LEGALITY OF INDUSTRIAL HEMP-DERIVED CBD

Transcription

1 WHITEPAPER LEGALITY OF INDUSTRIAL HEMP-DERIVED CBD Legal Opinions and Regulatory Affairs Full Spectrum Nutrition, LLC 781 Seedling Court Colorado Springs, CO Ph FarmaceuticalCBD.com

2 WHITEPAPER TABLE OF CONTENTS page Overview... Hoban Law Group Legal Opinion... The Brand Law Firm Memorandum... ADDENDUM Excerpt from 2014 Farm Bill pages with the language pertaining to the legal definition of Industrial Hemp... Full Spectrum Nutrition, LLC 781 Seedling Court Colorado Springs, CO Ph FarmaceuticalCBD.com

3 OVERVIEW... All of the products manufactured and marketed by Full Spectrum Nutrition, LLC use Colorado industrial hemp oil derived extracts. Industrial Hemp is legally defined in Federal legislation as products derived from Cannabis sativa L which contain less than 0.3% THC on a dry weight basis. With the passage of the 2014 Farm Bill, the United States Congress differentiated industrial hemp from marijuana plants. Section 7606 of the 2014 Farm Bill authorized the growth, cultivation and marketing of industrial hemp under agricultural pilot programs in states that have legalized such activities. States with permitting agricultural programs may authorize, upon the granting of an applicant s application, the issuance of a State license to lawfully participate under the 2014 Farm Bill s hemp program. The suppliers of our CBD materials are certainly licensed by the State of Colorado, and fully compliant with regulations to lawfully participate in the provisions provided by the 2014 Farm Bill. There is the potential for confusion about the legality of CBD after the U.S. Drug Enforcement Administration (DEA) published a rule about CBD on December 13, In its announcement, the DEA restated its rule that all cannabis extracts, which includes CBD, are considered Schedule 1 substances. The agency issued this clarification to ensure American laws conformed with the treaties established by the United Nations to govern controlled substances. The rule was instantly challenged in Federal court by hemp and CBD oil producers from across the United States. Since then, the DEA has provided another clarification, which reads as follows: The new drug code (7350) established in the Final Rule does not include materials or products that are excluded from the definition of marijuana set forth in the Controlled Substances Act (CSA). The new drug code includes only those extracts that fall within the CSA definition of marijuana. If a product consisted solely of parts of the cannabis plant excluded from the CSA definition of marijuana, such product would not be included in the new drug code (7350) or in the drug code for marijuana (7360). Since industrial hemp is excluded from the definition of marijuana in the CSA, any product derived from industrial hemp would be considered legal (including cannabinoid products) as long as it is compliant with the federal farm bill. So at the moment, people who enjoy using CBD products and find them beneficial do not have to worry about being able to get them legally, if they are derived from industrial hemp, or have a state program that allows for the production and sale of marijuana derived CBD products. Our company stands next to the legal opinion of Hoban Law Group, a leading cannabis industry law firm, which is well defined in their following legal opion letter. Also inlcuded here is a memorandum from The Brand Law Firm representing the legal position of Folium Bioscience. 1

4 December 14, 2016 DÉJÀ VU? IS THE DEA UNLAWFULLY ATTEMPTING TO OUTLAW ALL CANNABINOIDS AGAIN? I. INTRODUCTION The Drug Enforcement Administration (DEA) has, yet again, demonstrated its lawless recalcitrance for the prevailing law. A new Rule published in the Federal Register, and currently set to become effective on January 13, 2017, seeks to control all naturally occurring cannabinoids from the Cannabis sativa L plant. The DEA attempted something very similar in 2003, and the Ninth Circuit Court of Appeals rejected its efforts as unlawful and beyond the scope of the DEA s delegated Congressional authorization. But, here we go again. Within the framework of existing laws, a robust cannabis industry, including consumer, textile and manufacturing industries based around non-psychoactive varieties of the Cannabis sativa L. plant and derivatives and cannabinoids derived therefrom, has evolved from the efforts of thousands of companies across the United States and globally. These industries, which already exist in the European Union, Latin America, Canada and China, among other countries, are rapidly growing, creating vast economic opportunities along with job creation. Absent a reversal or the striking of the DEA s Rule, these businesses and industries stand to suffer a devastating impact from this Rule. To protect these individuals, businesses and this industry, the DEA s actions cannot be overlooked. More specifically, on Tuesday, December 14, the Federal Register published information concerning a Final Rule enacted by the DEA pertaining to a change to 21 CFR In sum, the DEA has created a new Administration Controlled Substances Code Number for Marihuana Extract. According to the Federal Register, [t]his code number will allow DEA and DEAregistered entities to track quantities of this material separately from quantities of marihuana in order to comply with relevant treaty provisions. There are a number of unusual things about this DEA action; not the least of which is that it appears to be, yet again, outside of the scope of the DEA s power and authority as it pertains to the legality and regulation of the Cannabis sativa L plant. The fact that the DEA, an unelected government body with no legislative authority, is attempting to outlaw all cannabinoids is concerning and problematic as it pertains to portions of the plant not legally defined as marihuana, and as it pertains to lawfully cultivated and processed Farm Bill-compliant industrial hemp. The discussion below addresses many of the salient reasons why the DEA s most recent action cannot stand, and outlines an action plan accordingly. 1

5 II. DISCUSSION A. The DEA/Federal Register Issue The DEA s new definition for Marihuana Extract includes: an extract containing one or more cannabinoids that has been derived from any plant of the genus Cannabis, other than the separated resin (whether crude or purified) obtained from the plant. The primary problem with this new definition is that it purports to broadly outlaw all 80-plus cannabinoids [such as cannabidiol (CBD), cannabinol (CBN), cannabigerol (CBG), etc.] contained within this genus. And cannabinoids are not unlawful controlled substances. The only cannabinoid that has been specifically identified in the Controlled Substances Act (CSA) is tetrahydrocannabinol (THC), as set forth below. Per the Federal Register, the DEA previously established separate code numbers for marijuana and for tetrahydrocannabinols (THC), but not for Marihuana Extract. This is true, and directly related to the DEA s Congressionally-delegated authority under the Controlled Substances Act (CSA) because "marihuana" (marijuana) and "tetrahydrocannabinols" (THC) are both listed on Schedule I. 21 U.S.C. 812(c)(Schedule I)(c)(10), (17)). B. CSA INCLUSION OF THC But even the CSA definition of THC, as an individually identified cannabinoid, does not appear to prohibit inclusion of THC in these extracts, as the Ninth Circuit determined when it stated that the definition of THC under the CSA includes only synthetic THC. 21 C.F.R (d)(27). THC is defined there as "[s]ynthetic equivalents of the substances contained in the plant, or in the resinous extractives of Cannabis, sp. and/or synthetic substances, derivatives, and their isomers..." The lawful definition of THC expressly excludes THC that is naturally occurring in the stalks and fibers of a lawfully imported industrial hemp plant. And the controlled substances listing of THC is different from the listings for DMT, mescaline, psilocybin, and psilocyn, the definitions for which are not limited to synthetic forms of the drugs. See 21 C.F.R (d). In Hemp Indus. Ass'n. v. DEA, supra, the court held that the DEA could regulate products containing natural THC if it is contained within marijuana, and can regulate synthetic THC of any kind. But they cannot regulate naturally-occurring THC not contained within or derived from marijuana, i.e., non-psychoactive hemp products, because non-psychoactive hemp from the stalks and fibers of such a plant is not included in Schedule I. The Court concluded that the DEA has no authority to regulate drugs that are not schedule. Id. at Furthermore, the Court concluded, [I]f naturally-occurring THC were covered under THC, there would be no need to have a separate category for marijuana, which obviously contains naturallyoccurring THC. Yet Congress maintained marijuana as a separate category." Hemp Indus. Ass'n. 2

6 v. DEA, 357 F.3d 1012, 1014 (9th Cir. 2004) (quoting Hemp Indus. Ass'n v. DEA, 333 F.3d 1082, 1089 (9th Cir. 2003). In summary, under the CSA, the DEA can regulate foodstuffs and related products containing natural THC if it is contained within marijuana, and can regulate synthetic THC of any kind. But they cannot regulate naturally-occurring THC not contained within or derived from marijuana--i.e., non-psychoactive industrial hemp products--because non-psychoactive industrial hemp is not included in Schedule I, as set forth above. This is because statutes must be interpreted strictly and pursuant to their specific terms, and because the DEA has no authority to regulate drugs that are not scheduled. C. FEDERAL DEFINITION OF MARIHUANA It is clear that marijuana, or marihuana, is a controlled substance. But not all parts of the Cannabis sativa L plant are considered marihuana under the federal definition. Moreover, when it comes to industrial hemp, as set forth in the Agriculture Act of 2014 (commonly known as the Farm Bill), the entire industrial hemp plant is lawful, as set forth more fully below. To be clear, the federal definition of marihuana expressly excludes various portions of this plant. Yet, the DEA fails to recognize this express caveat. Under the CSA, "marihuana" is defined, not by the DEA, but by Congress, as follows: [A]ll parts of the plant Cannabis sativa L., whether growing or not; the seeds thereof; the resin extracted from any part of such plant; and every compound, manufacture, salt, derivative, mixture, or preparation of such plant, its seeds or resin. Such term does not include the mature stalks of such plant, fiber produced from such stalks, oil or cake made from the seeds of such plant, any other compound, manufacture, salt, derivative, mixture, or preparation of such mature stalks (except the resin extracted therefrom), fiber, oil, or cake, or the sterilized seed of such plant which is incapable of germination. 21 U.S.C. 802(16)(emphasis added). By definition, the listing of "marihuana" in Schedule I excludes the mature stalks of such plant, fiber produced from such stalks, oil or cake made from the seeds of such plant, any other compound, manufacture, salt, derivative, mixture, or preparation of such mature stalks (except the resin extracted therefrom), fiber, oil, or cake, or the sterilized seed of such plant which is incapable of germination. Hemp Indus. Ass'n., 357 F.3d at 1014 (quoting 21 U.S.C. 802(16)). Thus, any extracts derived from the foregoing portions of a Cannabis sativa L plant lawfully cultivated outside of the United States remain lawful. 3

7 D. FARM BILL S EXPRESS AUTHORIZATION OF INDUSTRIAL HEMP, INCLUDING CANNABINOIDS DERIVED THEREFROM The Farm Bill renders the entire industrial plant, including extracts, as lawful. On February 7, 2014, President Obama signed the Agricultural Act of 2014 into law. See P.L ( 7606). Section 7606 of the act, Legitimacy of Industrial Hemp Research, defines industrial hemp as distinct from marijuana and authorizes institutions of higher education or state departments of agriculture in states that legalized hemp cultivation to conduct research and pilot programs across the country. Id. Importantly, the Farm Bill specifies that the entire industrial hemp plant is made lawful, in spite of, or notwithstanding, the CSA. As such, it expressly carves out an exception to the CSA for the entire industrial hemp plant and products/extracts therefrom. Id. Specifically, it states that [n]otwithstanding the Controlled Substances Act (21 U.S.C. 801 et seq.), the Safe and DrugFree Schools and Communities Act (20 U.S.C et seq.), chapter 81 of title 41, United States Code, or any other Federal law, an institution of higher education (as defined in section 101 of the Higher Education Act of 1965 (20 U.S.C. 1001)) or a State department of agriculture may grow or cultivate industrial hemp (with certain regulatory limitations). Id. And industrial hemp has been defined, accordingly, as an exclusion/exception to the CSA, as, the plant Cannabis sativa L. and any part of such plant, whether growing or not, with a delta-9 tetrahydrocannabinol concentration of not more than 0.3 percent on a dry weight basis. Id. There it is expressly clear that all parts of said plant, within this definition, are lawful, including but not limited to the extracts therefrom. E. CANNABINOIDS ARE NOT ILLEGAL CONTROLLED SUBSTANCES Cannabinoids are not illegal if they are derived from certain parts of the plant, and the Farm Bill expressly indicates that the entire plant is lawful, as set forth above. Moreover, naturally occurring cannabinoids are not unlawful substances per se. In Hemp Indus. Ass'n. v. DEA, 357 F.3d 1012 (9th Cir. 2004), the Ninth Circuit ruled that naturally occurring cannabinoids in industrial hemp foods, including oil, were never scheduled under the CSA; therefore, the DEA has no jurisdiction. This means that naturally occurring industrial hemp cannabinoids are federally legal in the view of the Ninth Circuit. In this case, the Court concluded: [a]s in the case of poppy seeds commonly consumed on bagels and expressly exempted from the CSA, that come from a non-drug variety of, but the same species as, the opium poppy non-psychoactive hemp seed products do not contain any controlled substance as defined by the CSA F.2d at

8 F. DEA CITATION OF INTERNATIONAL TREATIES By citing reconciliation with international treaties as the premise for this Rule, the DEA appears to be seeking to invoke 21 CFR , which, in theory, allows the DEA to bypass normal rulemaking procedures, effectively eliminating due process from the procedures set forth by Congress and through the Federal Register. This use of such procedure by the DEA is akin to emergency rulemaking and not only undermines the premise of due process afforded to adversely affected interested persons, but is essentially is an abuse of process and appears to be an attempt to circumvent Congressional restrictions upon the DEA s authority. G. HEMP INDUS. ASS N v. DEA CASE PRECEDENT Fundamentally, cannabinoids are not specifically or generally defined under the Federal Controlled Substances Act (the CSA ). However, through its ruling, the DEA has improperly taken the position that all cannabinoids, even isolated and pure cannabinoids such as CBD, are unlawful under the CSA. Without an express provision under the CSA, it is questionable whether the DEA has any sort of authority to take this position. But more importantly, in the case of Hemp Indus. Ass'n v. DEA, 333 F.3d 1082 (9th Cir. 2003), the DEA attempted to initiate rules and interpretations concerning certain cannabinoid constituents of a Cannabis sativa L plant that were not expressly set forth under the CSA or the DEA s own regulations (at the time), and the Ninth Circuit Federal Court of Appeals struck down its efforts, stating that: [t]he petition requesting that we declare the rule to be invalid and unenforceable is GRANTED. Hemp Indus. Ass'n v. DEA, 333 F.3d 1082 (9th Cir. 2003). In short, an agency such as the DEA is not permitted to change a legislative rule retroactively through the process of disingenuous interpretation of the rule to mean something other than its original meaning. Yet, here they go again, and, again this needs to be stopped. H. CONGRESSIONAL BUDGETARY APPROPRIATIONS ACTS DE-FUNDING DEPARTMENT OF JUSTICE PURSUANT TO FARM BILL To further confirm Congressional intent pursuant to the Farm Bill, Congress enacted the Consolidated and Further Continuing Appropriations Act of 2015 (Pub. L , 128 Stat. 2130, 538 (2014)), and re-authorized such regulations in the Consolidated Appropriations Act, 2016, (Pub. L. No , 129 Stat ( 763)), and most recently, this week extended the same through April 28, 2017 (collectively, the Spending Bill ) (Pub. L. No ). The Spending Bill effectively precludes block federal law enforcement authorities from interfering with conduct authorized by the Farm Bill, such state agencies and hemp growers, as well as to counter efforts to obstruct agricultural research. Accordingly, the Spending Bill sets forth: 5

9 None of the funds made available by this Act or any other Act may be used (1) in contravention of section 7606 of the Agricultural Act of 2014 (7 U.S.C. 5940); or (2) to prohibit the transportation, processing, sale, or use of industrial hemp that is grown or cultivated in accordance with subsection section 7606 of the Agricultural Act of 2014, within or outside the State in which the industrial hemp is grown or cultivated. See Pub. L. No , 129 Stat ( 763). The enforceable effect of the Spending Bill s de-funding mechanisms have since been affirmed in multiple cases. See U.S. v. Marin Alliance for Medical Marijuana (MAMM), Case No ; see also U.S. v. McIntosh, Case No (2016). Therefore, the DEA s final rule regarding Marihuana Extract not only contradicts its own rulemaking authority, as otherwise discussed herein, but also explicitly conflicts with the Spending Bill provisions enacted by Congress, which disallows the DEA from expending resources that conflict with the Farm Bill. I. DEA FINAL RULE DISTINCTION BETWEEN CANNABIS RESIN AND MARIHUANA EXTRACT There is a positive aspect to this publication and the DEA s position accordingly. Specifically, the new Rule defines marihuana extracts as distinct from its resins Marihuana Extract is a new category and is other than the separated resin (whether crude or purified) obtained from the plant. It finds that the use of the term cannabinoid necessitates that the DEA clarify that the new marihuana extract category (drug code 7350) is not intended to include cannabis resin as defined in the U.N. Single Convention (and under the CSA). 21 CFR Part 1308, 81 FR This is an important distinction because it effectively acknowledges that cannabis extracts are not resins, but are something else altogether. This is a good sign because the CSA definition of marijuana makes any resins extracted from any part of the plant unlawful. 21 U.S.C. 802(16). And we have always known that resins are distinct from extracted oils; this Rule expressly makes that distinction and furthers the argument that the DEA has exceeded its jurisdiction here. J. CANNABINOIDS ARE NOT EXCLUSIVELY NATURALLY OCCURRING IN CANNABIS PLANTS The genus Cannabis sativa L. possesses over eighty distinct and naturally occurring cannabinoids. For example, research indicates cannabinoids also naturally occur in coneflower (Echinacea), oxeye (Heliopsis helianthoides), electric daisy (Acmella oleracea), Helichrysum umbraculigerum, liverwort (Radula marginata), black pepper (Piper nigrum) and even chocolate (Theobrama cacao) plants. 6

10 Importantly, the DEA has even admitted that cannabinoids naturally occur in other plants and/or can be derived from sources other than marijuana. See 21 CFR Chapter II, Docket No. DEA426, p Further, the DEA also admits the tetrahydrocannabinol is the main psychoactive cannabinoid in marijuana psychoactivity being the main impetus behind scheduling (synthetic) tetrahydrocannabinol while also acknowledging that many of the other cannabinoids, specifically including CBD, do not possess psychoactive effects. See 21 CFR Chapter II, Docket No. DEA-426, p ; Docket No. DEA K. ACTION PLAN There are administrative procedures, including requests for hearing, and/or the commencement of litigation seeking injunctive and declaratory relief that can be taken in response to the DEA s Rule. Examples of such prior challenges include the HIA v. DEA case itself, along with recent challenges regarding the DEA s ruling with regard to banning Kratom. Our team is diligently and expediently working to prepare a recommended strategy in response to the DEA s Rule and looks forward to working on behalf of the continued success of the effected industries. /s/ Robert T. Hoban, Esq. Managing Partner, Hoban Law Group /s/ C. Adam Foster, Esq. Partner, Hoban Law Group /s/ Garrett Graff, Esq. Associate Attorney, Hoban Law Group, Hemp Attorney /s/ Dennis Brovarone, Esq. Senior Attorney, Hoban Law Group, Hemp Attorney /s/ Patrick Goggin, Esq. Counsel, Hoban Law Group, Hemp Attorney /s/ Lisa Sweeney, Esq. Counsel, Hoban Law Group, Hemp Attorney /s/ Matthew Smith, Esq. Counsel, Hoban Law Group, Hemp Attorney 7

11 December 23, 2016 THE PRESENT LEGAL FLUX OF THE DEA S DECEMBER 13, 2016, FINAL RULE APPLICABLE TO WHOLE HEMP COMPANY A/K/A FOLIUM BIOSCIENCES STATE OF COLORADO REGISTRATION # & Kashif Shan, CEO Whole Hemp Company d/b/a Folium BioSciences 828 Wooton Road Colorado Springs, Colorado While the industry set off warning alarms surrounding the DEA s Tuesday, December 13, 2016, Final Rule pursuant to the CFR, Establishment of New Drug Code for Marihuana Extract, I do not believe nor see reason to partake in the fear-mongering hitting the hemp and extract industry. I believe Whole Hemp Company is presently in full legal and licensing compliance. We do dare to mention that of course with our opinion, thoughts and impressions, as any great lawyer must, legal Disclaimers must be incorporated herein as follows: STANDARDIZED LEGAL DISCLAIMERS: DISCLAIMER: This memorandum has been prepared for the sole benefit of Whole Hemp Company LLC and it s trade name Folium Bio-Science. It is not intended for the guidance or education of any other person or entity. The purpose of the memorandum is to examine the current state of the law with regard to industrial hemp. The memorandum takes no position as to whether any particular activity of Whole Hemp Company LLC (or any activity of its clients or its affiliates) is, or is not, within the bounds of the law. Nothing in the memorandum should not be construed as taking such a position and it should be noted that any opinions, statements or affirmations herein are the opinion of the author alone and may be subject to other and different opinions by other industry professionals. DISCLAIMER: In preparing this memorandum, this law firm and it s attorney(s) are not advising as to the legality of any particular activity nor providing a course of action. This area of the law is politically charged, is in wide flux, and has not been well-defined by the courts or otherwise. In short, the law in this regard is subject to change at any time. Engaging in activities in such a fluxuating and irregular industry might cause the incurrence of adverse, legal liability(s). This memorandum should not be construed as providing a shelter against these industry risk(s) and in fact should be considered as a warning that those within this industry must keep apprised of the ever changing, laws and decisions of governmental agencies. DISCLAIMER: Under NO circumstances is this letter or the facts, theories, opinions or

12 conclusions meant for any third party. This letter and its content is for the eyes of Whole Hemp Company, only, as their facts, circumstances and situation (legal and factual) is specific and specific to the content of this letter as they have conveyed them to the authors herein. Under NO circumstances is this writing meant to establish a third party benefit or relationship. The only known entity to the authors of this writing and to which the statements made are geared to and for are to World Hemp Company, LLC., and their licensing The December 13, 2016 amendment to the Code of Federal Regulations (CFR), now states that all cannabis extracts are encumbered as a Schedule I drug under the Controlled Substance Act, CSA. See, 21 U.S.C. Sec. 812, and 21 C.F.R. Sec (23) and (31). What the DEA left out is that CBD derived from Industrial Hemp, as protected pursuant to the Congressionally passed 2014 Farm Act, is not specifically set forth within the CSA. There is a long standing legal argument that what Congress has not specifically set forth would be a legal omission from the United States Code (USC) and therefore not part of the Schedule 1 Substance list at all. On the DEA s website, the agency has taken a different understanding by claiming: A substance need not be listed as a controlled substance to be treated as a Schedule I substance for criminal prosecution. A controlled substance analogue is a substance which is intended for human consumption and is structurally or pharmacologically substantially similar to a Schedule I or Schedule II substance and is not an approved medication in the United States. Pursuant to the DEA s approach, CBD is and has always been a Schedule I substance. CBD already possess a Schedule I DEA drug code, Therefore to the DEA, nothing has changed. It appears that there may be some within the hemp industry, or certain Chicken Little s, with benefits to gain, going around screaming the sky is falling and creating a nonexistent crisis. The delightful news is we are aware from multiple, valid sources that the FDA and the DEA are presently engaging in separate trials to determine if CBD explicitly should be removed from the Schedule I status. There is a large scale clinical trial taking place via NIDA/FDA, which I am informed is to be completed in The results of this clinical testing will again go to the determination of CBD s rescheduling review. The chances of CBD rescheduling in the near future is becoming more likely, not less likely (as stated by HHS). 1 Also, there are several pending federal bills before Congress (e.g., S. 1333, HR 1635, HR 4779) that seek to reschedule CBD. House Speaker Paul Ryan believes there may be enough 1 Information learned directly from Paul Armentano, Deputy Director of NORML/NORML Foundation

13 Congressional support to pass a law that would legalize CBD oil for certain treatments. 2 In 2015, House Speaker Ryan endorsed legislation to legalize CBD oils. House Speaker Ryan signed on as co- sponsor for Rep. Scott Perry s (R-PA) bill, which sought to remove hemp and CBD-rich cannabis products (with less than 0.3 percent THC) from the definition of marijuana under the Controlled Substances Act. It s going to take a while to get through the legislative process just like any other bill in Congress, Ryan said. 3 This oil does not have THC in it, so therefore it really shouldn t be lumped into the category of anything close to legalization of marijuana and that s the confusion that typically surrounds the issue. Once you get people through the confusion that surrounds this issue, I think people agree this is a good thing and there s no reason to oppose this, Ryan said. 4 Pursuant to BREAKING NEWS UPDATE: The Truth About the DEA and CBD by ireadculture December 15, 2016, Barbara Carreno, DEA public relations officer, was happy to set the record straight about the DEA s move in amending the Rule on December 13, Ms. Carreno, explaining that the rule amendment was merely an internal decision made to help their work more effective and clear. This Federal Register Notice does not change the control status of anything having to do with marijuana, she said. These extracts were Schedule I before yesterday, and they still are. No provisions of the Controlled Substances Act (registration, security requirements, research protocols, etc.) have changed. This is a record-keeping matter. Within this same BREAKING NEWS UPDATE: The Truth About the DEA and CBD by ireadculture December 15, 2016, it was reported that the DEA felt it necessary to classify extracts as Schedule I substances because separating the many different compounds is essential to the FDA and DEA process in rescheduling cannabis, and in the new research that the DEA is demanding on the cannabis plant, they need to figure out a way for cannabis compounds to be recreated in a laboratory, in order to be rescheduled. Barbara Carreno, DEA public relations officer, states the DEA established a new drug code for marijuana extracts (which includes, but isn t limited to, CBD) as a means to more easily and accurately track scientific research on marijuana. The cannabis plant contains hundreds of compounds, and there are over 400 studies into marijuana and its various components taking 2 Channel30 ( CBD-oil-can-pass-Housethis-session/ ) report. 3 Channel30 ( CBD-oil-can-pass-Housethis-session/ ) report. 4 House Speaker Paul Ryan Believes CBDLaw Will Pass Congress GRAHAM ABBOTT - WEDNESDAY, MAY 25TH,

14 place. Separating the extracts from other parts of the cannabis plant makes our work more efficient. What the DEA is ultimately attempting to do is assign a DEA code to CBD extracts. Without reading anything further into the DEA s December 13, 2016 Amended Report, the literal read and the statements from Barbara Carreno, the DEA s Public Affairs Officer, is that the DEA is amending its internal record keeping. There will be a distinct code for CBD (which already exists 7372 ), and that there would now be a separate code for CBD extracts. The latter is likely to be legitimately necessary as there are proposed state-sponsored research programs where funding is in place for clinical trials involving CBD extracts in pediatric patients. 5 Todd Winter, Esq., of Winter LLP, opinioned that the DEA s recent amendment will not affect anyone in the ways that news outlets have initially been reporting: The CSA has not changed; there has been no change in law. CBD derived from hemp is not illegal; it s not a Schedule I drug regardless of what the DEA has done. Regardless of what the DEA has done, or said, or written on the changes they have made, it s totally irrelevant because it s not law. Only Congress can pass our laws, so anyone currently selling CBD derived from hemp products can continue to sell this as if this didn t happen, because in my opinion, this didn t even happen. 6 For the public to better understand the legalities, we must first look to what is law and what is agency dicta. The Code of Federal Regulations (CFR) is agency dicta. Yes, this dicta can take a bite, however, can it stand up to the law that has a much larger bite? Under the nondelegation doctrine, federal agencies are authorized by "enabling legislation" to promulgate regulations (rulemaking). 7 In 1930, under the New Deal legislation, Congress set up a process so that the citizens can more readily access proposed laws, proposed law changes, effective laws, and agencies would have a centralized filing and publication system to keep track. This process became known as the Federal Register or CFR. Thus, the CFR was designed not to become the passage of laws as agencies saw fit, but to report on what is the status of laws made by those who could really make them. So, who can really make laws: A. Legislation, Congress; B. Executive orders and OMB Circulars; C. Court Orders. 5 December 14, from Paul Armentano, Deputy Director of NORML. 6 BREAKING NEWS UPDATE: The Truth About the DEA and CBD by ireadculture December 15, "Federal Administrative Law". Duke University School of Law. Retrieved March 10, 2014.

15 Law enforcement, hence the DEA, is to carry out the enacted laws, not make them and the Court system will rule on the permissibility and constitutionality of either the law, the enactment and/or the enforcement. Federal agencies use the regulatory process to enforce legally effective regulations, rules and laws established by those who have the constitutional authority to make them. The effect of the Federal Register is to: A. Provide official notice of a document's existence, its contents and legal effect indicates date of issuance and the effective date of actions; B. Specifies the legal authority of the agency delegation of authority from Congress; C. Gives documents evidentiary status, makes them admissible in court, establishes FR text as true copy of original signed document; D. Shows how and when the CFR will be amended Farm Bill: With the passage of the 2014 Farm Bill, Congress differentiated industrial hemp from marijuana plants. Section 7606 of the 2014 Farm Bill authorized the growth, cultivation and marketing of industrial hemp under agricultural pilot programs in states that have legalized such activities. States with permitting agricultural programs may authorize, upon the granting of an applicant s application, the issuance of a State license to lawfully participate under the 2014 Farm Bill s hemp program. Such licenses and registrations have been granted to companies such as Whole Hemp Company d/b/a Folium Bio-Science with operations in the state of Colorado and its encompassing distribution system. Whole Hemp Company is therefore classified as approved under and pursuant to the State of Colorado and it s agricultural program as meant and authorized by the U.S. Congress by passage of the 2014 Farm Bill. The 2014 Farm Bill, past by Congress, further discussed stopping the use of federal funds to impede hemp activities carried out pursuant to it. Congress, clearly making a distinction or an exemption (semantics) between the classifications of cannabis as marijuana and industrial hemp as defined. A distinction that had not gone unnoticed and set forth within their petition to remove hemp from the Controlled Substance Act (CVA) by the Hemp Industries Association (HIA), the Kentucky Hemp Industry Council, whose members include, among others, CV Sciences (formerly known as CannaVest), Dr. Bronner s, the hemp soap company, and the hemp food maker Nutiva. However, DEA spokeswoman Barbara Carreno in an stated, Botanically speaking, any plant of the genus cannabis constitutes marijuana under the CSA regardless of whether the plant is referred to as hemp, marijuana, or any other name." 8 However, as Congress has established a distinction or exemption, industrial hemp, as defined, is placed within the purview and protection of the Congressionally passed 2014 Farm Bill. It is opinioned that Barbara Carreno s position and that of the DEA is legally 8 DEA spokeswoman Barbara Carreno in an statement.

16 incorrect. Whether hemp or actual cannabis laden with THC, the August 29, 2013 Cole Memorandum (Deputy Attorney General, James M. Cole), states in part: In October 2009 and June 2011, the Department issued guidance to federal prosecutors concerning marijuana enforcement under the Controlled Substances Act (CSA). The guidance set forth herein applies to all federal enforcement activity, including civil enforcement and criminal investigations and prosecutions, concerning marijuana in all states. As explained above, however, both the existence of a strong and effective state regulatory system, and an operation's compliance with such a system, may allay the threat that an operation's size poses to federal enforcement interests. Accordingly, in exercising prosecutorial discretion, prosecutors should not consider the size or commercial nature of a marijuana operation alone as a proxy for assessing whether marijuana trafficking implicates the Department's enforcement priorities listed above. Rather, prosecutors should continue to review marijuana cases on a case-by-case basis and weigh all available information and evidence, including, but not limited to, whether the operation is demonstrably in compliance with a strong and effective state regulatory system. A marijuana operation's large scale or for-profit nature may be a relevant consideration for assessing the extent to which it undermines a particular federal enforcement priority. The primary question in all cases - and in all jurisdictions -should be whether the conduct at issue implicates one or more of the enforcement priorities listed above. As Whole Hemp Company LLC maintains the strictest of compliance with the State of Colorado s strong and effective state regulatory system, and an operation's compliance with such a system, Whole Hemp Company LLC is the model entity fitting the four corners of the Cole Memorandum. Federal resources, pursuant to the Cole Memorandum, should not be spent on tampering, impeding or interfering with Whole Hemp Company s operations, sales and distributions. The issues centered within the Cole Memorandum were actually litigated and ruled upon in a recent 9 th Cir. Federal Appellate Court. 9 The U.S., Federal Court of Appeals held that, the U.S. Department of Justice cannot spend money to prosecute federal marijuana cases if the defendants comply with state guidelines that permit the drug's sale for medical purposes. This ruling goes hand in glove with Congress s 2014 passing of it s budget rule which prohibits the DOJ from using federal funds to interfere in the implementation of state marijuana regulations. The Court in United States v. McIntosh, 2016 DJDAR 8484 (Aug. 16, 2016), reasoned that if the DOJ punishes individuals for engaging in activities permitted 9 United States v. McIntosh, 2016 DJDAR 8484 (Aug. 16, 2016).

17 under state law (such as the use, cultivation, distribution and possession of medical marijuana), then the DOJ is preventing state law from being implemented as a practical matter. By officially permitting certain conduct, state law provides for non-prosecution of individuals who engage in such conduct. If the federal government prosecutes such individuals, it has prevented the state from giving practical effect to its law providing for non-prosecution of individuals who engage in the permitted conduct." The Appellate Court in The Court in United States v. McIntosh, 2016 DJDAR 8484 (Aug. 16, 2016), paved the way for State HEMP relevance against Federal criminal prosecution. Following the Federal Appellate Court s holding, should a hemp farmer, properly licensed pursuant to their state s agricultural department and be found in strict compliance of their state s agricultural license, an affirmative defense to the Federal Government s prosecution should exist. In the Hemp Industry Association s petition for removal of hemp from the CSA, a 2004 appellate court opinion was cited 10, holding that the DEA regulations were invalid and that the DEA s regulations would have prohibited the sale of food and cosmetic products made from hemp oil and seed containing naturally occurring THC in any trace quantities. The U.S. Court of Appeals for the Ninth Circuit previously held that the listing of marijuana in Schedule I of the CSA excludes the plant s mature stalks, fiber produced from the stalks, and oil produced from the seeds of the plant. This court ruling as well as other appellate courts 11 and Congress s 2014 Farm Bill coupled with State approved Licensing programs, such as Colorado and Kentucky, are at odds with the DEA s interpretation of hemp and its extracts being classified as a Schedule I. Since President Nixon was in office, cannabis has been wrongfully classified as a Schedule 1 controlled substance. Schedule I is the most severe drug category. This category is reserved for drugs such as ecstasy, heroine, LSD and peyote. [T]o be included on any of the five schedules, a substance must have some potential for abuse," HIA and the Kentucky Hemp Industry Council noted in the petition. The industrial hemp plant, with a THC concentration of three-tenths of a percent or less by dry weight, has no potential for abuse whatsoever. First, ingestion of industrial hemp, whether by smoking, eating or otherwise, will not cause any psychoactive effect at all, as has been established by studies going back over many years Hemp is a crop that has no psychoactive effect and there is no reason why it can t be grown as any agricultural commodity, and the notion that it is scheduled on the Controlled Substances Act akin to heroine 10 See, Hemp Industry Assoc. v. Drug Enforcement Administration, 357 F.3d 1012 (9 th Cir. 2004)(DEA lacks jurisdiction over unscheduled naturally occurring cannabinoids). 11 See, Hemp Ind. Assoc., v. DEA, 333 F.3 d 1082 (9 th Cir. 2003).

18 is an outrage. August 11, 2016, Statement of Principles on Industrial Hemp: On August 11, 2016, a Statement of Principles on Industrial Hemp (the Statement ) was issued by the Office of Secretary of the U.S. Department of Agriculture ( USDA ), the Drug Enforcement Administration ( DEA ) of the U.S. Department of Justice ( DOJ ) and the Food and Drug Administration ( FDA ) of the Department of Health and Human Service ( HHS ). On this date, Jonathan Miller, Esquire, FROST BROWN TOD, Lexington, KY., and Co-signed by Joseph Sandler, Esquire, SANDLER REIFF LAMB ROSENSTEIN & BIRKENSTOCK, Washington, DC., provided to the Members of the Kentucky Hemp Industry Counsel, a legal Opinion on the U.S. Federal Agency Statement of Principles. Within this legal opinion the following was stated: As we outlined comprehensively in our Opinion on the Legal Status of Industrial Hemp, dated December 21, 2015 and attached as Appendix B ( our December Opinion ), the Agricultural Act of 2014, P.L. No (the 2014 Farm Bill ) and the Consolidated Appropriations Act for FY 2016 (the Omnibus Law ) constitute a sweeping legal revolution for the industrial hemp crop. Taken together, the two laws ensure that individuals and firms that are engaged in authorized agricultural pilot programs should be permitted to grow, cultivate, transport, process, sell and/or use industrial hemp under the guidelines and regulations of state law, without interference from agencies using federally-authorized funds. The issuance of the Statement of Principles by the three federal agencies most involved in these issues the USDA, the DEA and FDA brings that valued sense of certainty to individuals and firms involved in the industrial hemp business. Further, clarity provided by the Statement brings several items of good news to hemp farmers and firms: While initially, the DEA rejected a clear understanding of the 2014 Farm Bill that institutions of higher education and state departments of agriculture could contract out hemp pilot projects to private farmers and business requiring us to go to federal court to clarify the Statement clearly acknowledges that private persons licensed, registered, or otherwise authorized by state agriculture departments and persons employed by or under a production contract or lease with colleges and universities may participate in pilot programs. Moreover, in the most welcome portion of the Statement, authorized pilot program participants may be able to participate in USDA research or other programs to the extent otherwise eligible for participation in those programs. We believe that this broad language for the first time opens up duly registered pilot projects to be eligible for loans, grants, certification programs, and the wide variety of other opportunities made available to farmers and agri-businesses at USDA and its sub-agencies.

19 These federal agencies also for the first time acknowledge that, as part of marketing research programs, industrial hemp products can be sold in or among states with pilot programs. This recognition, which reflects clear authorization by the 2014 Farm Bill and the Omnibus Law, will not only give hemp farmers and businesses confidence that they can sell their products; but perhaps more importantly, provides much needed assurance to financial institutions that such commerce is legal, and that they can facilitate financial transactions in the industry. The Statement makes clear that the FDA will continue to oversee marketing claims and the process for drug applications, while the Controlled Substances Act will still apply to the manufacture, distribution, and dispensing of drug products. Accordingly, the advice we shared in our December Opinion is confirmed: Firms engaged in producing hemp products for human consumption should not market their products as a drug nor make any medicinal claims without prior FDA approval. However, there are no blanket prohibitions on any other kind of sale of hemp-based consumable products such as cannabidiol ( CBD ), nor even any mention of CBD in the Statement. Note that CBD is mentioned in a separate DEA letter also released on August 11, 2016 (attached as Appendix C) rejecting petitions recently filed regarding the rescheduling of marijuana. That letter, which imprecisely describes CBD as a constituent part of marijuana focused exclusively on FDA-authorized clinical trials of CBD, and CBD s potential for medical use, again is legally distinguishable from its sale without medicinal claims. 12 (Emphasis added). At this juncture Cannabis is a medicinal herb and it should be regulated as an herb or nutraceutical, not as a pharmaceutical or a street drug. Cannabidiol or CBD is a nonintoxicating component of the cannabis plant with enormous therapeutic, scientific and health potential. Although CBD doesn t make people feel high like THC does, it s being utilized in conjunction with a wide range of conditions - chronic pain, cancer, Crohn s, diabetes, rheumatoid arthritis, PTSD, cardiovascular disease, anxiety, antibiotic-resistant infections, multiple sclerosis, schizophrenia, and more. Big business, including Wall Street are all placing their bets with the wide audience and enormous product potentials that can be joined with CBD, it s oil and extracts. Academic research centers around the world are presently studying the effects of CBD on these and other ailments. Extensive preclinical research and some clinical studies have shown that CBD has strong anti-oxidant, anti-inflammatory, anticonvulsant, anti-depressant, anti-psychotic, anti-tumoral, and neuroprotective qualities. Cannabidiol can change gene 12 August 11, 2016 legal opinion by Jonathan Miller, Esquire, FROST BROWN TOD, Lexington, KY., and Cosigned by Joseph Sandler, Esquire, SANDLER REIFF LAMB ROSENSTEIN & BIRKENSTOCK, Washington, DC

20 expression and remove beta amyloid plaque, the hallmark of Alzheimer s, from brain cells. Approximately 30 states, including Colorado, have adopted laws governing the research and cultivation of industrial hemp. 13 These states have taken three approaches in compliance with Federal law as enacted by Congress: (1) they have established industrial hemp research or pilot programs; (2) they have authorized studies of the industrial hemp industry; or (3) they have established commercial industrial hemp programs. Colorado is one of 16 states to have legalized industrial hemp production for commercial purposes. 14 The Colorado statute, codified at Colorado Revised Statutes sections to 109, defines Industrial Hemp substantially similar with its federal counterpart; allowing a person who is properly registered with the Colorado Department of Agriculture (1) to engage in Industrial Hemp cultivation for commercial purposes, or, (2) to grow Industrial Hemp for research and development purposes. 15 Colorado law further provides that a person who is properly registered with the Department is not subject to any civil or criminal penalties for processing, selling, transporting, possess[ing] or otherwise distributing industrial hemp in accordance with Id (2). Colorado, unlike the Federal Industrial Hemp Research statute, 7 U.S.C. 5940, explicitly provides for the commercial cultivation of Industrial Hemp. 16 A literal read of both statutes fails to elaborate on the issue of transporting industrial hemp across state lines. However, we have help in attempting to resolve this apparent shortcoming of legislative intent. The Omnibus Appropriations Act of 2016, P.L , 129 Stat. 2242, was enacted into law on December 18, One of the provisions of that act prohibits use of federal funds to prohibit the transportation, processing, sale, or use of Industrial Hemp that is grown or cultivated [under the Agricultural Act of 2014]. P.L , 763, 129 Stat Federal case law supports this interpretation. In 2015, a federal district court decided United States v. Marin Alliance for Medical Marijuana, 139 F. Supp. 3d 1039 (N.D. Cal. 2015), which involved a similar appropriations restriction. The Federal Court of Appeal s holding specifically prohibited the Department of Justice from using funds made available by the act to prevent states from implementing their own State laws that authorize the use, distribution, possession, or cultivation of medical marijuana. Id. at See National Conference of State Legislatures, State Industrial Hemp Statutes, August 19, 2016, state-industrial-hemp-statutes.aspx#ut. 14 See National Conference of State Legislatures, State Industrial Hemp Statutes, August 19, 2016, state-industrial-hemp-statutes.aspx#ut. 15 Colo. Rev. Stat Colo. Rev. Stat. 35- l.

21 The court further held that by this language that Congress clearly intended to prohibit federal officers from spending funds to enforce any law that interferes with [a state s] ability to implement its own State law that authorizes the use, distribution, possession, or cultivation of medical marijuana. Id. at The Federal Court reasoned that although the Controlled Substances Act remained in full force and effect, the court could only enforce it to the extent allowed by Congress, with regard to any medical marijuana not in full compliance with State law that authorizes the use, distribution, possession, or cultivation of medical marijuana. Id. (emphasis added) Recently, the Ninth Circuit Court of Appeals issued a similar ruling. United States v. Mendoza-Padilla, 2016 U.S. App. LEXIS 15027, at *3 (9th Cir. Aug. 16, 2016). Wherefore, the Omnibus Appropriations Act of 2016, coupled with Federal Court interpretation, presently prevents, the federal enforcement of the Controlled Substances Act in relation to industrial hemp (as defined in 7 U.S.C. 5940). CONCLUSION: Colorado s Amendment 64 became controlling constitutional authority on December 10, 2012, with the Governor s Proclamation. The Colorado Constitution is the Supreme Law of the State of Colorado and Whole Hemp Company, LLC and any of its trade names are bound by the State regulated Department of Agriculture and its pilot programs, rules, regulations, licensing criteria and compliance as well as compliance pursuant to the State of Colorado s marijuana enforcement department. The Colorado Department of Agriculture s hemp registration program qualifies as a pilot program under federal law. Whole Hemp Company LLC has been granted registration into this program by way of two licenses. Nothing further is needed by way of registration, licensing or administrative action relating to Whole Hemp Company. Moreover, relating to sales or marketing of hemp, Section 7606 authorizes agricultural pilot programs which study the growth, cultivation, or marketing of industrial hemp. Accordingly, marketing of hemp raw materials or products derived therefrom is permitted under the pilot programs authorized in federal law and with further definition and clarification pursuant to Colorado state law. Marketing includes packaging, shipping, transportation, distribution, and sale, and includes all in the chain of commerce, wholesaler, retailer, advertiser, reseller, customer, and ultimate user. The law, both Federally and State, do not specifically address shipping across state lines, as the legislature may have assumed it was simply a logical assumption given the defining of Marketing and permissive use. The Omnibus Appropriations Act of 2016, P.L , 129 Stat. 2242, was enacted into law on December 18, One of the provisions of that act prohibits use of federal funds to prohibit the transportation, processing, sale, or use of Industrial Hemp that is grown or cultivated [under the Agricultural Act of 2014]. P.L , 763, 129 Stat Federal case law supports this interpretation and would

22 seem to allow the dissemination of hemp across state lines or support the notion that the Federal agencies are not permitted to use federal funds to impede such transportation. 17 Whole Hemp Company cultivates, transports, processes, and markets Industrial Hemp in the State of Colorado, pursuant to it s licenses and the state authorities as well as within compliance of the scope and safeguards of the 2014 Farm Bill. Whole Hemp Company further ensures that all of it s Industrial Hemp contains 0.3% or less of delta-9 tetrahyrdocannabinol ( THC ) and has it s plants and finished product regular and routinely inspected, tested and safeguarded. At this juncture it does not appear that the DEA s December 13, 2016 Amended Rule materially impairs Whole Hemp Company or the way it continues to engage in business. The company is engaging in business as it is licensed by and through a state pilot program established by a Congressionally approved Bill and further protected from interference by the Omnibus Appropriations Act of The Amended Rule, if taken literally and if the DEA is not misleading the public it serves, is creating a new control number for the hemp extract and CBD. Note, that hemp, itself, already has a control number and has since 1970 been classified as a Schedule I substance. This new rule does not contain any discussion regarding any new enforcement initiatives, actions, or safeguards that would be adverse to the CBD industry unless it was being allegedly used in violation of the FDA. Mention is made that the DEA along with the FDA is against any use or representation that CBD is a pharmaceutical or medically approved product. The new Amended Rule as explained by the DEA s Ms. Barbara Carreno was created for and its purpose being for internal documentation purposes in order to make their work more efficient and clinical trials with the substances more easily identifiable. This does not mean that the DEA is misleading the public with a secret agenda or with hidden malicious intent against the hemp or CBD industry, but to do so would mean that the DEA would be inviting further Federal Court rulings, possible congressional action, and possible executive fall out, all of which could significantly back fire against the DEA and other law enforcement agencies. [INTENTIONALLY LEFT BLANK] 17 There is no test case on point at this time as there is no case at this time where the DEA has actually stopped such sale and/or transportation under these circumstances.

23 The legal advice and opinions set forth herein are an expression of our professional judgment and not a guaranty of a result. The federal agencies mentioned above may contest the interpretations we have provided. Additionally, as noted above, in states without hemp regulatory regimes, local and state laws governing hemp or products containing THC may be applicable. Sincerely, Legal Cannabis Specialist Frank E. Gil, Esq. Legal Cannabis Specialist With Additional Offices and International Presence at: