.

First, Federal law removes the entire cannabis sativa l plant from the definition of marijuana when it is lawfully cultivated pursuant to a state’s pilot industrial hemp program in accordance with the industrial hemp provisions of the 2014 Farm Act. Individual state laws differ, but to be Federally compliant they must all provide (a) that delta-9 THC concentrations in the plants cannot exceed 0.3 percent on a dry weight basis, and (b) that the plants be grown pursuant to an agricultural pilot program operated by an institution of higher learning or a State’s agriculture department. When these requirements are met the entire cannabis plant is lawful, including the flowering buds which are the most abundant sources of CBD.

The Opinion does not offer much to counter the industrial hemp exception. Its primary focus is on the “DEA Statement on CBD, Hemp and ‘Farm Bill’” (Statement), a non-binding position statement by the DEA issued in August 2015. Aside from the fact that the Statement is not law, or even the Justice Department’s official interpretation of it, it conflates industrial hemp and marijuana, two separate and distinct things under the law. It states that industrial hemp is for “agricultural research purposes” and that “the Agricultural Act of 2014 does not permit such entities, or anyone else, to produce non-FDA-approved drug products made from cannabis.” Hill adopts this view in page 12 of the Opinion. First of all, CBD is not a drug. Simply processing industrial hemp so as to extract CBD and/or other naturally occurring oils and compounds does not make it so.

Second, the Farm Act does not limit the pilot programs solely to agricultural research. Section (b)(1) of the Farm Act states that it is lawful “to study the growth, cultivation, or marketing of industrial hemp“. (emphasis added) Congress clearly intended for the economic effects of industrial hemp to be studied, something that a state can license individuals and businesses to do under a pilot program. (States commonly license private actors to carry out public research.) This view is bolstered by the fact that Congress has enacted several consecutive Appropriations Acts which prohibit Federal funds from being used to interfere with the “transportation, processing, sale, or use of industrial hemp“. (emphasis added) (You can read more about the Appropriations Acts as they relate to hemp here.) So, while it is true that an individual state, such as Indiana, can limit its research program so that sales of hemp products are not allowed, it is clear that processing and sale of industrial hemp products is legal under Federal law.

The Opinion also cites the 2016 “Statement of Principles on Industrial Hemp” (Joint Statement) issued jointly by the DEA, USDA, and FDA. As with the DEA’s Statement, the Joint Statement is not law. Notably, even if it carried the force of law it does not restrict the sale of CBD. It simply reiterates the uncontested view that “Federal law continues to restrict hemp-related activities, to the extent that those activities have not been legalized under [the Farm Act].” In other words, cannabis sativa l that is grown, processed, used, marketed, or sold outside the scope of the Farm Act is illegal under Federal law. No one contests this view. In fact, the Joint Statement completely belies Hill’s position. It states: “industrial hemp products may be sold in a State with an agricultural pilot program or among States with agricultural pilot programs but may not be sold in States where such sale is prohibited.” (emphasis added)

II. Non-psychoactive hemp cultivated abroad.

In 2004 the 9th Circuit Court of Appeals ruled in Hemp Industries Association v. DEA, that “non-psychoactive hemp is not banned under Schedule I [of the Controlled Substances Act.]” The Court went on to state: “Congress knew what it was doing, and its intent to exclude non-psychoactive hemp from regulation is entirely clear.” It is hard to imagine a more straightforward statement. This may be the reason that Hill completely overlooks it in the Opinion. Under Federal law, “non-psychoactive hemp” is legal. Back in 2004 the USA did not have a domestic hemp program, so all hemp products were imported. For this reason, it is an open question as to whether the Court’s ruling applies to domestically cultivated industrial hemp. However, it is clear that the ruling applies to hemp grown outside the USA. So long as the hemp is “non-psychoactive”, which the Court states means that it contains no more than “trace amounts” of “naturally occurring THC”, the imported hemp and hemp products are legal under Federal law. (I should note that there is common confusion about this issue. Many people assume that “trace amounts” of THC means no more than 0.3%. However, the 0.3% metric is specific to domestically cultivated hemp under the Farm Act. The Court did not provide a specific THC concentration figure for imported non-psychoactive hemp.)

Hill does not address CBD from non-psychoactive hemp lawfully grown in another country. This is a significant oversight. Non-psychoactive hemp is legal. CBD extracted from it is thus legal since it is not a separately scheduled illegal substance. At the Federal level it is legal. In fact, and for the reasons set forth in this article I wrote for the Cannabis Law Journal in September, Federal law preempts (ie, overrides) contrary state law on this issue. Thus, non-psychoactive hemp is legal in all fifty states. NOTE: That being said, I do not suggest that people in Indiana sell CBD from non-psychoactive hemp in their state right now. They will almost certainly face prosecution for doing so. Even if they were acquitted based on Federal preemption the stress and uncertainty of being a “test case”, in which a Court could conceivably “get it wrong”, outweighs any benefit that may be derived from flouting the AG’s Opinion.

III. The mature stalk of the marijuana plant.

Both Federal law and the laws of most states except “mature stalks” from the definition of marijuana. In other words, the mature stalks of the marijuana plant are legal. Thus, CBD (and anything else) derived from the mature stalks of the marijuana plant is legal. Hill notes this exception in the Opinion. On page 11 he states: “The issue is not whether cannabidiol, standing alone, creates a psychotropic effect in the user. The issue for purposes of the [Controlled Substances Act “CSA”] classification comes down to whether the substance is derived from the genus Cannabis and parts of the plant that are within the CSA definition of ‘marijuana’“. Importantly, this statement endorses the view I first stated above, namely, that CBD is legal or not based on its source. If it is sourced from “marijuana” it is illegal. If it is not sourced from “marijuana” then it is lawful, which is the basis of the first two exceptions discussed above.

The “mature stalks” of the marijuana plant are not illegal “marijuana” under the law. They are lawful. CBD derived from them is thus lawful. Not only is this plain, but Hill himself endorses this view in the Opinion. There is literally no way to refute this conclusion. Instead of refuting it, Hill uses the same method used by the DEA to deal with the “mature stalks” exception. He states, “it is well established that cannabidiol cannot be meaningfully produced from the plants’ seeds or stalks.” He also quotes the DEA’s position that “cannabinoids are not found in the parts of the Cannabis plant that are excluded from the [federal] CSA definition of marijuana, except for trace amounts.” In other words, CBD is lawful if it is derived from the mature stalks, but since the mature stalks do not contain meaningful amounts of CBD, then CBD is illegal. From a logical standpoint, this is totally incoherent. It is the exact same position taken by the DEA in its most recent brief to the 9th Circuit in a case presently challenging its contention that so-called “marihuana extract” is illegal. (I address the marihuana extract rule below.) I discuss the DEA’s argument in detail here.

It may be true that meaningful amounts of CBD cannot currently be obtained from mature stalks. I do not know. However, that is not a valid legal argument in support of the proposition that CBD is illegal. It is a circular argument based wholly upon perceived current limitations with extraction technology, which itself is probably inaccurate. Any evidence tending to show that meaningful amounts of CBD can be derived from the mature stalks completely undercuts Hill’s position. As anyone in the cannabis industry knows, extraction technology is rapidly advancing. It is conceivable, even likely, that meaningful amounts of CBD can be derived from the mature stalks- either now or in the near future. In short, Hill’s argument fails because it is not based on a logical legal proposition. Rather, it is based on dated, anecdotal evidence of our current ability to extract CBD from the mature stalks. In fact, in making his argument he actually lends official support to the fact that CBD’s legal status is based on its source.

Finally, as a “hanging paragraph” to my three sections, I’ll briefly discuss the DEA’s “Marihuana Extract Rule” (Rule) (the DEA uses the antiquated spelling of marijuana), which Hill cites in the Opinion. The Rule asserts that an extract “containing one or more cannabinoids that has been derived from any plant of the genus Cannabis” is illegal. Since CBD is a cannabinoid it falls within the purview of the Rule. I discuss the Rule in depth here. My conclusion is that the DEA overstepped its Constitutional bounds in promulgating the Rule. As I’ve discussed above, there are certain situations (three, to be exact) under which cannabinoids that are not scheduled in the CSA (ie, all of them except THC) can be obtained from lawful plants/parts of plants. For this reason, the Rule is being challenged in the 9th Circuit Court of Appeals, which is likely to issue a decision in 2018. A discussion of the lawsuit is beyond the scope of this post. However, I do want to note that the DEA later issued a “Clarification” of the Rule (discussed here) in which it stated that the Rule “does not include materials or products that are excluded from the definition of marijuana set forth in the CSA”. In other words, the DEA affirmed that there are scenarios in which CBD is lawful. Hill conveniently omits any mention of the Clarification in his Opinion.

In summary, AG Hill got it wrong when it comes to CBD under Federal law. The fact that he has threatened to prosecute for CBD sale, use, and possession under federal law in addition to Indiana state law is chilling. (Although it rarely occurs, state law enforcement officers can prosecute for violations of federal law.) Additionally, he has issued a distorted and fundamentally flawed legal position which is likely to influence other law enforcement officials and muddy the already complex waters surrounding CBD. I encourage you to contact his office and demand that he withdraw the Opinion. In the meantime, though, I do not recommend that anyone sell CBD products in or to Indiana. This is a big and unfortunate loss for the people who need them.

Rod Kight is a lawyer based in Asheville, NC. He is licensed in North Carolina and Oregon and represents legal cannabis businesses. You can contact him by clicking here.