A U.S. appeals court has ruled that the hemp-derived cannabinoid THC-O-acetate is federally legal under the 2018 Farm Bill, rejecting the position of the Drug Enforcement Administration (DEA) that the chemical is a Schedule I controlled substance.

The opinion, published on Wednesday by the U.S. Court of Appeals for the Fourth Circuit, comes in an employment case that rests in part on the federal legality of the cannabinoid. In it, the majority of a three-judge panel ruled that DEA’s interpretation of what qualifies as illegal marijuana is overbroad and does not apply to THC-O, which can be synthesized from other cannabinoids found in legal hemp.

In rejecting DEA’s 2023 interpretation of the law, the Fourth Circuit panel sided with an earlier opinion out of the Ninth Circuit Court of Appeals that ruled the Farm Bill’s legalization of hemp removed restrictions on a wide range of cannabinoids, for example delta-8 THC.

“Because the statute is subject to this other reasonable (and, we think, better,) interpretation,” says the new Fourth Circuit opinion, “we reject [the employer’s] contention that the DEA’s interim final rule or letter mandates a finding that THC-O is illegal.”

“Between the DEA’s February 2023 letter and [the Ninth Circuit opinion], we think the Ninth Circuit’s interpretation of the 2018 Farm Act is the better of the two,” judges wrote. “And we’re free to make that determination ourselves, despite a contrary interpretation from the DEA, because we agree with the Ninth Circuit that [the federal definition of hemp] is unambiguous.”

Specifically, the opinion says, “The Ninth Circuit held that it didn’t need to consider the DEA’s position on synthetically derived substances because the definition of ‘hemp’ under the 2018 Farm Act was unambiguous in its application to all products derived from the cannabis plant, ‘so long as they do not cross the 0.3 percent delta-9 THC threshold.’”

To further justify its reasoning, the court cited a Supreme Court decision from this year that overturned the so-called Chevron doctrine of providing deference to federal agencies’ interpretations of ambiguous statutes, writing that it means judges need not defer to DEA’s own interpretation of the law.

The opinion says of the federal hemp definition: “Even if it were ambiguous, we needn’t defer to the agency’s interpretation, see Loper Bright Enters. v. Raimondo.”

The Fourth Circuit’s majority opinion added that “guidance concerning synthetic cannabinoids from other federal agencies also supports this conclusion,” for example a definition of synthetic cannabinoid from the National Institute on Drug Abuse (NIDA) that defines the category as “a class of lab-made substances that are chemically similar to chemicals found in the cannabis plant, though they often produce very different effects.”

Cannabis attorney Rod Kight, who wrote about the Fourth Circuit opinion, Anderson v. Diamondback Investment Group, on his blog, Kight on Cannabis, called the ruling “groundbreaking and unexpected.”

He noted the ruling could also have implications for THCA—another cannabinoid that DEA has deemed federally illegal and one it says should be included as part of products’ THC levels.

“The 4th Circuit’s broad dismissal of the DEA’s position on THC-O, combined with the 9th Circuit’s ruling that delta-8 THC is lawful despite the DEA’s position to the contrary, confirms that federal courts will not defer to the DEA on the Farm Bill when its position is not reasonable. Both courts dismissed DEA positions on the Farm Bill that focused on the Farm Bill’s supposed ‘intent”and that required inserting additional language into the definition of ‘hemp’. Instead, the courts focused on the plain and ‘unambiguous’ language of the law in their rulings. This bodes well for the hemp industry. In particular, it seems to be a win of sorts for the burgeoning market in THCa flower, which the DEA contends is illegal. This is because THCa meets the definition of ‘hemp’ when its delta-9 THC concentration does not exceed 0.3% by dry weight since the plain language of the Farm Bill, and rulings by both the 4th Circuit and the 9th Circuit courts of appeal, confirm that delta-9 THC is the sole metric to distinguish legal hemp from illegal marijuana and also because the definition of ‘hemp’ includes its ‘acids’. (THCa is an ‘acid’.)”

Kight, who described the underlying case as “a feast of legal issues,” also pointed out that one of the Fourth Circuit judges on the panel wrote a dissenting opinion questioning “whether the court reached the right conclusion in determining that THC-O meets the definition of a legal hemp ‘derivative’ since, as the DEA states, it does not naturally occur in the plant.”

Kight wrote last year that he believed “DEA is right that Congress requires a post-decarboxylation test for hemp production,” but he argued that “once hemp has been deemed to be compliant and allowed to be harvested, the ‘post decarboxylation’ test no longer applies.”

Hemp-derived cannabinoid products have proliferated since hemp’s legalization, essentially existing in an unregulated legal grey area. If a cannabinoid is naturally extracted from hemp, it’s federally legal. But it’s generally considered common practice to synthesize certain cannabinoids from CBD because it’s a more cost-effective process.

At DEA’s 2023 Supply Chain Conference in May, Terrence Boos, chief of DEA’s drug and chemical evaluation section, explained the agency’s view that synthetic cannabinoids are banned. He said DEA officials were in the process of developing a final rule to formally clarify that policy, at the recommendation of the U.S. Department of Health and Human Services (HHS).

Boos, who penned the DEA’s position rejected by the Fourth Circuit judges, has been responsible for a number of recent agency opinions on cannabis and other drugs. Notably in 2022, for example, he penned the DEA letter clarifying that marijuana seeds are considered legal hemp as long as they fall below federal THC limits.

More recently, he opined in a January letter that psilocybin mushroom spores are not, on their own, federally prohibited. They become illegal only after they begin producing psilocybin, he said.

While issues around the legality of hemp-derived cannabinoids continue to be the subject of court cases and agency opinions, congressional lawmakers are also eyeing the issue. Dozens of anti-drug, law enforcement representatives, health groups and even legal marijuana businesses are calling on Congress to impose a general ban on hemp-derived cannabinoids such as delta-8 THC.

A sign-on letter last month led by an anti-drug organization, for instance, asked federal lawmakers to support an amendment that was recently attached to a large-scale agricultural bill, a change that some hemp industry advocates say could also impact many non-intoxicating CBD products.

Rep. Mary Miller’s (R-IL) amendment to the pending Farm Bill reauthorization, which was approved by a House committee in May, would remove cannabinoids that are “synthesized or manufactured outside of the plant” from the federal definition of legal hemp.

The change is backed by prohibitionists as well as certain marijuana companies, who’ve described the restriction as a fix to a “loophole” that was created under the 2018 Farm Bill that federally legalized hemp and its derivatives.

In addition to Miller’s amendment in the new Farm Bill, the House Appropriations Committee last month approved a separate spending bill that contains a similar provision to prohibit cannabinoid products such as delta-8 THC and CBD containing any “quantifiable” amount of THC.

If either measure is enacted into law, cannabinoids that are “synthesized or manufactured outside of the plant” would no longer meet the definition of legal hemp.

Miller said in support of the change in May that her amendment “will close the loophole created in the 2018 Farm Bill that allows intoxicating hemp products like delta-8 to be sold.”

Rep. Derrick Van Orden (R-WI) said the “issue is this Congress inadvertently created this problem in the 2018 Farm Bill because they could not reasonably predict, or they they didn’t reasonably predict, that these types of cannabinoids could be synthesized and then they passed this bill through in the intervening time.”

“There are now tens of thousands of Americans who have created different businesses, including several in my district now, that are using this process to feed their own kids,” he said.

How to address hemp-derived cannabinoids has caused some fractures within the cannabis community, and in some cases marijuana businesses have found themselves on the same side as prohibitionists in pushing a derivatives ban.

In a letter to congressional leaders ahead of Miller’s amendment, the U.S. Cannabis Council (USCC) proposed specific language they wanted to see included that would place hemp-derived cannabinoids containing any amount of THC under the definition of federally illegal marijuana.

While they’ve focused on the need to address public safety concerns related to unregulated “intoxicating” cannabinoid products such as delta-8 THC, some hemp industry advocates say the effect of the proposed language could be a ban on virtually all non-intoxicating CBD products as well, as most on the market contain at least trace levels of THC, consistent with the Farm Bill definition of hemp that allows for up to 0.3 percent THC by dry weight.

“The 2018 Farm Bill has wrongly been used to justify the mass production and sale of unregulated intoxicating hemp products,” USCC Executive Director Ed Conklin said in a press release following the amendment vote earlier this year. “We support a uniform approach to regulating intoxicating THC products. That means intoxicating hemp products should be regulated the same as cannabis products. We believe that all of these products should be available for sale to adults with strict age gating and safety standards.”

Meanwhile, the legislation that advanced through the House Agriculture Committee in May also contains provisions that would reduce regulatory barriers for certain hemp farmers and scale-back a ban on industry participation by people with prior drug felony convictions.

Specifically, it would make it so the U.S. Department of Agriculture (USDA), states and tribal entities could choose to eliminate a policy that prevents people with felony drug convictions in the past 10 years from being licensed to produce industrial hemp.

However, advocates had hoped to see more expansive language, such as what was described in Senate Democrats’ recent summary of their forthcoming Farm Bill draft. Under that plan, there would be a mandate to eliminate the ban, rather than simply authorizing it, and it would cover all hemp producers, not just those growing it for non-extraction purposes.

The Senate Agriculture Committee has not yet released the draft text of their bill, so it remains to be seen if the summary description matches what will ultimately be released. Bipartisan House lawmakers filed standalone legislation last year that would broadly lift the felony ban for would-be hemp producers.

Lawmakers and stakeholders have also been eyeing a number of other proposals that could be incorporated into the Farm Bill—and which could come up as proposed amendments as the proposal moves through the legislative process—including measures to free up hemp businesses to legally market products like CBD as dietary supplements or in the food supply.

The hemp market started to rebound in 2023 after suffering significant losses the prior year, according to an annual industry report from the U.S. Department of Agriculture (USDA) that was released in April.

The data is the result of a survey that USDA mailed to thousands of hemp farmers across the U.S. in January. The first version of the department’s hemp report was released in early 2022, setting a “benchmark” to compare to as the industry matures.

Bipartisan lawmakers and industry stakeholders have sharply criticized FDA for declining to enact regulations for hemp-derived CBD, which they say is largely responsible for the economic stagnation.

To that end, FDA Commissioner Robert Califf testified before the House Oversight and Accountability Committee earlier this year, where he faced questions about the agency’s position that it needed additional congressional authorization to regulate the non-intoxicating cannabinoid.

USDA is also reportedly revoking hemp licenses for farmers who are simultaneously growing marijuana under state-approved programs, underscoring yet another policy conflict stemming from the ongoing federal prohibition of some forms of the cannabis plant.

For the time being, the hemp industry continues to face unique regulatory hurdles that stakeholders blame for the crop’s value plummeting in the short years since its legalization. Despite the economic conditions, however, a recent report found that the hemp market in 2022 was larger than all state marijuana markets, and it roughly equaled sales for craft beer nationally.

Meanwhile, internally at USDA, food safety workers are being encouraged to exercise caution and avoid cannabis products, including federally legal CBD, as the agency observes an “uptick” in positive THC tests amid “confusion” as more states enact legalization.

Read the full Fourth Circuit opinion, Anderson v. Diamondback, below:

Trump’s Former Attorney General Says Biden Marijuana Rescheduling Move Is ‘Grossly Irresponsible,’ Calling Cannabis A ‘Gateway Drug’

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