Industry Celebrates as Delta-8 Stays Legal, but for How Long?

Cannabusinesses try to keep up with laws concerning the THC product

Grassroots Harvest founder and CEO Kemal Whyte holds a Delta-8 product cartridge (Photo by John Anderson)

At the Veterans of Foreign Wars post in Leander, a vending machine in the lobby sells not Cokes or chips, but products used by a growing number of Texans to manage physical and psychological pain. The machine is designed to vend edibles containing Delta-8, an isomer of THC, the psychoactive component found in cannabis, whether "hemp" or "marijuana."

On October 25, the VFW post unplugged the machine because it feared legal repercussions. Ten days earlier, the Texas Depart­ment of State Health Services "clarified" on its website that it considered Delta-8 a dangerous Schedule I controlled substance, a class of drugs that includes methamphetamine, cocaine, and heroin. Under that interpretation, the contents were potentially felonious under Texas law.

Mitch Fuller, the post's commander and the VFW's state legislative chairman, said he was angry and confused by the announcement. Less than two months before that notice was published, the VFW post had received a license from the Texas Comptroller's office to operate the machine. "It didn't make any sense because the state of Texas, the government of the state of Texas, was not synchronized with itself," said Fuller of the DSHS determination. "If it was so obviously illegal ... then why did we get a license?"

The DEA considers Delta-8 legal, but allows states to opt for stricter prohibitions. Hellerstedt invoked that authority, largely under the noses of the many Texas cannabusinesses that his agency now regulates.

But on Monday, Nov. 8, Fuller was happy to announce that the vending machine was plugged back in, after a judge in Travis County issued an injunction blocking enforcement of Delta-8's Schedule I listing. The ruling by District Judge Jan Soifer followed a hearing the previous Friday in a lawsuit brought forward by Sky Marketing Corporation, doing business in Texas as Austin-based CBD retailer Hometown Hero – one of at least four lawsuits filed over the Delta-8 listing. The hearing, scheduled quickly after Hometown Hero's first emergency motion for a temporary restraining order was denied, focused largely on a process complaint against DSHS for how it made the rules, not on whether Delta-8 is really a dangerous drug.

The ruling held that an injunction was necessary to prevent "irreparable harm such as brand erosion, reputational damage, including loss of customers' goodwill, unsalvageable loss of nationwide customers, loss of market share, loss of marketing techniques, employee force reduction, revenue lost and costs incurred" by the thousands of retailers who've built a market for Delta-8, despite its legality being murky, for more than a year.

Additionally, Soifer wrote, an injunction was necessary because users of Delta-8 would "have no effective treatment to anxiety, depression, insomnia, migraines, loss of appetite, chronic pain, and nausea" if it remained a Schedule I controlled substance. (Those, by definition, have no accepted medical use and can't be recommended or prescribed by doctors, unlike the low-THC medical cannabis in Texas' Compassionate Use Program.) The state of Texas will likely file an appeal against the injunction, and Montgomery County District Attorney Brett Ligon has asked for an opinion from Texas Attorney General Ken Paxton. But for now, Texans in possession of Delta-8 can rest assured they will not be prosecuted.

A Monumental Step

For the state's burgeoning cannabusiness sector, the ruling is a monumental step toward long-term security in a marketplace that's been marred by both legal and financial uncertainty. According to Kemal Whyte, who owns Austin hemp retailer Grassroots Harvest, what happens in Texas regarding Delta-8 could determine the future of cannabusiness in the U.S. "We have a strong commercial white space, and with 87% of Texas being for medical marijuana legalization, I think there's a fine chance that this is going to move forward in Texas." (The Chronicle partners with GRH on its custom line of "Austin Chronic" Delta-8 products.)

Additionally, the vocal support of the veterans community doesn't hurt, Whyte says. "That's a group that really supports medical marijuana as well and has the ear of the politicians here in Texas." Just hours after the Friday hearing, before Soifer issued her ruling, GRH announced that it had restocked its products containing Delta-8 – the same choice made by many Texas retailers, who bet on the risk that law enforcement wouldn't bother to crack down until a once-and-for-all decision is made about Delta-8's status. Now that jail time is off the table for those who use, buy, or sell Delta-8, Whyte says GRH is notifying its customers and suppliers that it's resuming its normal business.

However, he knows that the fight to preserve the market for Delta-8 isn't over. As further courtroom challenges loom, Whyte said, many companies still struggle with access to banking and credit card services, due to stigma as well as uncertainty about Delta-8's legality. For now, though, he's taking the court's action as a win. "This tells me that the will of the people is in favor of access to cannabis," Whyte said.

How Did This Happen?

In 2019, the Texas Legislature adopted House Bill 1325, which – following the federal legalization of hemp cultivation the prior year – legalized cannabis with less than 0.3% of Delta-9-tetrahydrocannabinol, what's usually just called THC. Products containing the Delta-8 isomer but less than 0.3% Delta-9-THC were thus thought to have been legalized, along with the vast array of hemp and CBD (cannabidiol, another chemical compound in hemp) products now sold in Texas in the wake of HB 1325.

Lukas Gilkey, founder and CEO of Austin-based CBD retailer Hometown Hero (Courtesy of Hometown Hero)

Only a few weeks ago, that understanding came into widespread doubt when the website for DSHS's Consumable Hemp Pro­gram – also created by HB 1325 to regulate CBD and hemp product manufacturers, distributors, and retailers – was updated to read: "All other forms of THC, including Delta-8 in any concentration and Delta-9 exceeding 0.3%, are considered Schedule I controlled substances." Once this caused alarm, the agency clarified that Delta-8 had been included on the revised controlled substance list it adopted in January.

Maintaining the status quo would protect the hundreds of thousands of Texans, the industry estimates, that have relied on Delta-8 in the last year for relief from conditions that are not eligible for the state’s limited (and expensive) Compassionate Use Program.

In her ruling, Soifer casts doubt on the legal authority of DSHS and its top official, Texas Health Commissioner John Heller­stedt, to classify Delta-8 as a dangerous drug. However, Hometown Hero's lawsuit focuses on whether proper notice was given of the agency's plans to list Delta-8, and of the hearing on that proposal held in October 2020. If it had been, said Jay Maguire, executive director of the Texas Hemp Federation, hemp industry lobbyists and entrepreneurs like himself would've gotten involved and fought back. "If they had done that straightforwardly, everybody would have known what was going on and we absolutely wouldn't be having this discussion – we wouldn't have had our case, but we also wouldn't be where we are because we would have shown up," Maguire said.

As Maguire explained in his testimony at Friday's hearing, he regularly searches the Texas Register, the official record of administrative actions by state agencies, to stay up to date with any regulatory news relating to a set of search terms including "hemp," "Delta-8," "THC," "tetrahydro­cannabinol," and "DEA." In the 30 years he's been using the database posted to the Texas secretary of state's website, he said, he's never had a problem conducting text searches for keywords. That is, until last fall.

In September 2020, a notice was published in the register directing readers to DSHS's website for new information about an "objection hearing." That hearing was prompted by Hellerstedt's decision to reject changes made to the federal controlled substance list by the U.S. Drug Enforcement Administration. Although notice of an objection hearing, set for Tuesday, Oct. 6, 2020, at 9am, was published on the DSHS site, that same notice appeared in the register as an image file, not seen by text searches. No Texans appeared or provided written testimony during that hearing.

"You shouldn't have to have a Sherpa to guide you through the abstruse and absurd ... directions," Maguire said. "The [Texas Health and Human Services] Commission should have posted in the Texas Register directly that they were going to have a hearing on a decision to reschedule legal, hemp-derived Delta-8 onto the controlled substances list." To this, Assistant A.G. Cynthia Akatugba, representing the state, retorted that no one knew about the meeting because people like Maguire weren't doing their jobs.

Leaving Delta-8 in a Fog?

Nationally, hemp cultivation was legalized by the 2018 Farm Bill, which changed the definition of "lawful marijuana extracts" in federal statute to include ones with less than 0.3% THC. The DEA considers Delta-8 legal, but the Farm Bill allows states to opt for stricter prohibitions that deviate from the DEA controlled substance schedule. As Delta-8 grew in popularity with both producers and consumers, Hellerstedt invoked that authority, largely under the noses of the many Texas cannabusinesses that his agency now regulates.

Many Texas elected officials, including ones who'd supported HB 1325 and others who'd opposed it, didn't know what was happening either. Earlier this year, during the Legis­lat­ure's regular session, lawmakers attempted to resolve some of the many questions raised as hemp production and sales burgeoned throughout Texas with a bill by Rep. Joe Moody, D-El Paso. A proposed amendment to it by Sen. Charles Perry, R-Lubbock, aimed to outlaw Delta-8 – 18 other states have already restricted or banned it, with several more considering such measures. But that amendment was dropped, apparently, after health officials informed lawmakers it had already been listed as a Schedule I controlled substance.

Delta-8 products “don’t leave me in a fog like the other medications that I was on. I can still conduct my day job. I’m still a functioning and [even] high-functioning member of society.” – Injured combat veteran David Walden

However, the language used by DSHS in that listing itself may have created yet another loophole hemp advocates are trying to leverage to their advantage. The list reads that Schedule I substances include: "tetrahydrocannabinols ... except for up to 0.3 percent delta-9 ... as well as synthetic equivalents of the substances contained in the cannabis plant." As some industry members are arguing, Delta-8 is not synthetic but occurs naturally in hemp.

In most cases, Delta-8 is only found in small quantities in hemp as it grows out of the ground, explained Calvin Trostle, the statewide hemp specialist for Texas A&M AgriLife Extension Service. However, in labs Delta-8 is commonly produced through a chemical process with cannabidiol – CBD, which is legal, available in hundreds of products, and found in large quantities in hemp. Although it is psychoactive, Delta-8 differs on a molecular level from Delta-9-THC and produces a much milder effect. However, during Friday's hearing, Akatugba told the judge, "Delta-8 gets you high, your honor."

At Friday's hearing, Hometown Hero and the industry sought to allow the status quo to continue until arguments can more effectively be made, not just in the courts but with DSHS and the Legislature. That would protect the hundreds of thousands of Tex­ans, by industry estimates, who have relied on Delta-8 in the last year for relief from conditions that are not eligible for the state's limited (and expensive) Compas­sion­ate Use Program, the alternative Akatugba offered to legalizing Delta-8.

The VFW began selling the Delta-8 products to help veterans like David Walden, injured in combat. Since Delta-8 was popularized in Texas, Walden has used it to manage both physical pain and PTSD symptoms. Prior to discovering hemp-derived products, he said during the hearing on Friday, he managed his ailments using a cocktail of prescription medications. Delta-8 products "don't leave me in a fog like the other medications that I was on," he told Soifer's (virtual) court. "I can still conduct my day job. I'm still a functioning and [even] high-functioning member of society."

Fuller says he's relieved that Texans like Walden can once again have access to Delta-8 without fear of repercussions. "Delta-8 is not going to work for everybody, but it is a path that helps our brothers and sisters and it's damn sure better than pharmaceutical drugs," he said, adding that he's personally witnessed cases of substance use disorder among veterans relying on prescribed medications. Now he hopes the court's decision inspires DSHS and the Legislature to get more serious about expanding Texas' medical cannabis programs.

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