Watching the Pot™ (Apr. 2022)

The beginning of spring brought some interesting developments in administrative legal challenges to the U.S. Drug Enforcement Administration (“DEA”) and its policies on cannabis. Two different ongoing challenges highlight the importance of administrative law in this rapidly evolving industry and illustrate the role that agencies play in interpreting two complex statutory schemes involving cannabis: the Controlled Substances Act (“CSA”) and the 2018 Farm Bill.

Hemp Industries Association, et al v. DEA, et al. (D.C. Cir. 21-5111): Back in 2020, the Hemp Industries Association and RE Botanicals, Inc. filed a petition for review in the United States Court of Appeals for District of Columbia Circuit challenging the DEA’s 2020 interim final rule, which indicated that any hemp derivative would be considered a Schedule I substance if it went over the 0.3% Delta-9-THC limit articulated in the 2018 Farm Bill. The 2018 Farm Bill removed “hemp” from the reach of the CSA, however, a question of statutory interpretation has arisen based on the DEA’s position that a derivative of “hemp” could still be within the reach of enforcement under the CSA if the derivative contains more than 0.3% Delta-9-THC (often called “hot” hemp). These two groups and the DEA sparred over this question before the D.C. Circuit, which heard oral arguments on April 19, 2022. The groups are challenging the DEA’s interim final rule as arbitrary, capricious, contrary to law, without observation of procedure required by law, and void, challenges grounded in administrative law. How the appellate court rules could affect whether processes used to make hemp-derived products that may indirectly produce hot hemp are compliant with the 2018 Farm Bill or are subject to the DEA’s enforcement authority.

MMJ Internal Holdings Corp. et al v. Garland et al. (D.R.I. 1:22-cv-00152): On April 8, 2022, MMJ International Holdings Corp. and MMJ BioPharma Cultivation Inc. filed a petition for a writ of mandamus in the United States District Court for the District of Rhode Island seeking declaratory and injunctive relief against the DEA over applications MMJ filed for registration to manufacture cannabis “for use only in a clinical trial” under 21 U.S.C. § 823(i)(2). Petitioners are alleging that the DEA has unreasonably delayed making a determination on its applications, which sought authorization to cultivate specific genetic strains of cannabis and manufacture MMJ’s proprietary active pharmaceutical ingredient (“API”) for use in FDA-approved clinical trials involving treatments for multiple sclerosis and Huntington’s disease. The petition alleges that the DEA failed to comply with the statutory timeline requirement for processing the application for registration and is therefore requesting that the court “compel agency action unlawfully withheld” under 5 U.S.C. § 706(1) of the Administrative Procedures Act. In addition to outlining an administrative legal challenge, this case provides a unique window into the efforts being undertaken by those who are working to manufacture APIs for cannabinoid therapeutics.

These cases illustrate how the cannabis landscape is maturing within a complex regulatory environment and posing important questions about the interplay between these statutory schemes and DEA policy. We will continue to monitor both challenges closely.

This article appeared in the April 2022 issue of MarkIt to Market®. To view our past issues, as well as other firm newsletters, please click here.