If you think that the wave of legalized cannabis in recent years has turned the tide of reefer madness, think again. On May 2, 2018, a panel of judges for the 9th U.S. Circuit Court of Appeals rejected a challenge filed by cannabidiol (CBD) producers against a Drug Enforcement Agency rule that classifies CBD as a Schedule I drug.
The rule originated in 2016 when the DEA created a new Administration Controlled Substances Code Number for the term “marijuana extract,” which defined a marijuana extract as “an extract containing one or more cannabinoids that has been derived from any plant of the genus Cannabis…” This meant that CBD, regardless of whether it was extracted from hemp or cannabis, was now effectively a Schedule I substance.
Firing back at the DEA, the Hemp Industries Association filed a challenge against the rule, arguing that the agency overstepped its authority by scheduling substances that were not included in the Controlled Substances Act and that hemp-based CBD extracts were protected under state laws and Farm Bill provisions.
However, because of the vagaries of the federal law, their arguments mattered little. Under federal law, a party can petition a Court of Appeals for a review of final DEA decision. However, if the petitioner fails “to make an argument before the administrative agency in comments on a proposed rule,” they are prevented from raising that argument on judicial review.
Without its strongest argument, the HIA’s case hinged on whether or not the DEA rule violated agricultural laws, which the justices determined it did not and consequently ruled in favor of the DEA. Although the case is currently being appealed, the results of this case could have a chilling effect on the U.S. CBD market.
In 2016, the U.S. hemp industry generated approximately $688 million in product sales, with $130 million alone coming from Hemp-based CBD. According to the Hemp Business Journal, the CBD market will grow to a $1.8 billion in consumer sales by 2020 with $450 million of those sales coming from hemp-based sources.
Now those projections are cast into doubt because of this recent ruling. At the moment, hemp-based CBD products are still available for purchase online from online retailers like Amazon, but the question is for how long?