Is the Delta 8 Loophole Closing?

The Nineth Circuit ruling created a loophole to sell psychoactive substances, like Delta-8, without an age limit, without a possession limit, and without any product safety or contamination standards.

Delta-8 is a cannabinoid found in cannabis but its natural quantities are low. Shortly after the glut of hemp and CBD oil in 2019 people started to synthesize the CBD oil into Delta-8 products. As of early 2021, Delta-8 was one of the fastest growing segments of products derived from hemp. The list of psychoactive substances derived from hemp keeps growing with Delta-8, Delta-10, THC-O, THC-P, etc. and they all fall under this loophole.

To recap recent history in this country: The voters in states that have legalized medical and recreational marijuana voted to regulate a psychoactive substance to patients and adults and to require the product be tested for potency and contamination. Then the 2018 Farm bill legalized hemp nationally. The understanding at the time was THC (Delta-9) was THE psychoactive substance. With hemp being define as 0.3% THC, the assumption was no one would ever get high from hemp products. That was obviously a wrong assumption…

When Delta-8 came on the market some states banned or regulated it while most have done nothing. Most people do not know what delta-8 is. Some products make it more confusing, like Delta-8 Flower. Most people I have talked to that have purchased it say they think it’s ‘natural’ and ‘grown that way’. What most don’t know is ‘Delta-8 flower’ is hemp flower sprayed with delta-8, and in many cases, it has not been tested for chemical residuals, pesticides, metals, or for potency other than THC (Delta-9). The lack of understanding of the product has led to product safety issues.

As of November 21, 2022 – 21 states have banned or regulated delta-8 while four are reviewing its legal status. Currently Delta-8 is legal in 29 states and DC, but that might all be coming to an end with another federal ruling.

‘A federal judge threw out a lawsuit against Kansas’ governor and attorney general that alleged $120,000 worth of delta-8 THC products destroyed by police were legal.’

In dismissing the suit Tuesday, the judge wrote that, “in short, no part of the 2018 Farm Act demonstrates an unmistakable focus to benefit plaintiff or other unlicensed possessors and sellers of hemp products.

“The 2018 Farm Act does not create a private right for plaintiff to (possess) and sell hemp and hemp products, either under Section 1983 or as an implied cause of action under the 2018 Farm Act itself.”

The question now is ‘what’s next?’. Is this the end of the Delta-8 loophole? If so how do the feds enforce its new position. Many hemp operations will be impacted by this ruling and should prepare themselves for the change.

There are a lot of shared problems operating cannabis businesses, but inventory issues are arguably the most common. In the lean manufacturing system, where waste is defined as “something that adds no value”, inventory is identified as one of seven wastes. Lean Manufacturing Tools describes inventory waste in this way:

“Inventory costs you money, every piece of product tied up in raw material, work in progress or finished goods has a cost and until it is actually sold that cost is yours. In addition to the pure cost of your inventory it adds many other costs; inventory feeds many other wastes.

Inventory has to be stored, it needs space, it needs packaging and it has to be transported around. It has the chance of being damaged during transport and becoming obsolete. The waste of Inventory hides many of the other wastes in your systems.” (http://leanmanufacturingtools.org/77/the-seven-wastes-7-mudas/)

From state-to-state inventory violations tend to be the most common fines, in the cannabis industry. These violations are typically for not properly reporting inventory and not reconciling actual inventory to the virtual seed-to-sale tracking system’s inventory.

While manufacturing waste and fines and violations are concerns for any business the biggest perils associated with inventory are criminal in nature. Inventory that is not well tracked is vulnerable for theft, embezzlement, and diversion of product into the black market.

The issues compound very quickly, if inventory discrepancies happen day after day, it becomes nearly impossible to identify what exactly went wrong. If a business does not catch an inventory discrepancy with in 48 hours the likelihood of identifying the issues drops dramatically.

To control waste, fines, and criminal activity every cannabis business must button up their inventory controls. Every process involved in producing, moving, and selling product should be clearly defined with responsibility assigned to specific personnel. While many states do not require daily inventory reconciliation it is best practice to do so. This requires businesses to count every plant and product daily and verify the virtual tracking numbers match. Many businesses see daily inventory reconciliation as too time consuming and burdensome, but the consequences are too high to not know exactly what your inventory is every day.

The Nineth Circuit ruling created a loophole to sell psychoactive substances, like Delta-8, without an age limit, without a possession limit, and without any product safety or contamination standards.

Delta-8 is a cannabinoid found in cannabis but its natural quantities are low. Shortly after the glut of hemp and CBD oil in 2019 people started to synthesize the CBD oil into Delta-8 products. As of early 2021, Delta-8 was one of the fastest growing segments of products derived from hemp. The list of psychoactive substances derived from hemp keeps growing with Delta-8, Delta-10, THC-O, THC-P, etc. and they all fall under this loophole.

To recap recent history in this country: The voters in states that have legalized medical and recreational marijuana voted to regulate a psychoactive substance to patients and adults and to require the product be tested for potency and contamination. Then the 2018 Farm bill legalized hemp nationally. The understanding at the time was THC (Delta-9) was THE psychoactive substance. With hemp being define as 0.3% THC, the assumption was no one would ever get high from hemp products. That was obviously a wrong assumption…

When Delta-8 came on the market some states banned or regulated it while most have done nothing. Most people do not know what delta-8 is. Some products make it more confusing, like Delta-8 Flower. Most people I have talked to that have purchased it say they think it’s ‘natural’ and ‘grown that way’. What most don’t know is ‘Delta-8 flower’ is hemp flower sprayed with delta-8, and in many cases, it has not been tested for chemical residuals, pesticides, metals, or for potency other than THC (Delta-9). The lack of understanding of the product has led to product safety issues.

As of November 21, 2022 – 21 states have banned or regulated delta-8 while four are reviewing its legal status. Currently Delta-8 is legal in 29 states and DC, but that might all be coming to an end with another federal ruling.

‘A federal judge threw out a lawsuit against Kansas’ governor and attorney general that alleged $120,000 worth of delta-8 THC products destroyed by police were legal.’

In dismissing the suit Tuesday, the judge wrote that, “in short, no part of the 2018 Farm Act demonstrates an unmistakable focus to benefit plaintiff or other unlicensed possessors and sellers of hemp products.

“The 2018 Farm Act does not create a private right for plaintiff to (possess) and sell hemp and hemp products, either under Section 1983 or as an implied cause of action under the 2018 Farm Act itself.”

The question now is ‘what’s next?’. Is this the end of the Delta-8 loophole? If so how do the feds enforce its new position. Many hemp operations will be impacted by this ruling and should prepare themselves for the change.