DEA: Delta-8 and -9-THCO Now Classified as Schedule I Drugs:

There's more rough news for the U.S. hemp industry this week. The Drug Enforcement Agency (DEA) issued a letter stating that "delta" cannabinoids, including Delta-8 and Delta-9-THCO, synthetically derived from hemp do not qualify as hemp and will be viewed as Schedule I drugs. This is not a surprising stance from the DEA, considering our understanding of the delta derivatives and the law enforcement agency's mandate.  

For those unfamiliar, the delta market includes a group of new cannabinoids synthesized chemically from legal hemp. Delta-9-THCO and Delta-8-THCO are the most common delta compounds in the market, and both produce an intoxicating high similar to that of Delta-9 THC – a compound specifically called out in the Controlled Substances Act (opens in new tab) as a Schedule I drug.

THCO (tetrahydrocannabinol-o-acetate) is a modified form of THC that has been chemically altered by adding an acetyl group to the molecule. This modification changes the way the body metabolizes and processes the compound, making it longer-lasting and potentially more potent than THC. Because THCO is not found naturally in cannabis plants, and is instead created through chemical synthesis or modification of existing THC, it is often used in delta products for its unique effects, which may be longer lasting and more potent than standard THC.

Due to the costs and lack of raw materials to naturally derive Delta-8 or -9-THC from hemp, nearly all the current delta products are produced synthetically. And it is unlikely that naturally derived versions of these products will become substitutes in existing sales channels.

Delta products are derivatives of legal hemp, and many within the hemp industry previously argued that the language in the 2018 Farm Bill – which legalized hemp and its derivatives – would extend to delta as federally regulated and legal. However, the DEA states that delta products are not naturally derived from hemp, but must be chemically synthesized and thus do not qualify as derivatives. Other counterarguments to delta's legal status have cited the Federal Analogue Act, which states that any chemical that is substantially similar to a Schedule I or Schedule II controlled substance will be treated as if it were scheduled if it is intended for human consumption.

By not being exactly the same as Delta-9 THC, other chemically synthesized delta products have existed in a nebulous space as far as legality is concerned. This gave some entrepreneurs the cover they wanted to aggressively pursue the development, marketing, and sale of delta products outside of the state legal cannabis regulatory framework. This week, the DEA acted to clarify delta's status.

Since its development in 2020, delta sales have grown rapidly in the U.S., specifically in states where the legalization of cannabis has not been passed. One research report estimated that Delta-8 products generated $2 billion in sales (opens in new tab) over two years. Delta products are being sold widely outside of dispensaries in conventional retail, often gas stations and convenience stores. The products are technically unregulated, have been blamed for one death, and have triggered over 104 adverse event reports to the Food and Drug Administration (FDA). There is a growing concern that underage children can buy these products and are subject to abuse. Some states have moved to ban or regulate delta products, including New York, Ohio, Michigan and Texas.

One of the key pillars of the legal cannabis industry's platform for legalization was responsible, regulated use by adults. It seems the delta market may be at odds with this, so it makes sense that it could be targeted for federal action.

It will take time for this all to play out and for legal experts to interpret the letter from the DEA, but it will give pause to some entrepreneurs and investors concerned about the risk of crossing the DEA. Remember, they are the ones that put you in the orange jumpsuit. #knowyoursource