Federal appeals court’s delta-8 legality ruling adds to hemp product chaos

One month has passed since the U.S. Court of Appeals for the Ninth Circuit issued its decision in AK Futures LLC v. Boyd St. Distro LLC. Despite the proclamations to the contrary, the legality of hemp-derived delta-8 tetrahydrocannabinol (THC) is not settled and the regulatory patchwork continues in full force.

As a quick case refresher, AK Futures LLC sued Boyd Street Distro LLC, alleging copyright infringement, federal unfair competition and false designation under the Lanham Act. AK Futures moved for a preliminary injunction in lower court against Boyd Street, alleging Boyd Street was selling delta-8 THC vaporization products similar to those manufactured by AK Futures. In essence, Boyd Street acknowledged it was selling a similar product but argued AK Futures had no trademark claim because possession and sale of these delta-8 THC products violate federal law. (Broadly speaking, products that violate federal law are not entitled to copyright and trademark protections.) Therefore, the case hinged on whether delta-8 THC products were legal under federal law and therefore entitled to copyright and trademark protections.

The Ninth Circuit affirmed the lower court’s preliminary injunction and held, “The record on appeal convinces us that AK Futures’ delta-8 THC products are lawful under the plain text of the Farm Act and may receive trademark protection.” Notably, the Ninth Circuit only had the record developed in the lower court, meaning it did not have a robust amount of information or documents from which to base its opinion.

In reaching its conclusion, the Ninth Circuit relied upon AK Futures’ assertion that the delta-8 THC products are “hemp-derived” and thereby concluded AK Futures was likely to succeed in showing its products are not illegal under federal law. While the opinion makes a broad sweeping statement that AK Future’s “delta-8 THC products are not prohibited by federal law,” the only federal laws discussed in the opinion are the Agriculture Improvement Act of 2018 (the 2018 Farm Bill) and the Controlled Substances Act. There is no mention of the Federal Food, Drug, and Cosmetic Act or the Federal Analogue Act. These other federal laws could be interpreted as prohibiting delta-8 THC.

However, FDA’s public position on delta-8 THC is clear as mud. (FDA at least gets points for addressing the elephant in the room, while the Drug Enforcement Administration has not squarely addressed the legality of these products.) While FDA has recently sent warning letters to several companies that sell delta-8 THC products, these have mainly been limited to firms that make drug and disease claims about these products. In addition, FDA’s consumer updates “5 Things to Know About Delta-8” could have benefited from a sixth bullet point. In absence of guidance from FDA, states and courts—as was the case here—have stepped in to fill the gap.

Many states have already passed legislation or regulations prohibiting delta-8 THC products and other cannabinoids created through chemical conversion or isomerization. Leaving regulation up to the states creates a patchwork of laws and regulations that are difficult, and costly, for companies to navigate. Products may be legal in one state and illegal in the next; staying on top of these quickly changing laws is difficult for many companies to manage.

In addition, in the absence of laws or regulations regulating or prohibiting delta-8 THC, some state regulatory agencies have issued policies prohibiting these products. The policy decisions are not always well publicized (sometimes just in the form of a tweet or FAQ), and many companies that manufacture and sell such products may not even be aware they exist. Moreover, a policy enacted by one state agency is not binding on other agencies in the same state. Consequently, it is possible that within a single state various agencies could have different interpretations of state laws and regulations regarding hemp-derived cannabinoids.

The Ninth Circuit’s decision has only added to the state-by-state chaos since its holding is only binding on U.S. district courts in Alaska, Arizona, California, Hawaii, Idaho, Montana, Nevada, Oregon and Washington. Forty-one other states are free to agree or disagree with the conclusions of this case.

With the Ninth Circuit seemingly saying delta-8 THC products are legal, states are likely to step in to either regulate or prohibit certain hemp products. Several states have already passed or attempted to pass legislation relating to delta-8 THC and other converted cannabinoids, and we will likely see more of these bills being introduced in the coming legislative sessions. Regardless of what is to come for this industry, the one thing hemp businesses did not need is another layer of regulatory uncertainty. Unfortunately, that is exactly the outcome of AK Futures LLC v. Boyd St. Distro LLC.

Michelle Bodian is co-chair of Vicente Sederberg's Hemp and Cannabinoids Department. She advises hemp and CBD clients on how to navigate through the complex and interconnected federal, state and local regulatory frameworks.

Catie Wightman is an associate attorney in Vicente Sederberg’s Denver office, where she focuses on regulatory compliance for hemp and marijuana businesses. She is responsible for assisting hemp and marijuana clients in navigating complex federal, state and local laws and regulations.