On May 22, the federal Drug Enforcement Administration (“DEA”) issued an internal directive (the “Directive”) acknowledging the Agency’s jurisdiction over cannabis has its limits. The directive is in line with a plain reading of the federal Controlled Substance Act (“CSA”), which authorizes the DEA’s enforcement power, but does not regulate the whole cannabis plant.

To conceptualize this, think of the CSA distinguishing the cannabis plant into two parts. The first is “Marihuana” which is “all parts of the plant Cannabis sativa L., whether growing or not; the seeds thereof; the resin extracted from any part of such plant; and every compound, manufacture, salt, derivative, mixture, or preparation of such plant, its seeds or resin.” The second classification under the CSA is “Exempt Cannabis Plant Material.” As per the CSA definition, we can break Exempt Cannabis Plant Material into four categories:

Mature stalks Fiber produced from mature stalks Oil or cake made from seeds Seeds incapable of germination

Exempt Cannabis Plant Material also includes “any other compound, manufacture, salt, derivative, mixture, or preparation” of the items listed above. However, there is an exception to the exemption as resin derived from mature stalks is considered Marijuana, not Exempt Plant Material. If you are feeling confused at this point, don’t worry: This stuff is not for the faint of heart.

And that is where the Directive comes in. The Directive states that it was issued in order to clarify the ruling in Hemp Industries Ass’n v. DEA, 357 F.3d 1012 (9th Cir. 2004). In this 2004 decision the Court prevented the DEA from enforcing 21 C.F.R. § 1308.11(d)(31), which independently lists THC as a Schedule I substance, with respect to Exempt Plant Material. The Directive also acknowledges that the DEA does not enforce 21 C.F.R. § 1308.35, which was the agency’s attempt to regulate Exempt Plant Material when it was contained in products intended for human consumption. Kyle Jaeger of Marijuana Moment reported that the Directive’s concession was part of a settlement with the Hemp Industries Association (“HIA”).

So why would the DEA is issue a directive based on a case that was decided 14 years ago? It probably has to do with the HIA’s more recent lawsuit against the DEA over its Marijuana Extract Rule. In that case, the Ninth Circuit declined to review the Marijuana Extract Rule on largely procedural grounds. For those keeping score, HIA has sued the DEA three times, with two wins and a qualified loss.

The “Marijuana Extract Rule” broadly defines a “marijuana extract” as:

“[A]n extract containing one or more cannabinoids that has been derived from any plant of the genus Cannabis, other than the separated resin (whether crude or purified) obtained from the plant.”

Under the plain text, the “hook” for this rule is the presence of any cannabinoid from any part of the cannabis plant. Full stop. It makes no distinction between Exempt Plant Material and Marijuana. This seems to go far beyond the scope of the CSA. However, this directive concedes that the DEA’s power is limited to Marijuana and not Exempt Plant Material:

“Products and materials that are made from the cannabis plant and which fall outside the CSA definition of marijuana (such as sterilized seeds, oil or cake made from the seeds, and mature stalks) are not controlled under the CSA.”

The Directive goes a step further by acknowledging that Exempt Plant Material is outside of the DEA’s jurisdiction despite the presence of a cannabinoid:

“Such products may accordingly be sold and otherwise distributed throughout the United States without restriction under the CSA or its implementing regulations. The mere presence of cannabinoids is not itself dispositive as to whether a substance is within the scope of the CSA; the dispositive question is whether the substance falls within the CSA definition of marijuana.”

The Directive goes on to clarify that Exempt Plant Materials are also legal to import and export in compliance with the Controlled Substances Import and Export Act.

The Directive does not explicitly address Industrial Hemp as defined in 7606 of the 2014 US Farm Bill (the “Farm Bill”). The Farm Bill allows states to grow “Industrial Hemp” defined as having less than 0.3% THC on a dry weight basis in states that have implement agricultural pilot hemp programs. In the Court’s recent decision to deny reviewing the Marijuana Extract Rule, it threw HIA a pretty nice bone:

“[The Farm Bill] contemplates potential conflict between the Controlled Substances Act and preempts it. The Final Rule therefore, does not violate the [Farm Bill].”

Preemption means that the Farm Bill overrides the CSA, when the two conflict. The DEA cannot use its enforcement authority under the CSA to enforce the Marijuana Extract Rule with regards to extracts derived from bona fide Industrial Hemp. Specifically, the Industrial Hemp must be grown pursuant to a state’s industrial hemp program and contain less than .3% THC. Also, the DEA has stated that the Farm Bill does not permit the commercial sale of Industrial Hemp or its interstate transfer, although Congress has limited DEA’s ability to use federal funds to prohibit the sale or interstate transfer of Industrial Hemp until September 2018.

So where does that leave us with regards to cannabidiol (“CBD”)? The Marijuana Extract Rule is valid. Obviously, it would cover any product containing CBD if that product were derived from Marijuana. However, based on the Directive and the Ninth Circuit’s decisions, extracts containing CBD derived from Exempt Plant Material or Industrial Hemp would not be within the Marijuana Extract Rule.

There is significant scientific research showing that meaningful levels of CBD cannot be extracted from Exempt Plant Material. The Farm Bill provides protection to all parts of the cannabis plant if the plant is Industrial Hemp, including the flowering tops. CBD could be extracted from Industrial Hemp without necessarily falling under the DEA’s jurisdiction. And can it be sold interstate? Well, given what Congress has done, at least until September.