Like other states across the country, Washington has been grappling with how to regulate intoxicating hemp-derived cannabinoid products that are being innovated faster than state lawmakers can respond. The state has decided on an extreme solution that prohibits products containing “any amount of THC” from being sold within the state unless the product is sold pursuant Washington's adult-use cannabis (I-502) regulations. This results in the prohibition of not only intoxicating hemp products but also “full spectrum” CBD products that contain minute amounts of THC. Washington’s blunt strategy may appear to be a simple solution, potentially enticing other states to copy the idea as they grapple with intoxicating hemp cannabinoids. It nevertheless raises questions over fairness, effectiveness and the viability of enforcement.

Legal Loopholes

The 2018 Farm Bill unintentionally created significant legal loopholes for hemp products by focusing only on the concentration of delta-9 THC as the single metric of what constitutes federally legal “hemp” versus illegal “marijuana,” and by defining hemp as including “all derivatives.” This untidy draftsmanship has facilitated the explosion of intoxicating but federally legal delta-8 THC, delta-10 THC and other products that are chemically converted from CBD, as well as legally intoxicating products that contain delta-9 THC extracted directly from the hemp plant. The intoxicating hemp product market was further encouraged by the decision last year from the Ninth Circuit Court of Appeals in the case of AK Futures v. Boyd Street Distro, LLC, 35 F.4th 682 (9th Cir. 2022), which affirmed that delta-8 THC products fall within the Farm Bill’s broad definition of legal hemp.

These intoxicating hemp products are now widely available online and have found their way into convenience stores, markets and other retail stores throughout the country. Robust debate over how to address public health concerns and access by adolescents to intoxicating hemp products is now taking place in many statehouses.

Washington Senate Bill 5367

Washington Senate Bill 5367 was first introduced on January 13, 2023. In its original form, the bill simply reduced the amount of THC required in certain products to be considered a “cannabis product,” but excluded “hemp consumables,” defined as products having THC concentration not to exceed 1 mg per unit or 3 mg per package.

The final version of the bill as passed and enacted goes much further, defining “cannabis product” as including “any detectable amount of THC.” The bill also amends the definition of “THC concentration” to include any tetrahydrocannabinol content, not just delta-9 THC.

Washington House and Senate Bill Reports that were released between February and April 2023 summarized public testimony during recent hearings on the draft bill. The reports describe a vigorous debate over how to regulate intoxicating hemp products within the state. Those in favor of the more-stringent approach argued that the bill is necessary for public health and consumer protection, especially for preventing children accessing unregulated intoxicating products containing THC that currently fall into a regulatory gap. Testimony was given that “the THC limit for products sold outside of the regulated market should be zero, or effectively zero, for consumer safety and to avoid subverting the regulated market.” The opportunity to maximize state tax revenue also was highlighted.

Those opposed to the approach argued that the bill is overly broad and more restrictive than necessary, and would effectively destroy the state’s hemp market. They also emphasized that the bill will be almost impossible to enforce with respect to online and out-of-state sales of full-spectrum and other hemp products that contain some detectable amount of THC.

With an effective date of July 23, 2023, SB 5367 defines “cannabis products” as “including any product intended to be consumed or absorbed inside the body by any means including inhalation, ingestion, or insertion, with any detectable amount of THC.” The new law incorporates “cannabis products” into the label requirements that exist for regulated adult-use marijuana products, and provides that “no person may manufacture, sell, or distribute … any cannabis products without a valid license issued by the board or commission.” Although the final version of the bill contains a definition for “hemp consumable,” those products are limited to hemp products with no THC such as CBD isolate products. Also, the processing or sale of synthetically derived cannabinoid products is prohibited.

On July 14, 2023, the Washington State Liquor and Cannabis Board (LCB) issued a Guide on “Discontinued Sales of Products Containing THC by Businesses That Do Not Hold a Cannabis License.” The Guide identifies the new definitions discussed above and reaffirms that “[t]he sale of any product(s) containing detectable amounts of THC without a valid cannabis license is prohibited by state law and is subject to criminal sanctions.” (Emphasis in original.)

Discussion

As of July 23, 2023, all manufacturers, distributors and retailers of hemp-derived products that contain any amount of THC are prohibited from selling those products within the state of Washington except by entities that hold a valid cannabis operating license issued by the LCB. This includes all “full-spectrum” CBD products, as well as all other hemp-derived products that contain any amount of delta-8 THC, delta-10 THC or any isomer of delta-9 THC.

It is not clear when enforcement of the new law will begin, but we recommend that hemp companies and their insurers take action now to ensure compliance. Unlike obtaining licenses for “hemp processing” or similar licenses that exist in numerous states for entities that wish to sell hemp-derived products, it is much more difficult, time-consuming and expensive for companies to obtain a license and operate within Washington's heavily regulated adult-use market. Moreover, LCB is not currently accepting new applications for cannabis producer, processor or retail licenses, so it is not clear how the state expects hemp companies to pivot in response to the new law.

Washington’s aggressive strategy deprives consumers of CBD products, causes significant damage to the state’s existing hemp product market and leaves several questions unanswered. Full-spectrum CBD products are among the most effective cannabidiol products used by people for a variety of health and wellness purposes. Those non-intoxicating products are largely considered safe and effective when used in moderation, and they are not associated with the problem of adolescents accessing unregulated intoxicating hemp products. Prohibiting full-spectrum CBD products does not assist with achieving the state’s primary policy goal of preventing access to unregulated intoxicating hemp products and makes little sense in this context.

To Be Determined

The timing on enforcement and level of penalties remains unclear. To achieve compliance, companies must decide what to do with existing product inventory. Because contracts will need to be terminated or modified, disputes and litigation is inevitable. Although the law is not limited to Washington-based entities and applies to companies that sell online and ship products into Washington, it is unclear how the state intends to enforce the law against such entities. We anticipate that LCB will soon issue new rules that may clarify some of these questions.

Although state regulations around hemp products are highly variable and inconsistent, Washington State is now an outlier with its aggressively blunt strategy. The perceived simplicity of its approach, however, may nevertheless be attractive to states that are looking at ways to control intoxicating hemp products. Close attention should be paid to whether this portends a new trend that is copied by other state legislatures that favor simplicity over nuance when tackling the complex questions posed by hemp cannabinoids.