Note: Delta-8-THC-O and Delta-9-THC-O are different than delta-8-THC and delta-9-THC. While the latter both exist naturally in the hemp plant, THC acetate (better known as THC-O) doesn’t. That’s the underlying basis for the DEA’s position.

THC acetate is most typically a component of products like edibles and vapor cartridges. As Los Angeles cannabis business lawyers, we want to ensure any companies that currently produce, transport, stock, and sell these products take immediate note. It’s not immediately clear how this will impact the market, so it’s a smart idea to immediately consult with a cannabis lawyer on how best to proceed and ensure you’re on the right side of the law.

How the Farm Bill Factors

The 2018 Farm Bill opened the door to a number of cannabinoid products that are known to also have intoxicating properties. This has drawn the attention and ire of some politicians and interest groups. The additional scrutiny has led to legal challenges that have wound up in court.

Last year, the U.S. Court of Appeals for the Ninth Circuit involved a copyright/trademark/patent protection case. The defendant didn’t even contest that it was selling counterfeit versions of the plaintiff’s delta-8 THC products. The appellate court affirmed the lower court’s grant of a preliminary injunction’s on the defendant’s sales, and held that the plaintiff was likely to prevail on their claims. What the defendant argued was that plaintiff couldn’t own a valid trademark for its products because of the illegality doctrine (which has been cited in other cannabis trademark infringement and patent infringement cases). Basically, products that are illegal under federal law aren’t entitled to federal protections – such as those for trademarks. Plaintiffs argued that delta-8 THC was legalized under the 2018 Farm Bill as a hemp-derived product. Defendants argued that was not the intention of the legislature to approve legalization of psychoactive substances – which delta-8 THC is. The appellate court sided with plaintiffs, finding the 2018 Farm Bill language was unambiguous, and the delta-8 products in question fit the requirement of containing less than 0.3 percent of THC.

But Delta-8-THC-O and Delta-9-THC-O are not the same thing.

DEA’s Novel Cannabinoid Stance

Essentially what the DEA’s Drug & Chemical Evaluation Section has concluded is that if a certain cannabinoid or compound is produced naturally by the hemp plant – then it’s legal (as long as it doesn’t have more than 0.3 percent THC). It’s not a controlled substance, no matter how it’s processed or manufactured into the final product. That’s important to note because delta-8 actually is synthetically-manufactured from CBD (which is hemp-derived). However, trace amounts of it also occur naturally in the plant.

While the Delta THCO products do contain THC that has a similar structure chemically and similar pharmacological outcomes compared to hemp plants, they aren’t the same – and they don’t naturally occur in the plant. They can only be produced through processes that are synthetic.

The DEA’s statement doesn’t clarify the rules for all novel cannabinoid derived from hemp, but it’s a start.

If you have questions about how to ensure your Southern California cannabis business is adhering to current laws and regulations, our marijuana business lawyers help.

The Los Angeles CANNABIS LAW Group represents growers, dispensaries, ancillary companies, patients, doctors and those facing marijuana charges. Call us at 949-375-4734. Additional Resources: DEA Classifies Novel Cannabinoids Delta-8 And -9 THCO As Controlled Substances, Even When Synthesized From Legal Hemp, Feb. 13, 2023, By Kyle Jaeger, Marijuana Moment More Blog Entries: California Pot Purveyor Pushes Back Against Product Potency Lawsuit, Dec. 6, 2022, Los Angeles Marijuana Lawyer Blog

To explain the significance of this, we have to step back a bit to examine the historical context. Cannabis companies run into all kinds of legal stumbling blocks in the simple course of doing business. Matters like banking, transportation, real estate purchases/rental agreements, security, insurance, employment, etc. – all of these things are more complicated than they would be for typical businesses. Despite state-level laws that legalize marijuana cultivation, production, sales, and possession (such as California’s Proposition 64), the U.S. Controlled Substances Act still classifies cannabis as a Schedule I narcotic. This has resulted in much confusion about practical applications for state-legal cannabis companies just trying to conduct regular business.

One legal concern that has cropped up in the past couple years deals with the transport cannabis company cash – particularly when it involves crossing state borders. Because of federal banking regulations, cannabis companies tend to deal primarily in cash, which can pose some practical challenges. Moving that cash from one point to another is not as simple as a digital transfer. It may require physical transport. But in the course of doing so, several companies found themselves smack in the center of federal civil forfeiture cases wherein the government seized the cash, on the basis of it being tied to illegal drug trafficking.

Civil forfeitures, also sometimes called civil asset forfeiture or judicial forfeiture, is a highly controversial process whereby law enforcement/government agencies to seize – and keep – property and other assets that belong to persons suspected of committing a crime. Forfeitures can happen as part of a criminal case, but in civil forfeitures, no crime need be proven in a court of law in order for the government to keep those assets. Some have likened it to “highway robbery,” except it’s fully legal. The laws were written to target criminal organizations, fugitives, terrorists, etc., but have been used in many cases against state-legal cannabis companies.

As Los Angeles marijuana business lawyers can explain, these scenarios involving cannabis companies have puzzled legal scholars because they fall into something legal gray area – thanks to the patchwork of conflicting state and federal pot laws.

This brings us to the federal cannabis civil forfeiture case that was recently dismissed. About a year ago, an armored truck transporting $165,000 cash profits from legal medicinal marijuana sales in Missouri to a credit union in Colorado (which allows both medical and recreational marijuana) was stopped by authorities in Kansas (where marijuana is not legal for any purpose). The cash was confiscated, and federal prosecutors in Kansas City argued that civil forfeiture was lawful because the cash could be traced to marijuana sales, in violation of the U.S. Controlled Substances Act. Similar incidents were reported in California, too.

The company whose cash was seized fiercely contested the forfeiture, and actually filed a lawsuit to get their money returned. That lawsuit asserted that state and federal law enforcement acted illegally in initiated pretextual stops specifically to seize cannabis company vehicles, cash, and other assets for the purpose of civil forfeiture because they knew such actions would be lucrative. (Civil forfeiture allows for equitable sharing of the proceeds between federal and state authorities where they collaborate on such actions.)

Late last year, federal authorities in California agreed to return some $1 million seized from cannabis companies in a similar civil forfeiture action involving the same company. In return, the company agreed to drop its lawsuit against the government.

Now – and without any real explanation – federal prosecutors in Kansas are doing the same thing, which means the $165,000 seized will be returned. Prosecutors’ brief was just five sentences and did not elaborate on the decision to drop the case, but it was expected after the California case – with a nearly identical fact pattern – was dropped as well.

If you are a cannabis company doing any sort of business, advertising, or transport across state lines, it is imperative that you work with an experienced cannabis business lawyer who can review your policies and practices and make recommendations to ensure you’re protecting your products, your profits, and your people.

The Los Angeles CANNABIS LAW Group represents growers, dispensaries, ancillary companies, patients, doctors and those facing marijuana charges. Call us at 949-375-4734.

Additional Resources:

DEA Asset Forfeiture, DEA.gov

set of insects and animals and requires special care to deter wildlife from harming crops. Farmers must also take into consideration how pest-control methods could harm natural surroundings and affect the people who will consume the product. Cannabis farms are no different, though they lack the years of shared wisdom other farmers have gathered. In fact, cannabis farmers have to be even more thoughtful in some ways about what they use because their end product isn’t easily washable like an apple. Although it wouldn’t seem a cannabis attorney would be your first consult on this front, it’s worthwhile to review it with your counsel so you are sure you’re abiding local and state environmental regulations.

The California Department of Pesticide Regulation, has been tasked by California’s Medicinal Adult-Use Cannabis Regulation and Safety Act to provide guidelines for pesticide use in cannabis farming. The department said there is not a pesticide product federally registered for use specifically for cannabis farmers. However, there are plenty of pesticides that can legally be used on cannabis so long as they meet certain criteria. According to the department, the state permits certain pesticides for use on cannabis crops that are “exempt from residue tolerance requirements and the product is either exempt from registration requirements or registered for a use that is broad enough to include use on cannabis.” Examples of substances exempt from registration would be food-grade essential oils, such as peppermint and rosemary. A full list of legal pesticides for cannabis farms is provided by the department. Warning labels on pesticide packaging also must be adhered to in regards to how much pesticide is used and how frequently it is applied to maintain safe levels.

Officials are voicing concerns over an increased use of Carbofuran, a highly toxic pesticide that’s illegal in the U.S. This type of pesticide has become popular with unlicensed marijuana farmers because of its effective pest control, but it has extremely adverse effects on wildlife and the end product. While strong pest control can be appealing, this is not a corner cannabis farmers can afford to cut. Consider this: the reason the chemical is so effective is that a single teaspoon can kill a bear. There’s a reason this pesticide is illegal and should not be trifled with. The Department of Pesticide Regulation also provides a list of pesticides, including Carbofuran, that are not permitted for use on cannabis crops.

Not only is using proper pesticides the right thing to do for the environment and your customers, it’s also the best thing for you and your business. Attorney McGregor Scott, the top prosecutor for northeastern California, has stated he intends to leave the state’s new legal recreational marijuana market alone, according to an article from The Sacramento Bee, but has his sights on those who are skirting key regulations. On a short list of his top concerns are organized crime, farming on public lands, interstate trafficking, and use of Carbofuran.

Making a quick buck today isn’t worth harming animals, putting the safety of people in jeopardy, losing your business, and facing criminal prosecution tomorrow. That’s why it’s essential that cannabis businesses learn about proper regulations, obtain licenses, and form a business plan that has longevity with the help of our skilled Riverside cannabis business attorneys. We’ll show you how to stay out of the way of the law and keep safety a top priority while still making money.

The Los Angeles CANNABIS LAW Group represents growers, dispensaries, collectives, patients, defendants, workers and those facing criminal marijuana charges. Call us at 949-375-4734.

Additional Resources:

Use of Toxic Pesticides Increased in California’s Illegal Weed Farms, May 30, 2018, By Nick Lindsey, High Times

More Blog Entries:

One California Sheriff Warns Marijuana Users About Pesticide Dangers, June 3, 2016, Cannabis Law Group

of data about the cannabis industry. Our attorneys know one of the most difficult things about establishing any new industry is lack of concrete data. There can be a lot of growing pains as authorities and economic leaders gather a foundation of facts that help in making critical decisions about public safety, regulations, and taxation. This is particularly true when dealing with a controlled substance, like marijuana. Even though marijuana has been legal for medical purposes in California since the passing of the Compassionate Use Act of 1996, the switch to recreational legalization in the state as of Jan. 1 was a real game changer. MAUCRSA, Medicinal and Adult-Use Cannabis Regulations and Safety Act, was created to combine guidelines for medical marijuana with all the new stringent licensing rules for recreational cannabis, so all regulations lived under one umbrella.

The mission of the newly formed California Cannabis Authority is to “develop and manage a statewide data platform that will gather, collect, and analyze information from a myriad of data sources into one resource.” The more local governments that participate, the more compelling and significant the data will be for everyone who accesses it.

The group was created by the California State Association of Counties Finance Corp. The group started with San Luis Obispo, Humboldt, and Monterey Counties on board, with Mendocino following suit. According to a report by the Ukiah Daily Journal, the platform will make it easier to track tax payments, provide compliance information to county departments, and allow health officials to access product information. Our knowledgeable cannabis business attorneys in Riverside know this database is helpful for public officials, but also to the sustainability of cannabis businesses. Sharing this information can increase understanding between local governments and owners. Detailed tracking of finances, taxation, licensing and regulatory compliance could also pave the way for financial institutions to more easily work with cannabis-related businesses. Financial institutions must have an excessive amount of proof that a cannabis-related business is following all state guidelines before a relationship can form, so a database of this sort would be an excellent first step to easing this process significantly. In turn, this benefits the cannabis industry, which largely has to operate with cash. Any modern businessperson will tell you this is a gargantuan feat. The long-term stamina of the marijuana industry is dependent in part on allowing growers and distributors to move their platforms into the 21st century.

Cooperation between cannabis businesses and local governments is a positive thing, and the hope is we’ll soon see more of it in Southern California. Trust and communication are key factors to success going forward, which is why our marijuana attorneys work with cannabis businesses to establish a business framework that incorporates regulatory considerations and financial viability. We want to see your business start off on the right foot and continue to grow into the future.

The Los Angeles CANNABIS LAW Group represents growers, dispensaries, collectives, patients, defendants, workers and those facing criminal marijuana charges. Call us at 949-375-4734.

Additional Resources:

California Cannabis Authority (CCA), California State Association of Counties

More Blog Entries:

Cash-Only System Tough on Marijuana Businesses When Paying Taxes, March 27, 2018, Cannabis Law Group

Why Marijuana Farmers Cannot Insure Their Businesses Marijuana is entirely prohibited under federal law. There are no provisions for personal or even medicinal usage. Because of this, insurance carriers – most of whom are subject to federal regulations – are prohibited from insuring the businesses, products, or assets of marijuana businesses. Even when businesses are cultivating cannabis lawfully under the state’s Medical Marijuana Program (California Health and Safety Code §11362.7 to 11362.85), they are not able to access insurance coverage. These business losses have been even greater due to the timing of these wildfires. Salon reports that many business owners have spent “their life savings” getting permits and preparing their crops for legal sales on January 2, 2018. These same federal regulations prevent many cannabis owners from using traditional banks or financial services. Banks with locations in multiple states are subject to federal regulations, and thus cannot offer accounts or lending services to cannabis business owners. Many cannabis businesses are left to operate entirely in cash. This, too, has caused devastating losses for marijuana business owners who lost cash in the wildfires – in addition to structures, crops, and other business assets. According to CNN, many farmers often invest as much as $5 million on their facilities and $3 million on their crops. Some of these facilities can be insured as structures. Many cannot. Crops are left wholly unprotected. How Marijuana Business Owners Can Recover Their Business Operations While insurance coverage may not be available, there are many strategic business plans which can help business owners reinitiate operations and, in time, regain profitability. Certain investments are not entirely lost by the destruction of a single crop. Business permits, for example, may cover the next growing cycle. The administrative and legal preparations for a new enterprise of recreational marijuana sales can be applied to future crops. Distributors and retailers may not sustain direct losses as a result of the wildfires, but they, too, may face supply issues with destruction of so much product. These business owners can also mitigate their losses by adjusting their business plans. Supply sources can be diversified. Retailers can expand their inventory to carry a wider selection of cannabis products and equipment. Consult with an experienced California cannabis business plan lawyer to determine how you can best rebuild your business after a natural disaster. While disaster may have already struck, and insurance coverage may not be available, it is still possible for business owners to plan for a profitable future. The Los Angeles Cannabis Law Group represents growers, dispensaries, collectives, patients and those facing marijuana charges. Call us at 949-375-4734. Additional Resources: California wildfires torch state’s legal marijuana farms, leaving owners helpless, October 12, 2017 by Charlie May, Salon More Blog Entries: Marijuana Insurance Concerns Amid Expanding Legalization, March 13, 2015, by Cannabis Law Group