The DEA's Prohibition of TCHO: Why It Matters and Why It May Not

The hemp industry's explosive growth following the 2018 Farm Bill has produced a number of consequences, some intended and many more almost certainly never considered by lawmakers. The development of THC acetate ester (THCO), a synthetic substance created from hemp, almost certainly falls within the latter category.

Recently, THCO has gained substantial popularity. In a Feb. 13, 2023, letter, however, the Drug Enforcement Agency (DEA) stated that delta-8 and delta-9 THCO—unlike delta-8 and delta-10 tetrahydrocannabinol (THC) that is naturally derived from hemp—fall within the Controlled Substances Act's (CSA) definition of "marijuana." As a practical matter, this made the distribution and possession of delta-8 and delta-10 THCO illegal under federal law. The letter rocked the hemp industry and those who provide ancillary services to the industry such as banks, insurance companies and commercial real estate companies.

We will focus on what DEA's new policy means—and does not mean—with a focus on how stakeholders can keep moving the hemp industry forward in light of the policy and how the upcoming Farm Bill may address this critical issue.

Hemp vs. Marijuana

Until recently, every cannabis plant fell within the CSA's definition of "marijuana"—a Schedule I controlled substance (21 U.S.C. Section 802(16)). That changed when Congress passed the 2014 Farm Bill, which carved out "hemp" from the CSA's definition of "marijuana." Hemp is defined as "the plant Cannabis sativa L. and any part of such plant, whether growing or not, with a delta-9 [THC] concentration of not more than 0.3% on a dry weight basis" (7 U.S.C. Section 1639o(1)). Marijuana, on the other hand, is a cannabis plant with a delta-9 THC concentration that exceeds 0.3%.

The 2014 Farm Bill allowed for hemp operators to begin developing a hemp program and assessing the newly legal product's capabilities. The 2018 Farm Bill expanded on these hemp provisions, allowing for the widespread cultivation, processing, distribution, sale, and use of hemp and products derived from it.

THC vs. THCO

Since the 2018 Farm Bill, numerous hemp-derived cannabinoids have flooded markets across the country. Two of the most common are delta-8 THC and delta-10 THC, which, like their close cousin delta-9 THC, have a psychoactive effect.

Delta-8 and delta-10 THC naturally occur in cannabis plants, albeit in trace amounts. Because it's far too costly to process entire hemp plants to extract these nominal amounts, processors usually extract cannabidiol (CBD) from the plant and then convert the extracted CBD into delta-8 or delta-10 THC. When created this way, delta-8 and delta-10 THC meet the 2018 Farm Bill's definition of "hemp" and are thus legal under federal law.

Delta-8 and delta-10 THCO is a different story. THCO has been defined as "a non-natural cannabinoid":

Also called THC-O-acetate, this compound is not derived from hemp in the same way other cannabis products, like CBD, CBG and CBN are. This means that THC-O is not found naturally in the hemp plant.

To synthesize THC-O, acetic anhydride is used. This chemical compound is a highly inflammable, colorless liquid that is typically used in making pharmaceuticals, dyes, fibers, plastics and explosives. Because of the chemicals involved, production requires specialized equipment. This process begins by extracting Delta-8 THC from hemp. The acetic anhydride is then combined with Delta-8 molecules to create THCO.

So delta-8 THC, delta-10 THC, delta-8 THCO, and delta-10 THCO are all created in a lab from cannabis plants that meet the legal definition of hemp. The DEA has issued guidance stating that hemp-derived delta-8 and delta-10 THC is legal under federal law. Federal courts, including the U.S. Court of Appeals for the Ninth Circuit, have agreed (see AK Futures v. Boyd St. Distro, 35 F.4th 682 (9th Cir. 2022)). This led many hemp industry participants to believe delta-8 THCO and delta-10 THCO were legal, too.

The DEA Shuts the Door on THCO

The DEA made clear this belief was misplaced in its Feb. 13 letter. The DEA explained that delta-8 and delta-9 THCO do not occur naturally in cannabis, can only be synthetically derived, and "therefore do not fall under the legal definition of hemp."

Again, how is delta-8 THC different from delta-8 THCO when both are created in a lab? The distinction made by DEA appears to be that delta-8 THC is naturally present in cannabis plants, even if only in trace amounts. Because cannabinoids such as delta-8 THC "occur naturally in the cannabis plant," their lab-created versions still qualify as federally legal "hemp" under the 2018 Farm Bill so long as the starting point for the process was a hemp plant.

As the DEA explained in a September 2021 letter to the Alabama Board of Pharmacy, only THC "in or derived from the cannabis plant" can fall outside the purview of the federal Controlled Substances Act. "Synthetic" THC—like delta-8 and delta-10 THCO—cannot.

The Consequences of DEA's Ruling

Perhaps the biggest takeaway from DEA's Feb. 13 response letter is that it did not alter the status quo for delta-8 or delta-10 THC at the federal level, where naturally derived versions of these cannabinoids remain legal. It did, however, make clear that DEA views THCO products as controlled substances.

Put another way, if you are currently manufacturing or selling delta-8 or delta-10 THC, you should be able to continue to do so under federal law, with two important caveats: You should ensure that no state or local law prohibits that activity, and those laws are becoming more prevalent around the country; and you should absolutely continue to monitor the landscape to determine whether there are any additional updates to federal and state rules.

WILL THE 2023 FARM BILL CHANGE EVERYTHING?

That brings us to what is quickly becoming the elephant in the room. The 2018 Farm Bill expires at the end of September, and there should be a new Farm Bill later this year. Whether and how to federally regulate hemp-derived, psychoactive cannabinoids like delta-8 and delta-10 THC is one of the most important policy choices Congress faces with respect to hemp. Lawmakers could maintain the status quo, change everything or do something in between.

Maintaining the status quo would leave any mention of psychoactive cannabinoids out of the Farm Bill, keeping full regulatory control of those products with the states. Changing everything would be closing the loopholes in the 2018 Farm Bill that allowed psychoactive cannabinoids to proliferate, making them illegal nationwide. Doing something in between could be setting a regulatory floor on psychoactive cannabinoids, which may include age limits and testing requirements, and allowing individual states to regulate more stringently if they wish.

Only one thing is for sure—the hemp industry will be closely watching (and heavily lobbying) Congress in the leadup to the 2023 Farm Bill.

Republished with permission. This article, "The DEA's Prohibition of TCHO: Why It Matters and Why It May Not," was published in The Legal Intelligencer on May 23, 2023.