Cannabis Insight | Delta-9 Is Delta-9, SOUTH CAROLINA'S JOURNEY, ACB

Navigating the Haze: The Farm Bill's Unintended Consequences on Cannabis and Delta-9 THC

The landscape of cannabis legislation in the United States has undergone significant transformations, particularly following the enactment of the 2018 Farm Bill. While the bill aimed to redefine and expand the legal boundaries for hemp cultivation and consumption, it inadvertently spotlighted a contentious loophole concerning Delta-9 tetrahydrocannabinol (THC), the psychoactive component found in cannabis plants. Adding complexity to the issue is companies like Curaleaf actively selling hemp-based Delta-9 THC. We try to delve into the nuanced implications of the Farm Bill on cannabis legislation, exploring the surge in interest for Delta-9 THC from hemp, the consequences arising from this legal ambiguity, and potential pathways to a more coherent regulatory framework.

The Farm Bill's Ripple Effect

The 2018 Farm Bill was heralded as a landmark legislation for the hemp industry, distinguishing hemp from marijuana based on the THC content and legalizing hemp with a Delta-9 THC concentration of 0.3% or less by dry weight. This differentiation opened the floodgates for the hemp-derived CBD market but also cast a shadow of complexity over the legal status of Delta-9 THC. Ironically, Mitch McConnell, who is against any legalization or even SAFE banking, is why we have this issue today.

The Delta-9 THC Loophole

Chemically, Delta-9 THC from hemp is identical to that extracted from traditional cannabis strains that remain federally illegal under the Controlled Substances Act. The Farm Bill's oversight lies in not fully addressing the psychoactive potentials of hemp-derived Delta-9 THC products, which can be concentrated to produce effects akin to those of marijuana. This loophole has led to an increase in the availability of such products, even in states where cannabis remains illegal, sparking a debate on consistency and safety in cannabis legislation. This has led to an explosion in Delta-9 gummies and drinks.

Consequences and Challenges

A Surge in Alternative Cannabinoid Interest

Recent studies, including the one titled "Statistical Correlation Between Cannabis Legality and Public Interest in Delta 8 and Delta 9 THC," have highlighted a significant uptick in interest in Delta-8 and Delta-9 THC, particularly in regions with strict cannabis prohibitions. This trend underscores an unintended shift in consumer behavior, navigating towards these quasi-legal alternatives in search of legal highs.

Legal Ambiguity and Enforcement Difficulties

The current legal framework presents challenges for law enforcement and regulators, complicating the differentiation between legal hemp products and illegal cannabis substances. This ambiguity also poses risks to consumers, who may unknowingly purchase products with psychoactive properties not adequately regulated for safety and potency.

Pathways to Resolution

Addressing the Delta-9 THC loophole requires a multifaceted approach, balancing the need for regulation, consumer safety, and the burgeoning hemp industry's growth. Here are potential solutions:

Legislative Clarity

Amending the Farm Bill to specify regulations concerning the concentration and sale of hemp-derived Delta-9 THC products could mitigate confusion. Clear guidelines could help align the legal treatment of Delta-9 THC, irrespective of its source, ensuring a consistent legal standard across all cannabis products.

Comprehensive Cannabis Reform

A broader strategy involves reevaluating the federal legal status of cannabis, including Delta-9 THC. Legalizing and regulating cannabis at the federal level would eliminate the distinction between hemp-derived and marijuana-derived THC, establishing a unified regulatory framework that addresses safety, quality control, and access.

Enhanced Consumer Education and Safety Measures

Regardless of legislative changes, there's a critical need for consumer education on the effects, risks, and legal status of Delta-9 THC and other cannabinoids. Implementing rigorous testing and labeling requirements would further ensure that products on the market are safe, accurately represented, and compliant with legal standards.

Looking Ahead

The journey towards a coherent and fair cannabis policy is complex, reflecting the evolving societal, medical, and legal perspectives on cannabis and its derivatives. As public interest in Delta-9 THC and other cannabinoids continues to grow, the need for clear, comprehensive, and consistent legislation becomes increasingly apparent. Stakeholders across the spectrum — from policymakers to industry leaders and consumers — must engage in open dialogue, informed by research and best practices, to navigate the challenges presented by the Farm Bill and shape the future of cannabis legislation in a way that ensures safety, accessibility, and justice for all involved.

In this pivotal moment, the path forward demands not only legislative action but a collective commitment to understanding the nuances of cannabis and its impact on society. By addressing the current loopholes and advocating for informed policy decisions, we can pave the way for a regulatory environment that embraces the complexities of cannabis, protects consumers, and supports the industry's responsible growth.

Will South Carolina be #39? 

Overall, the South Carolina Compassionate Care Act represents a significant step toward legalizing medical cannabis in the state, with a focus on strict regulations and patient-centered care. If passed, South Carolina would join a growing number of states with medical cannabis programs, providing access to patients in need while ensuring proper oversight and control. The South Carolina Compassionate Care Act (S. 423) has gained significant traction in the state's legislative process, positioning South Carolina to become the 39th state to legalize medical cannabis potentially. Here's a breakdown of the key points:

1. Legislative Progress:
• On February 6, Majority Leader Shane Massey gave the bill legislative priority, allowing for expedited consideration on the Senate floor.
• The motion to expedite required a two-thirds supermajority, which it received with a 26-13 vote.
• This comes after a previous attempt to pass the bill failed to receive the required supermajority just five days earlier.
2. Bill Sponsorship and Support:
• The legislation is sponsored by Sen. Tom Davis, with support from 11 co-sponsors, including Sen. Gerald Malloy.
• Sen. Malloy spoke in favor of expediting the bill, highlighting Sen. Davis' longstanding efforts to advocate for medical cannabis legalization.
3. Previous Attempts:
• A previous version of the Compassionate Care Act passed the Senate in February 2022 but faced challenges in the House, where it was tabled due to concerns about its constitutionality.
• Rep. John McCravy raised objections, arguing that the bill's provisions related to taxation were unconstitutional.
4. Revised Legislation:
• Sen. Davis revised the bill to address concerns raised in the House, removing provisions related to taxation.
• The current version of the bill aims to create one of the most restrictive medical cannabis programs in the nation.
5. Key Provisions:
• The legislation includes tight regulations on qualifying conditions, forms of cannabis allowed (excluding smokeable forms), and purchasing limits for THC.
• Qualifying conditions include cancer, epilepsy, PTSD, Crohn's disease, and others.
• Physicians would be required to have in-person relationships with patients and create written treatment plans.
6. Regulatory Framework:
• The Department of Health and Environmental Control and the Board of Pharmacy would establish rules and regulations for the program.
• Medical cannabis would be dispensed through therapeutic cannabis pharmacies, with state-approved pharmacists on-site.
7. Local Control:
• Local governments would be able to regulate or prohibit medical cannabis establishments within their jurisdictions.
8. Next Steps:
• The bill is set for floor consideration in the South Carolina Senate, potentially as soon as the afternoon session on February 7.

Shifting the focus to Australia changes nothing. 

Aurora Cannabis Inc. has acquired the remaining ~90% equity interest of MedReleaf Australia for an enterprise value of A50M. The deal was fulfilled with a mix of cash and common shares of Aurora. MedReleaf Australia, a key player in the Australian medical cannabis market, boasts a significant position, holding the #2 spot. The acquisition is expected to bolster Aurora's financial performance and expedite its path to achieving positive free cash flow in 2024—Australian market growth driven by regulatory ease, local acceptance, and consolidation in market share. Acquisition of MedReleaf Australia will be margin accretive from day one, with similar margins to other markets.

Acquisition Highlights:

• Aurora Cannabis acquires the remaining ~90% equity interest of MedReleaf Australia for A50M enterprise value.
• The transaction comprises AUD9.45M in cash and issuance of ~69.5M Aurora Shares.
• MedReleaf Australia holds the #2 position in the Australian medical cannabis market.
• The Australian medical cannabis market is valued at ~A400M, presenting significant growth potential.
• MedReleaf Australia reported trailing 12-month net revenue of ~A40M and positive adjusted EBITDA.
• The acquisition is anticipated to enhance Aurora's financials immediately and support its goal of achieving positive free cash flow in 2024.

Other Notes From the Earnings Call

Germany's potential removal of cannabis narcotic designation could significantly impact the medical market and increase product access. Canadian medical business is expected to grow due to interest in cannabis as a benefit and increasing clinical trials on cannabinoids, but it will likely never be profitable. Aurora's leadership in Canadian medical cannabis allows for the successful navigation of other federally legal cannabis markets globally. Capital allocation strategy involves assessing the regulatory environment, opportunity size, and how the company will operate within each market. The Australian acquisition was financed through a mix of cash and shares to maintain financial flexibility while adding incremental revenue.