Whether you practice full time as a cannabis attorney, dabble in cannabis law, or are simply interested in the evolving federal views and laws on marijuana, you may have caught wind that the federal Agriculture Improvement Act of 2018, Pub. L. 115-334 (commonly known as “The 2018 Farm Bill”) changed the definition of hemp in ways that, likely unintentionally, legalized a wide spectrum of low tetrahydrocannabinol (“THC”) products. See 7 U.S.C. §§ 1639o et seq (codification of the pertinent parts of the bill). Many of these products, despite being legal under the technical language of the bill, have the potential for intoxicating effects, and the bill has opened up potential loopholes to produce and market these products without running afoul of federal law. But while many cannabis businesses have taken advantage of this new legal status, where and when this federal law preempts state laws criminalizing various forms of “hemp” remains an open question.
For many years, federal law did not distinguish between hemp, a low-THC derivative of the Cannabis sativa plant, and other, more intoxicating derivatives like marijuana. Both were classified as Schedule I drugs under the Controlled Substances Act (CSA), meaning drugs with a high potential for abuse and no medically accepted uses. As a Schedule I drug, possession or distribution of hemp carried significant criminal penalties.
This all changed with the passing of the 2018 Farm Bill. The 2018 Farm Bill defined hemp as "the plant Cannabis sativa L. and any part of that plant, including the seeds thereof and all derivatives, extracts, cannabinoids, isomers, acids, salts, and salts of isomers, whether growing or not, with a delta-9 tetrahydrocannabinol concentration [the form of THC most prevalent in mature cannabis plants] of not more than 0.3 percent on a dry weight basis," and created a licensing and regulatory scheme for the production and sale of hemp. See 7 U.S.C § 1639o(1); see also FDA Regulation of Cannabis and Cannabis-Derived Products, Including Cannabidiol (CBD), Food and Drug Administration, at items 1 and 2 (updated July 16, 2024). By treating hemp as a regulated agricultural commodity instead of a drug, the bill removed “hemp” products from the list of federally controlled substances, see 21 U.S.C. § 802 (16)(B)(i), and legalized them entirely. See 21 U.S.C. § 812(c)(17).
This has opened the door for companies to produce and market products containing, for example, high amounts of delta-8 and delta-10 (other intoxicating, though less prevalent, forms of THC found in the Cannabis sativa plant), other products containing related chemical compounds like THCA that can be converted into THC when heated, as well as things like cannabis seeds that naturally contain less than .3% Delta-9 THC but which can be cultivated into full grown cannabis plants by consumers once purchased. The unintentional creation of a legalized (albeit limited) marijuana market has angered some state leaders, a number of whom sent a March 20, 2024 letter to Congress asking them to close this loophole.
For its part, the DEA announced in a letter to a New York cannabis attorney that it will no longer pursue prosecution of the sale or production of cannabis seeds with less than .3 percent THC by dry weight that make their way into interstate commerce. Given that cannabis seeds naturally do not contain more than this amount of THC by dry weight, the letter, in effect, confirmed that producers can likely ship cannabis seeds between states and not be prosecuted by the federal government. The DEA, however, has maintained in other letters that synthetically derived THC, such as synthetic Delta-8 products, as well as products that can produce illegal amounts of THC when burned, like tetrahydocannabinolic acid (“THCA” or “THCa”), are not exempt from the CSA and are still considered Schedule I drugs. See email from the DEA on synthetic delta-8 products; see also letter to same New York attorney on THCA products. Despite this stance, producers and marketers of such products have flourished nationwide, even within states where cannabis in all forms remains illegal.
To make matters more complicated, the Farm Bill does not offer clear guidance on the scope of its preemption of state law in this arena. In one part, the Farm Bill purports to allow the states and Indian tribes to regulate the production of hemp products and to pass their own, more stringent laws governing the same. As codified, the Bill reads in relevant part, “No preemption. Nothing in this subsection preempts or limits any law of a State or Indian tribe that – (i) regulates the production of hemp; and (ii) is more stringent than this subtitle [7 USC §§ 1639o et seq].” 7 USCS § 1639p. Other provisions of the Bill, however, codified in the Statutory Notes of 7 U.S.C. § 1639o (see second tab entitled “Notes”) state the following in pertinent part:
(a) Rule of Construction.—
Nothing in this title…prohibits the interstate commerce of hemp (as defined in section 297A of the Agricultural Marketing Act of 1946 [7 U.S.C. 1639o] (as added by section 10113)) or hemp products.
(b) Transportation of Hemp and Hemp Products.—
No State or Indian Tribe shall prohibit the transportation or shipment of hemp or hemp products produced in accordance with subtitle G of the Agricultural Marketing Act of 1946 [7 U.S.C. 1639o et seq.] (as added by section 10113)
2018 Farm Bill § 10114 (emphasis added). Such clauses unequivocally bar the states from doing anything that might inhibit or interfere with the legal interstate transportation or shipment of hemp or hemp products, even as the previously cited passage allows them to pass stricter cannabis/hemp laws within their own borders.
Nonetheless, there remains ample room for the various states to continue to try to crack down on these products by way of local law. Whether or not such laws are preempted by federal law remains an open question; the federal courts who have grappled with this issue have taken a case-by-case view of various state laws and have not taken a uniform view of how these laws interact with the Farm Bill.
For example, in 2023, the United States District Court for the Eastern District of Arkansas enjoined the enforcement of an Arkansas law that excluded “hemp derived-cannabinoid products from the definition of marijuana” but “criminalized all hemp products ‘produced as a result of synthetic chemical process’ and ‘[a]ny other psychoactive substance derived therein.’” Bio Gen., LLC v. Sanders, 690 F. Supp. 3d 927, 933 (E.D. Ark. 2023) (quoting Ark. Code Ann. §§ 5-64-215(i)-(j)). Although the law attempted to avoid interstate commerce effects by affirmatively stating that it does not prohibit the continuous transportation through Arkansas of products federally defined as hemp, the federal district court nonetheless found that it was likely preempted by the 2018 Farm Bill.[1]
The court found that the 2018 Farm Bill delineated “downstream products” by whether or not they passed the “0.3 percent Delta-9 THC threshold” and not how they were produced (i.e. whether the resulting product was “synthetic” or naturally derived from a raw cannabis plant).[2] The court also chastised the Arkansas legislature for supporting the national legalization of hemp products only to then take advantage of the parts of the bill it liked, the industrial use of hemp, and criminalize the parts it didn’t like, the human consumption of hemp products. Therefore, the court found, the plaintiffs were likely to succeed in showing conflict preemption between the state and federal law. Id. at 939. The “continuous transportation” carve-out could not save the law, the court said, because it was vague and ambiguous and, therefore, “ineffective.” Id. at 940. Plaintiff was likely to succeed on their claim of express preemption as well given that “Arkansas law criminalizes hemp-derived products without an effective exemption for interstate commerce.” Id.[3]
This opinion, however, is in tension with other federal courts. For instance, the Southern District of Indiana upheld a state law, Senate Enrolled Act No. 516 (“SEA 516”) that mimics the Farm Bill in allowing hemp products that contain a Delta-9 THC concentration of less than 0.3 % by dry weight but criminalizes products it defines as “smokable hemp” in the face of a legal challenge to the law. C.Y. Wholesale v. Holcomb, 2021 U.S. Dist. LEXIS 33388, at *10-*11 (S.D. Ind. Feb. 22, 2021). The law defined “smokable hemp” as “a product containing not more than three-tenths percent (0.3%) delta-9-[THC], including precursors or derivatives of THC, in a form that allows THC to be introduced into the human body by inhalation of smoke” and which includes the derivatives commonly known as “hemp bud” and “hemp flower.” Id. at *11 (citing Ind. Code § 35-48-4-10.1(a)).
The case sidestepped the plaintiffs’ express preemption argument, concluding that the plaintiffs had only shown that they shipped and transported hemp to and from “non-licensed producers” and thus did not have standing to challenge the state law on express preemption grounds. Id. at *16. While the court found that the plaintiffs did have standing to make a conflict preemption argument, it rejected both theories of this form of preemption put forth by the plaintiffs on their merits. The court first found that the Seventh Circuit had already “clearly rejected” the argument that SEA 516 impermissibly altered the federal statutes definition of hemp by criminalizing “smokable hemp” and instead found the state law “brings Indiana’s definition of industrial hemp into line with the 2018 federal definition.” Id. at *19-*20 (quoting C.Y. Wholesale, 965 F.3d 541, 544 (7th Cir. 2020)). The court also rejected the argument that the statutes in question are conflict preempted “because they obstruct Congress’s overall intent in the 2017 and 2018 Farm Bills to treat all hemp, including hemp bud and hemp flower, as a legal agricultural commodity.” As the court explained, “The Seventh Circuit has explicitly rejected this theory [as well],” finding “nothing in the 2018 Farm Law that supports the inference that Congress was demanding the states legalize industrial hemp, apart from the specific provisions of the express preemption clause.” Id. at *20 (quoting C.Y. Wholesale, 965 F.3d at 544). Thus, the court found that the plaintiffs had not established a likelihood of success on their argument that SEA 516, and the related Senate Enrolled Act No. 335 (“SEA 335”), were conflict preempted. Id. at *22.[4]
Citing this same opinion, the United State District Court for the Eastern District of Virginia upheld Virginia’s attempt to prohibit products with a “total THC” (not just Delta-9) that was above 0.3% by dry weight. N. Va. Hemp & Agric. LLC v. Virginia, 2023 U.S. Dist. LEXIS 195168, *16-17 (E.D. Va. 2023). While the court primarily rejected a challenge to the law on standing grounds, it also found that the 2018 Farm Bill was silent on the sale of “delta-8 THC or other THC variants manufactured and sold in Virginia” and thus the State had every right to regulate these substances above and beyond the federal law in creating the “total THC” standard. Id at *34-*36. The Virginia court also rejected Plaintiffs’ field preemption argument in that the 2018 Farm Bill expressly allowed states to internally regulate hemp production in more stringent ways than it provided for. Id. at *32 (citing 7 U.S.C. § 1639p(a)(3)(A), the “savings clause” of the 2018 Farm Bill). In fact, it credited Virginia for submitting its plan to the USDA for approval before passing this state statute, which it took as evidence that Congress did not intend to “occupy[] the entirety of [this] legislative field.” Id.
Ultimately, it remains unclear to what extent the 2018 Farm Bill preempts state attempts to regulate and/or criminalize the production and sale of various “hemp” products, particularly those with intoxicating effects meant to mimic true cannabis consumption. While there appears to be relatively low risk when shipping products through states where they are otherwise prohibited, given the text of the Farm Bill and the apparent inaction of the DEA, the legal path to federal and local authorities seizing such products is not entirely shut. This is particularly true where the products are marketed for intoxicating effects. Until the legal landscape around these issues becomes more settled, producers, manufacturers, and retailers of such products should be wary of using the 2018 Farm Bill as a shield against federal or state prosecution, as the verdict on both the willingness of such authorities to prosecute such activity and the preemptive effect of the federal law still remain very much in flux.
NOTES
[1] There are two different forms of preemption, so-called “express” and “implied” preemption. Express preemption is where the federal law clearly and unequivocally states that it is meant to exclusively control in that arena, whereas implied preemption is exactly what it sounds like – that the law or context surrounding the law implies that the federal law should control. Implied preemption comes in three distinct forms: 1) field preemption: where the federal government is so heavily involved in a given area of law that there is no place for state involvement of any kind, 2) direct conflict preemption: where a state law must be disregarded as it directly competes or is so at odds with a federal law that complying with both is “impossible,” and 3) obstacle preemption, where the courts see the state law as a clear obstacle to the aims of the federal law. See Guthrie v. PHH Mortg. Corp., 79 F.4th 328, 336-337 (4th Cir. 2023) (defining “direct conflict preemption” and “obstacle preemption” as “two subsets” of “conflict preemption); see also Nelson v. Great Lakes Educ. Loan Servs., 928 F. 2d 639, 646-47 (7th Cir. 2019) (defining an “actual conflict” as one where it is impossible for a person to obey both state and federal law); Kellen Norwood, Chapter 1: Federal Preemption of State and Local Law, Municipal Law Deskbook (A.B.A.) (2015).
[2] In fact, the court credited the plaintiffs’ expert for pointing out that there was “no way” to determine whether a product was derived naturally from a hemp plant or through a synthetic process “because the substances are molecularly the same.” Id. at 939. It further found this assertion was entirely unrebutted by the defendants. Id.
[3] Although not dealing with preemption, the Ninth Circuit in AK Futures LLC v. Boyd St. Distro, LLC, 25 F. 4th 682, 690 (9th Cir. 2022) found, as part of a trademark infringement suit, that “the plain and unambiguous text of the Farm Act compels the conclusion that the delta-8 THC products before us are lawful” which, in turn, bolsters the argument for preemption.
[4] The C.Y. Wholesale court did not explain its conclusion that the plaintiffs lacked standing to challenge the express preemption claim but not the conflict preemption claim. The Southern District of Iowa, however, similarly rejected an express preemption argument on standing grounds, while adjudicating the plaintiffs’ conflict preemption argument on the merits, shedding light on this issue:
[I]t is unlikely that Plaintiffs have standing to bring the express preemption claim because they are not involved in the interstate transportation of hemp products through the state of Iowa. However, Plaintiffs also allege the Hemp Amendments are preempted because they act as an obstacle to the goal of the Farm Bill and therefore conflict with Congress’ Intent….Unlike their express preemption claim, it is likely that Plaintiffs do have standing for a conflict preemption claim….They are challenging the more stringent requirements placed on hemp products by the state of Iowa and do actually produce, distribute, sell, and possess those products. If the law was impliedly preempted by the Farm Bill, Plaintiffs would stand to suffer the injury of criminal enforcement of the law traceable to the restrictions in the Hemp Amendments and redressable by the actions of the Court.
HW Premium CBD, LLC v. Reynolds, 2024, *18-*19 (S.D. Iowa, July 25, 2024) (citing Spokeo, Inv. v. Robins, 578 U.S. 330, 228 (2016)). In this case, the Iowa law at issue prohibited carrying, producing, transporting, or selling cannabis plants that exceed the same 0.3% THC limit found in the 2018 Farm Bill, but also prohibited products that exceeded 4 mg of THC per serving or 10 mg of THC per container. Id. at *20 (citing Iowa Code § 204.2). Therefore, the court found that it was not impossible to comply with both laws and that the state law was simply adding more restrictive interstate regulations on top of the 2018 Farm Bill, which the latter’s “anti-preemption clause” was expressly created to allow for. Id. at *20-*21. Ultimately, in generally keeping with C.Y. Wholesale, Inc., the court wrote, “There is nothing in the Farm Bill that stands for the proposition that Congress intended to preempt states from regulating any part of the hemp cultivation, production, manufacturer, or sales process, except the express preemption for interstate transportation.” Id. at *21 (citing to C.Y. Wholesale, 965 F.3d at 544) (emphasis added); see also Duke’s Invs. LLC v. Char, 2022 U.S. Distr. LEXIS 211778, at *7 (D. Hawaii, Nov. 22, 2022) (accord).
