Cannabis: In Focus

• DEA Announces New Guidance for Synthetic Cannabinoids
• Oregon To Hold Landowners Responsible for Illegal Cannabis Grow Operations
• States Provide State-Level Tax Relief to Cannabis Businesses
• D.C. Superior Court Rules Cannabis Odor Constituted a Nuisance
• New Suit Alleges Illicit Cannabis Operations Harm State-Legal Retailers

DEA Announces New Guidance for Synthetic Cannabinoids

On June 9, the U.S. Drug Enforcement Administration (DEA) issued a letter in response to a request for information about the scheduling status of minor and synthetic cannabinoids.

In its letter, DEA stated that cannabinoids extracted from the cannabis plant that contain less than 0.3% delta-9 THC are considered “hemp,” and are therefore not a Schedule I controlled substance. The agency reiterated that a cannabinoid exceeding that limit is considered a controlled substance.

The agency also identified that certain cannabinoids, such as cannabis-derived delta-9 tetrahydrocannabinolic acid (THCA) and hexahydrocannabinol (HHC), were controlled substances. To the agency, cannabis-derived delta-9 THCA is a controlled substance because “upon conversion” it was equivalent to delta-9 THC. HHC does not occur naturally in the cannabis plant, so the agency concluded that it does not fall under the definition of “hemp.”

The agency concluded that if a product “contains any quantity of synthetically produced tetrahydrocannabinol,” it is a Schedule I controlled substance, “unless specifically excepted or listed in another schedule.”

Later this year, DEA is expected to release a rule regarding “synthetically-derived” cannabinoids including the ubiquitously available delta-8 THC.

Oregon To Hold Landowners Responsible for Illegal Cannabis Grow Operations

On June 12, Oregon Gov. Tina Kotek signed legislation (SB 326), which attempts to crack down on unlicensed cannabis grow facilities—in particular, the garbage, pollution, and drained water table they often leave behind.

The new law creates new criminal sanctions for illicit cannabis growing operations and holds landowners responsible for damage done by illicit cannabis cultivators by allowing local governments to file a lien against the property if the landowner refuses to pay for necessary cleanup. It also sets penalties for the use of water for illegal growing operations, criminalizes seizing the identity papers of migrant workers, and restores the ability for law enforcement to seek wiretap and surveillance warrants against grow operations.

States Provide State-Level Tax Relief to Cannabis Businesses

On June 13, 2023, Connecticut Gov. Ned Lamont signed legislation (House Bill 6941) that provides state-level tax relief to cannabis businesses as part of the biennial state budget for fiscal years 2024 and 2025. Under current federal tax code section 280E, and as long as cannabis remains controlled at Schedules I or II, cannabis businesses are prohibited from claiming deductions for most business expenses on their federal taxes. Under the new legislation, licensed cannabis businesses in Connecticut will be able to make ordinary business deductions on their state-level taxes.

Other states, including Illinois, New Jersey, and Virginia, have taken similar steps to provide state-level tax relief for the regulated cannabis industry while awaiting federal reform.

D.C. Superior Court Rules Cannabis Odor Constituted a Nuisance

On June 5, a Washington, D.C., judge ruled that a man who smokes medical cannabis in his apartment must stop after a neighbor complained that the odor infiltrated her home, causing a nuisance. Following a bench trial, D.C. Superior Court Judge Ebony Scott ordered the defendant to stop smoking cannabis in his apartment or within 25 feet of the plaintiff’s address. The court decided that even though the defendant has a license to possess and use cannabis, he did not have a license to interfere with his neighbor’s enjoyment of her home.

New Suit Alleges Illicit Cannabis Operations Harm State-Legal Retailers

On June 6, a cannabis retailer brought suit against another cannabis business for unlawful and unfair trade practices. The complaint alleges the grower uses licensed distributers to buy their products and then sells the products into the illicit cannabis market, bypassing state excise taxes, and obtaining better margins compared to state-legal retailers.