Washington state’s Liquor and Cannabis Board has stated that highly regulated and responsible holders of cannabis licenses might be in the business of selling products that aren’t legal. The board issued a notice wherein they stated that the sole purpose of resolving the legal issue of manufacturing Delta-9 THC from hemp-derived CBD in legal markets. The LCB considers this an illegal process. This has affected marijuana cultivators of the state. Their businesses of selling CBD hemp oil and other products like smell proof bags have already been adversely impacted by a decrease in biomass sales since processors now choose to purchase or make Delta-9 THC from hemp-derived CBD, which is less expensive.
The current situation
On July 22 this year, the Liquor and Cannabis Board (LCB) of Washington state released an interpretive statement with the purpose of coming up with a solution for the legality of processors who use THC to make Delta-9. The LCB’s conclusion stated that marijuana processors shouldn’t convert hemp-derived CBD into Delta-9 THC in the legal market for cannabis. Also, any processor who performs such activities may get subjected to criminal prosecution or administrative violations.
The notice of the LCB rides on the advisory statement last April 2021 and the policy clarification last May 2021, wherein they assessed potential rulemaking in terms of additives apart from Delta-9 THC. In the latest notice issued in July, the board concluded that delta-9 THC created by processors using hemp is illegal to sell or produce under the Washington State Controlled Substance Act.
Licensed cannabis processors are not allowed to buy or sell any THC products that aren’t legally produced by licensed cannabis producers. Although the advisory/interpretive statements of the LCB aren’t considered laws, they still clarify the interpretation of the LCB of the governing regulations and laws. It isn’t defined yet how the LCB plans to target the violations of the regulations. For now, the board plans to enforce this issue from an “education-first perspective” to assist licensees in achieving compliance.
Companies involved in manufacturing, marketing, or selling processor-made Delta-9 products don’t operate within the CSA’s bounds. As such, they’re at risk of receiving AVNs, civil lawsuits, and criminal exposure if they don’t cease these illegal practices. For now, the suggestion for these companies is to either sort and hold their existing products or dispose of them while complying with the disposal regulations. To ensure that these companies comply with all of the applicable regulations and laws, they should gain a comprehensive understanding of the state laws right away.
Fighting for stabilization
Growers hoped that the LCB would provide more clarification about the legality of the practice. This is something that the LCB has done recently, specifically in terms of Delta-9 THC. Licensed cannabis companies that sell Delta Botanicals CBD hemp oil or other products that use Delta-9 THC can expect the market to become more stable when this begins to take effect.
Micah Sherman, an owner of a cannabis business in Washington and a board member of the Washington Sun and Craft Grower’s Association, hopes that the statement that the LCB released will clarify any confusion in the market. In terms of short-term effects, cannabis businessmen will realize what the LCB does and how it affects stores and consumer behaviors. The statement about the delay has caused the Delta-9 THC from hemp-derived CBD to disrupt the cannabis market, which had a significant effect on farmers.
Sherman also said that licensed cannabis growers couldn’t sell their biomass for extraction since processors preferred to purchase and make THC products from hemp-derived CBD since this is a lot cheaper. But manufacturing THC products falls outside a processor’s privileges even if they’re licensed by the LCB. As such, they might be in violation of the Controlled Substance Act along with the misuse of their license. Also, licensed processors aren’t permitted to purchase or sell any THC products that aren’t legally produced by a licensed producer of marijuana. According to the agency, the interpretive statement they released isn’t a law, but it remains official for regulators targeting violations of the enforcement regulation.
Vicki Christophersen, the Washington CannaBusiness Association’s Executive Director, said that the LCB’s statement is a reminder of the inconsistency of state regulators in terms of compliance and enforcement. Christophersen also said that the LCB has assumed that highly regulated and responsible cannabis license holders might be currently selling illegal products. The board defined the license holders who operate properly in the legal market as Controlled Substance Act violators.
Christopherson also claimed that the position of the LCB may have a significant effect on the capacity of legal business owners to engage with regulators in collaborative environments that recognize legal requirements, industrial development, and safety. She emphasized that product liability insurance doesn’t cover illegal products. The stores that sell Delta-9 THC made from CBD could be at risk for lawsuits should a person fall sick from consuming their products.
The issue with clarity
After filing the CR-101, the Liquor and Cannabis Board met with several stakeholders and a group of experts to discuss the chemistry of cannabis plants and other related topics. They also received information from different stakeholders, licensees, other regulators from other states regarding the processes used in creating THC from CBD-derived hemp and other sources. These discussions brought about new inquiries regarding the process of conversion as it relates to Delta-9 THC. This resulted in the creation of a revised CR-101 where it eliminated the limitation “other than delta-9 THC”. This got approved on July 7, then filed as WSR 21-14-117.
Based on the latest reports, cannabis growers are actively looking for clarification from the LCB regarding the issue as they fear that this practice might undermine their activities. For the past months, Washington cannabis growers couldn’t sell their biomass for the purpose of extraction. The reason for this is that licensed processors have chosen to buy hemp-derived CBD, which is much easier to convert into Delta-9 THC compared to marijuana.
The notice that the LCB released isn’t a law, which means that it isn’t clear whether the board will initiate actions in terms of enforcement. Despite this, the new change that the board assumed could have an effect on the existing activities of licensed businesses whose liability insurance doesn’t include products considered illegal. This puts them at risk for legal actions.