Included in one of the bills to fund the federal government and end the government shutdown was a provision closing what is known as the “hemp loophole.” This gray area, created by a 2018 law, allowed an industry of hemp-derived intoxicants that were federally legal to be sold throughout the US in places where states hadn’t stepped in to regulate these products. On this episode of Policy Outsider, Heather Trela, the director of operations and a fellow at the Rockefeller Institute, spells out the distinction between hemp and marijuana, details how the “hemp loophole” came to be, and explains what closing the loophole means for this industry.
Guests
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Joel Tirado 00:00
Welcome to Policy Outsider presented by the Rockefeller Institute of Government. I’m Joel Tirado. Included in one of the bills to fund the federal government and end the government shutdown was a provision closing what is known as the “hemp loophole.” This gray area created by a 2018 law, allowed an industry of hemp-derived intoxicants that were federally legal to be sold throughout the US in places where states hadn’t stepped in to regulate these products. On this episode of Policy Outsider, Heather Trela, the director of operations and a fellow at the Rockefeller Institute, spells out the distinction between hemp and marijuana, details how the “hemp loophole” came to be, and explains what closing the loophole means for this industry. That conversation is up next.
Joel Tirado 01:10
Heather, welcome back to the show.
Heather Trela 01:11
Happy to be here.
Joel Tirado 01:12
I don’t even know how many times this has been so, but I think you still, you hold the record. We’re going to talk about hemp today, which I don’t think we’ve explicitly devoted an episode to hemp. So this is good and hemp derived intoxicants. So, you know, gummies, beverages, et cetera, that can get you high. And crucially, it’s important we’re going to talk about these intoxicants from hemp and not marijuana. And this has been in the news because included in one of the continuing resolutions to fund the government or a normal people speak to end the government shutdown, was this provision closing what is known as the hemp loophole. So we’re going to get back to all of this, but I think we should do a little context setting, because I think this could get a little bit confusing, but I think we can sort it out. So hemp and marijuana are the same species of plant, correct, right? So what distinguishes them
Heather Trela 02:11
really comes down to THC levels under a certain threshold, which we will talk about is considered hemp above a certain threshold, more intoxicating. Is marijuana,
Joel Tirado 02:22
great, simple. So marijuana federally illegal. It’s a schedule one drug. And, you know, we should note, and we’ve talked about this, it is under consideration for rescheduling. That’s a separate conversation. Hemp, however, is federally legal. So when did that distinction happen?
Heather Trela 02:44
Sure, so 2018 is going to be kind of the pivotal year here. Before 2018 hemp was a schedule one drug along with marijuana on the Controlled Substances Act. However, that changed with the passage of the 2018 farm Act. Now, the purpose of this was to try to build up an industry around hemp for its textiles and agricultural purposes. What happened, which is the whole purpose of this episode is a loophole was created for other purposes. So in 2018 the language this was pushed by then Senate Majority Leader Mitch McConnell hemp was going to be descheduled, so taken completely off of the scheduling, and it would be permitted as long as it was less than point 3% THC concentration by dry weight that it’s complicated, that’s technical, but basically under a certain threshold of THC. Now this was only for Delta nine THC. Because this was only based on Delta nine, it does not take into consideration that point 3% other strains of THC, like your delta eights or your delta 10s. So that’s where the loopholes created. There wasn’t enough clarity on what was prohibited. I don’t think the intent was to allow a new market for intoxicating products. But without thinking it through, they didn’t. They limited one, but they didn’t limit all the strains. Also important to note is that the 2018 Farm Bill did allow the FDA to regulate hemp after this bill was passed, so there was nothing stopping the federal government from stepping in and creating additional regulations. That did not happen. For whatever reason, the FDA never really put any additional parameters on hemp and THC levels beyond what was in the 2018 Farm Bill. So what this did was it created a entrance point for folks who wanted to sell intoxicating products that were derived from hemp, but may have included other strains of THC. That were not regulated by the 2018 Farm Bill.
Joel Tirado 05:02
So I’m going to just jump in because, and I know you’re not an expert on how to move from, from, you know, a hemp plant into a beverage and all of the chemistry that’s involved, but basically, now we have these two category categories. We have hemp and we have marijuana. And so, you know, some entrepreneurial people were able to say, okay, so we can take these hemp plants and we can use some of the other chemicals that are available that haven’t been regulated, yes, and in lay person speak, we’ll boil it all down and we’ll make, we’ll make these, these products, these edibles, these beverages, and they won’t be regulated by the state, and they won’t be regulated by the federal government, so I don’t know. They can go in grocery stores. You can buy them next year your yerba mate,
Heather Trela 05:49
yes, as long as they were below the point 3% of Delta nine, THC, they were good to go.
Joel Tirado 05:57
But they could have 12% Delta eight, okay, yes, okay, got it,
Heather Trela 06:02
and they could have synthetic added in as well. It doesn’t have to be just directly derived from the plan. It could be, and that’s part of the problem, right? Is with this not being regulated there, you’re not really sure what you’re getting and how this was created and what wasn’t tested. It wasn’t in the health claims that are being made or not verified. So it was certainly a entrance way to a new market, but it also created a lot of confusion and potential harm.
Joel Tirado 06:28
So I’m not going to ask you to speak for the FDA, but you know, this was in 2018 this market emerged. It seems like the FDA could have done something here, but they chose not to. And so we’ve seen this happen with other drugs. Recently. You wrote about kratom and how states are sort of tackling that issue on their own in the absence of meaningful federal regulation. So some states then looked at this and said, Okay, well, we don’t want these unregulated, intoxicating THC products making their way so we’re going to regulate them ourselves. And some states probably did a better job than others. I think when we talked before you mentioned Minnesota is doing a good example of this. So okay, great. So that’s how we ended up where we are, where we have this loophole, and you have this industry that has emerged and taken advantage of the loophole, then we have this government shutdown, and included in one of the bills was language that shuts down this loophole. So can you talk about what the provision in the continuing resolution does?
Heather Trela 07:50
Sure, and I should note that for every Minnesota that had a well regulated program, a lot of states also pivoted to banning these kind of products. Yep. So there was a movement to kind of stop these products from hitting the market. But so what the continuing resolution does is it redefines hemp. And what it redefines hemp is it takes the definition from the 2018 farm act and it clarifies that that point 3% is any THC. It is not just delta nine. It is not that includes Delta eight, delta 10, any other strains. So there’s no wiggle room anymore about what hemp is. Hemp is point 3% full stop all THC. So that addresses that problem. What it also does is it limits the amount of THC from hemp that can be in products, and it limits it to point four milligrams, which is pretty low. I’d say the market right now, the standard is at least five milligrams. Some go much higher. So this would effectively wipe out 95 of the product, 95% of the products that are currently on store shelves. The final thing it did is it also prohibited products that are derived from CBD, so synthetics from being included in hemp. So this really tightened things up. It made hemp not the loosey, goosey definition they had in 2018 but a very restricted, constricted it has to meet these points to be considered hemp. Otherwise it is marijuana and needs to be regulated like marijuana would be okay.
Joel Tirado 09:24
So this has the potential to wipe out what I imagine is maybe a multi, multi billion dollar industry, or at least a very large industry that’s emerged over the past seven years. But this is not the final note on this, because there’s a year before regulations go into effect. What happens during that year? Who are the players? What are they going to try to influence, and how would they go about that?
Heather Trela 09:57
So it’s interesting, this continuing resolution is kind. Into the battle of Kentucky, because originally, Mitch McConnell introduced the 2018 farm act. He’s also the one who pushed for this loophole to be closed. So Mitch McConnell give it. Mitch McConnell take it away. But his counterpart, the other senator from Kentucky, Rand Paul, is a ardent supporter of preserving the hemp industry, and flat actually threatened to slow down the continuing resolution from being passed if this wasn’t removed. He was not successful on that, but so he’s a key advocate other House members from Kentucky also. It’s a big industry in Kentucky, not necessarily the illicit hemp, but just hemp in general. They’re a big grower. So additionally, you’re going to see a lot of hemp industry interest groups getting involved here. They’re going to try to say, Okay, we’ve we’ve gone too far, right? The pendulum was too far on the one side, with being too loose with regulations. Now this is too tight. Let’s find just right. Let’s do some regulations, but allow us a little more flexibility, and don’t decimate a market. On the other side, those who are supporting this is the marijuana industry. They supporting the ban. They they pushed for this. They see hemp in general as a competition, right? And for them now, maybe they’d be more open to it with regulation, but they’re in a very regulated industry, and so having to go toe to toe in market confusion when something says, THC, what does that mean? So they’ve been advocates for some kind of regulation on this as well, as well as those who are opposed to marijuana or drug use in general. So it makes some interesting bedfellows on who’s on what side of the aisle on this,
Joel Tirado 11:45
I think the last question that I have here, and we can certainly talk about other things if you feel like we’ve missed something, but marijuana, schedule one drug federally illegal, but states have legalized it, and there are sizable state markets. So why couldn’t the same sort of playbook happen here for hemp?
Heather Trela 12:12
Short answer is, it could. But the long answer is, when I think it comes down to priorities, and it also comes down to the wiggle room written into the laws, the Controlled Substances Act, which is what schedules things, leave some room for state action, does not say Congress has the last word on all these things. Now that’s a small little wiggle room, but that’s where states have stepped in to kind of take over, creating well regulated marijuana markets. Department of Justice has let that happen. So that’s part of it is, if Department of Justice changed their minds and wanted to crack down, the marijuana industry could also disappear very quickly. Okay, so it’s partly just an enforcement thing. Partly it’s enforcement for hemp. They’ve now made this pretty clear where their perspective is the federal government, they’ve regulated. They’ve put restrictions on it. They’ve turned it over to the FDA for some additional regulations, which they should do. So it doesn’t mean they couldn’t eventually, with partnership in the federal government, create something similar to a marijuana market for hemp, but again, they would have to kind of work around the clear federal mandate on what they expect to happen with hemp.
Joel Tirado 13:22
And as you brought up already, they’d be working against a marijuana a legal marijuana lobby that just sees them as competition, correct. Okay, did we miss anything?
Heather Trela 13:34
I don’t think so
Joel Tirado 13:35
good. We’ll circle back in a year.
Heather Trela 13:37
Stay tuned.
Joel Tirado 13:38
Thanks again to our resident cannabis policy expert, Heather Trela, for joining us on the show to give us the rundown on hemp-derived intoxicants. If you liked this episode, please rate, subscribe, and share. It will help others find the podcast and help us deliver the latest in public policy research. All of our episodes are available for free wherever you stream your podcasts and transcripts are available on our website. I’m Joel Tirado; until next time. Policy Outsider is presented by the Rockefeller Institute of Government, the public policy research arm of the State University of New York. The Institute conducts cutting-edge nonpartisan public policy research and analysis to inform lasting solutions to the challenges facing New York state and the nation. Learn more at rockinst.org or by following RockefellerInst. That’s i n s t on social media. Have a question comment or idea? Email us at [email protected].
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