ANALYSIS: How Congress Created a Legal Market for THC—By Mistake

Congress’s legalization of hemp-derived tetrahydrocannabinol (THC) in 2018 is the most far-reaching move by the legislature to ease federal cannabis restrictions in recent history, and it happened by accident.

The hemp provisions in the 2018 Farm Bill were intended to remove hemp from the federal controlled substances list and to regulate it instead as an agricultural commodity. However, because the Farm Bill’s definition of hemp only prohibited one form of THC—the compound most commonly associated with a cannabis “high"—its enactment de facto legalized every other intoxicating cannabinoid that hemp can produce.

Attorneys general from 20 states and Washington, D.C. signed a letter to Congress in March requesting that they close this legal loophole and called the resulting influx of intoxicating THC vapes, food, and beverages a “significant threat to public health and safety.”

The Farm Bill remains effective until Sept. 30. Due for reauthorization roughly every five years, Congress will have to redefine hemp in the bill’s next iteration if they intend to undo their legalization of hemp-derived THC.

Patchwork Regulation

With no guidance regarding THC from Congress, state and federal actors are taking steps to provide it.

At the Federal Level

The US Drug Enforcement Administration (DEA) tried to rectify Congress’s omission by clarifying in the bill’s implementation plan that all forms of THC are still illegal. A 2022 Ninth Circuit trademark infringement case disagreed, ruling that the plain text of the Farm Bill legalized some forms of THC. A district court in the Seventh Circuit concurred with the Ninth Circuit in March 2024 by adopting the same interpretation.

At the State Level

Many states have taken advantage of the Farm Bill’s non-preemption clause and passed their own laws to fill in the gaps left by the federal act.

With the Farm Bill due for reauthorization in less than six months, a look at how Congress accidentally legalized THC in 2018 and the legislation’s widespread impact on state-legal cannabis regulations shows what the legislative branch needs to do the next time around.

How Hemp-Derived THC Became Legal by Accident

Understanding how the Farm Bill accidentally legalized some forms of THC requires the crash course in cannabinoids that Congress apparently didn’t receive in 2018. Cannabinoids are the chemical compounds produced by the cannabis plant that have therapeutic and sometimes intoxicating effects on users.

The most well-known cannabinoids are cannabidiol (CBD) and THC. Though both have therapeutic applications, CBD is non-intoxicating, while THC creates the “high” associated with cannabis. Hemp is a species of cannabis containing only trace amounts of THC and large amounts of CBD.

The 2018 Farm Bill distinguishes hemp from cannabis by capping hemp’s permissible concentration of delta-9 THC—one of many forms of THC—at no more than .3%.

What Congress didn’t realize in 2018 is that delta-9 THC isn’t the only intoxicating cannabinoid that can be made from hemp. Manufacturers can use CBD to synthesize delta-8 and delta-10 THC, which are just as intoxicating as delta-9 when consumed in large doses. Because the Farm Bill doesn’t cap these alternative forms of THC, hemp products can satisfy the .3% delta-9 limit while still having intoxicating levels of delta-8 and delta-10.

In a national landscape where half of the states prohibit the purchase of cannabis, the market vacuum is being filled with what is now a $28 billion market for hemp-derived THC products. And because the Farm Bill classifies hemp as an agricultural commodity, the production and sale of these products are less regulated than what any state cannabis program would require.

The states attorneys general’s letter says that states are struggling with the health and safety consequences of the bill’s omission, stating that hemp-derived THC products are often “attractive to youth and children—with staggering level of potency, no regulation, no oversight, and a limited capability for our officers to reign them in.”

Ninth Circuit Pushes Back Against DEA

The DEA tried to address this lack of regulation in their implementation plan for the 2018 Farm Bill by clarifying that delta-8 THC is still a Schedule I controlled substance, but has received some pushback.

In a review of a federal district court’s grant of a preliminary injunction in a trademark case, the Ninth Circuit disagreed that delta-8 THC is illegal under the bill. The law’s “clear statutory text overrides a contrary agency interpretation,” the appeals court said in its 2022 ruling.

In AK Futures v. Boyd Street Distro, the “lawful use in commerce” prerequisite for federal trademark protection required the Ninth Circuit to address for the first time whether hemp-derived THC products were de facto legal under the Farm Bill. Even though the case isn’t an appeal of a final judgment, it still offers a persuasive interpretation of the Farm Bill, which other circuits have already begun to incorporate.

The court unambiguously held that THC products derived from hemp were lawful under the plain text of the Farm Bill so long as they have less than 0.3% delta-9 THC. If Congress “inadvertently created a loophole legalizing vaping products containing delta-8 THC, then it is for Congress to fix its mistake,” the court said.

AK Futures’ interpretation of the Farm Bill will likely carry weight going forward because trademark cases make up 30% of the federal dockets mentioning delta-8 and THC, and the Ninth Circuit is the most active federal circuit in the legal hemp industry.

Next Farm Bill Needs a New Definition for Hemp

The 28 states’ attorneys general want Congress to define hemp in a way that removes the loophole for intoxicating cannabinoids and specifies that hemp only be used for industrial purposes, not consumer products. This could involve a separate cap on the permissible amount of delta-8 and delta-10 THC in addition to the cap on delta-9, or a total THC cap that includes all forms, similar to what some states have enacted.

Until then, state legislatures will continue to try to wrangle the runaway market on their own without federal assistance. The Farm Bill includes a preemption clause that allows states to regulate hemp more strictly than the federal standard. Thirty-four states have already taken steps to regulate hemp-derived THC, but at least six of these states have unclear or unenforced bans, and products from unregulated states often find their way into prohibited markets.

This has created a legal and regulatory landscape for hemp-derived THC that is almost the inverse of that for cannabis. While federal prohibition continues to complicate states’ attempts to create a safe and legal market for cannabis products, federal legalization of hemp hinders their ability to regulate the very intoxicating compounds that state cannabis regulations were designed for.

If Congress’ bungling of hemp legalization tells us anything, it’s that the federal legislature has a limited understanding of the cannabis plant and its complexities. If Congress decides to reform federal cannabis law, including through rescheduling, it’s likely to create as many new problems for states to address as it does solutions.

Bloomberg Law subscribers can find related content on our In Focus: Cannabis page, our Trademarks & Copyrights page, and our Practical Guidance, Trademarks page.

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