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(This story is part of the cover package in the March-April issue of MJBizMagazine.)
Members of Congress already might have legalized marijuana.
They just don’t know it – and neither do consumers.
We’re not talking delta-8 THC, hexahydrocannabinol (HHC) or the plethora of other cannabinoids that begin as CBD oil extracted from federally legal hemp plants and then are manipulated by chemists into psychoactive cannabinoids sold in states with and without regulated marijuana markets.
Those cannabinoids are federally legal, thanks to a loophole in the 2018 U.S. Farm Bill that essentially legalized any hemp-derived cannabinoid – although many states have since outlawed hemp-derived THC.
No, we’re talking about intoxicating cannabis that is licensed, meets state compliance requirements and is turned into consumer packaged goods sold in accordance with state laws.
Only it’s not being sold as marijuana, it’s labeled as THCA – a naturally occurring, nonintoxicating cannabinoid that becomes psychoactive THC when heated and a precursor to THC.
When marketed as THCA flower, these buds purportedly meet the Farm Bill’s 0.3% cap on total delta-9 THC and therefore meet the definition of federally compliant hemp.
THCA hemp sales
According to the Brightfield Group, a cannabis market data company in Chicago, THCA sales accounted for 7.3% – or roughly $200 million – of the nearly $2.8 billion in sales of hemp-derived cannabinoid products in 2023.
That puts THCA in third place behind delta-8 sales (44.2% market share) and hemp-derived delta-9 sales (20.3% market share).
Unlike delta-8 THC and other intoxicating hemp-derived cannabinoids created by chemistry and sold through a legal loophole, THCA sellers rely on a combination of well-timed testing and selective – possibly even misleading – labeling and marketing.
“There is a very cat’s-out-of-the-bag mentality around it. Some people view this as the actual legalization of cannabis in America,” said Madeline Scanlon, cannabis insights manager at Brightfield Group, which recently started tracking hemp-derived cannabinoid trends.
“Other people view this as a loophole to be squashed and are advocating for it. But no matter, it’s out there. People can buy it just like they would normal cannabis.”
One such business, The Dispensary, has 13 stores across North Carolina, Pennsylvania and its home state of Wisconsin that sell so-called THCA flower as well as products containing hemp-derived cannabinoids such as delta-8 THC.
“We definitely see the risk, and we worry about it,” The Dispensary CEO William Nething, a U.S. Army veteran, told MJBizMagazine.
“But there are plenty of genetics in the THCA realm now that can keep you federally legal.”
The Dispensary also has four stores in Virginia that don’t officially sell hemp-derived cannabinoids and THCA products since the state banned them last July.
The retail outlets now sell only cannabis-consumption accessories and merchandise such as bongs, dab rigs, rolling papers and T-shirts directly to consumers.
However, the Virginia stores still receive THCA flower and hemp-derived cannabinoid products from Wisconsin.
Virginia consumers looking to purchase these items must visit The Dispensary’s Wisconsin-based online store to see what THCA or hemp-derived cannabinoid products the Virginia store has in stock.
The consumer in Virginia can then buy the product from the online store in Wisconsin and pick up their order a few minutes later at the Virginia store.
“We can’t sell in every state due to restrictions. But because our products are federally compliant, we are allowed to ship products,” Nething said.
THCA legal confusion
Whether THCA flower is federally compliant depends on factors including plant degradation, when and how that flower was tested and who is interpreting the rules. (See “THCA Testing Controversy?”)
When testing occurs is important because the U.S. Department of Agriculture requires that cannabis be tested for “total THC” – meaning THC and THCA combined – within the 30 days before harvest.
The USDA does not, however, require testing after flower has been packaged or at the retail level, said Heidi Urness, the Seattle-based co-chair of the cannabis practice group at the McGlinchey Stafford law firm.
As long as pre-combustion delta-9 THC levels are beneath the federal limit of 0.3%, the product qualifies as federally legal hemp, she said.
Under those USDA rules, retailers in states without marijuana markets – such as North Carolina, Tennessee, Texas and Wisconsin – can sell flower as federally compliant hemp, even though high amounts of THCA will become THC upon combustion.
“When you get to the retail side, is it legal to sell? This is an academic debate. Folks like myself, we say yes. Under federal law, it’s OK to sell at that point because we are limited only to the delta-9 THC definition. THCA is not delta-9,” Urness explained.
Those same USDA rules, however, largely prohibit growing cannabis if its total THC level can’t stay beneath the 0.3% hemp threshold. Total THC is defined as:
% delta-9 THC + (% THCA x 0.877)
So, if a plant has 0.1% THC and 10% THCA, its total THC would be 8.8%, or 8.7% THCA plus 0.1% THC.
THCA testing manipulation?
Many cultivators say they are able to get away with growing high-THCA flower by finding strains that don’t express the THCA cannabinoid until late in the USDA’s 30-day testing window and then testing those strains early in the 30-day window.
“You can manipulate a plant to not express THCA while it’s in that production phase but then to express it once it’s in the hands of the retailers,” Urness said.
“At the retail stage, you’re OK with THCA.”
Plant scientist Av Singh concurred, noting studies have found that THC concentration increases later in the flowering period.
Therefore, businesses looking to sell federally compliant THCA flower want to test their crop as early as possible before harvest.
Because finding and growing hemp to be advertised as federally compliant THCA flower is so difficult, Power Biopharms, a hemp-derived cannabinoid company in Euless, Texas, doesn’t do it.
“We as a cultivator have elected not to grow our own THCA flower because I have not found a strain that’s on the approved list that would test appropriately and finish within the appropriate amount of time,” said Power Biopharms CEO Colt Power, referring to a list of strains approved by the Texas Department of Agriculture.
“Is it possible? I think so. But I am not privy to either the right strains or how to get them added to the list – or, potentially, how to modify our practices to be compliant.”
Power added: “For hemp flower to be compliant at the cultivation level in Texas, the total THC content – including the delta-9 THC content plus the estimated additional delta-9 THC if decarboxylated – must be below 0.3%. Once you get to the retail level, you’re held to a different potency standard. You have to just be below 0.3% delta-9 THC, and the THCA is not factored in.”
While Power currently isn’t comfortable growing cannabis to be sold as federally compliant THCA flower, he is comfortable buying it from out-of-state growers, selling it to Texans as well as online and shipping it to consumers nationwide.
“As a farmer and supplier, we wholesale high-CBD, type-II hemp flower to other states,” Power said.
“For cultivation of high-THCA, type-I hemp flower, there are other states that have more favorable laws and regulations, and that’s where we source the THCA from that we put into the market.
“It’s not a problem at all, as long as you have the appropriate third-party lab tests for the products that check all the boxes at the retail level.”
Cultivators deliver the THCA flower to Power Biopharms’ warehouse in Texas, and then the company packages the branded products and ships them out.
“People from all over the country are buying our products,” said Kim Flores, Power Biopharms’ business development manager who is known as The Hemp Housewife on social media and whose brand is in the Power Biopharms portfolio.
Cannabinoid crackdown
While many hemp-derived cannabis businesses believe federal law is on their side, lawmakers in some states have become alarmed about what they perceive to be unregulated – and potentially dangerous – cannabis products being too easily accessible to underage users.
As a result, some states have cracked down on or outright banned hemp-derived cannabinoid products, including California, Connecticut, Georgia and Virginia.
“You are seeing states start to crack down on this,” Urness said.
“I expect to see a lot of prohibitive legislation proposed over the next year in states that aren’t already using THC limits, if the federal government does not address this in some way.
“It’s so important for companies to act responsibly and transparently and be up front with law enforcement,” she added. “You need to test and find responsible labs.
“When you don’t register your business or don’t test or use sketchy labs is when the legislators start cracking down.”
Connecticut’s attorney general sued seven hemp-derived cannabinoid businesses in January.
Meanwhile, Urness noted that Georgia has had a thriving THCA market, but two legislators drafted bills “that are going to gut that industry” by implementing a total THC limit.
“It can go very quickly from a legal free-for-all to being totally prohibited under a 0.3% limit. You’re going to gut the industry just by that one stroke of the pen,” she said.
California, Urness noted, sent hundreds of cease-and-desist orders to hemp-derived cannabinoid businesses, and further action is being taken against those that haven’t complied.
But while enforcement might intensify in some places, many businesses are willing to take the risk.
Despite all the cease-and-desist letters that have been sent in California, for example, prohibited hemp-derived cannabinoid products are still easy to find in stores.
“That is a risk that some folks are taking,” Urness said.
Law enforcement and THCA
For The Dispensary’s Nething, the risk so far has panned out.
“We worked very closely with law enforcement,” Nething said.
He explained that he gives presentations to law enforcement agencies about the products, how they work and how the 2018 Farm Bill essentially legalized hemp-derived cannabinoids.
“We ran them through the process, how it’s made, and they brought in all their drug-recognition teams,” Nething said.
“So, we put it in front of them before we even have it on the shelf. We were talking to their drug officers before we had the sign on the building.
“We try and be in front of it rather than be scared.”
Colt Power of Power Biopharms in Texas agrees that working with law enforcement is important to the survival of hemp-derived cannabinoid companies.
“We try to make ourselves as known as possible. We put a licensed indoor cannabis farm in the middle of Fort Worth,” Power said.
“We’re right next to a strip club, where there’s police all the time, so we made it a point to establish great relationships with local authorities from the jump.”
He added: “The THCA boom has been fantastic for the hemp-derived industry. It helped really show that, within Texas and across the nation, there’s such a demand for these products.”
Power does worry how much longer the THCA flower market can continue to operate as it does.
“States are establishing their own licensed programs for medical and rec, and it’s hard to determine how this is all going to land,” he said.
The solution, according to Chris Hudalla, founder and chief science officer at ProVerde Laboratories, is to legalize marijuana at the federal level.
“The poor regulation has just created this nightmare of ambiguity,” he said.
“Regulators and law enforcement don’t know what to do anymore. They’re just confused by it all.”
Omar Sacirbey can be reached at omar.sacirbey@mjbizdaily.com.
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