Given the traditional new administration overhauls and the new-administration-specific overhauls quaking Washington, D.C., and the country today, perhaps it’s unfair to say that cannabis legalization has reached and exceeded its maximum saturation point in American government and in the public psyche. But little evidence exists that cannabis legalization or reform is heading swiftly to resolution, either. Lawmakers may have too much on their plates to make federal legalization of cannabis a priority in the 119th Congress. Efforts to “reschedule” cannabis as a Schedule III controlled substance – backed by the Department of Health and Human Resources’s 2023 recommendation to do so – are floundering. And no state seems poised at this point in the 2025 state legislative season to push the count of states legalizing adult recreational use of cannabis to 25 – the 50 percent mark – this year.
But when and if cannabis legalization or reform rises to the top of federal priorities has little to do with why and how many cannabis-related cases reach the federal court system. Despite the illegality of cannabis at the federal level (and perhaps because of it), federal courts regularly find themselves overseeing disputes over state-legal cannabis businesses. And disputes reaching the federal courts related to hemp and hemp-derived products – despite the removal of hemp from the Controlled Substances Act (CSA) under the 2018 Farm Bill – only add complexity to the federal courts role in adjudicating claims arising from the gray area between illegal cannabis (or marihuana, according to the CSA) at the federal level, legal cannabis at the state level, and legal hemp, well, everywhere.
Perhaps that’s why the Fourth Circuit Court of Appeals’ recent opinion handing a decisive loss to a North Carolina plaintiff alleging (among other things) a violation of the state’s law forbidding employers from firing employees for their lawful use of lawful products (here, hemp-derived cannabinoids) outside of work is so intriguing. In Anderson v. Diamondback Investment Group, 117 F.4th 165 (4th Cir. 2024), the Court thoroughly affirmed the District Court’s grant of summary judgment to the defendant employer on all of the plaintiff’s claims. But, in “an issue of first impression for” the Court, id. at 182, it also took the opportunity in dicta to use the powers granted to it by the United States Supreme Court’s June 2024 decision in Loper Bright Enters. v. Raimondo, 144 S.Ct. 2244 (2024), to reject the DEA’s interpretation of the 2018 Farm Bill’s legalization of hemp-derived products, id. at 187-88.
Has the Supreme Court’s overturning of Chevron deference in Loper Bright resulted in the DEA losing authority to enforce against “synthetic cannabinoids” – substances that it interprets to be outside the scope of Congress’ definition of “hemp”? According to the Fourth Circuit, whether the DEA finds Congress’ definition of “hemp” ambiguous and requiring Agency interpretation is, in the wake of Loper Bright, irrelevant.
The 2018 Farm Bill exempted hemp, which it defined as “the plant Cannabis sativa L. and any part of that plant, including the seeds thereof and all derivatives, extracts, [and] cannabinoids . . . with a delta-9 [THC] concentration of not more than 0.3 percent on a dry weight basis,” from Schedule I of the Controlled Substances Act. 7 U.S.C.A.§ 1639o. That legislation spawned a now nearly $2 billion industry in the US, with hemp and hemp-derived products flooding the food, beverage, cosmetics, and wellness industries, among others.
Plaintiff Anderson jumped into that market, apparently, and failed two drug tests during the first 90 days of her employment with the defendant – both showing THC in her urine – and was terminated as a result. Anderson, 117 F.4th at 171-72. Anderson, in turn, sued her former employer alleging that she had used legal hemp-derived products: CBD oil, delta-8 THC, delta-9 THC, THC-O, and HHC. Id. at 185.
The Court found Anderson had offered no evidence that the substances she had used that had resulted in the positive-THC drug test were, in fact, legal products whose delta-9 THC concentration fell below 0.3 percent THC on a dry weight basis. Id. at 188. But it rejected the defendant’s related contention that at least one of the hemp-derived products that Anderson admitted using, THC-O, was illegal at both the state and federal level. Id. at 186. And, although its rejection of defendant’s contention regarding the legality of THC-O had no bearing on the outcome of the case itself (“Our ruling is of no help to Anderson . . . .” Id. at 88.), the Court thoroughly discussed the biology of the cannabis sativa L. plant, its extensive regulation at the state and federal levels, and case law interpreting the 2018 Farm Bill’s definition of “hemp.” Id. at 182-89.
The defendant employer’s contention regarding the illegality of THC-O was based on a 2020 DEA interim final rule explaining that the 2018 Farm Bill did not alter the Schedule I status of “[a]ll synthetically derived tetrahydrocannabinols,” as well as a February 2023 DEA opinion letter that clarified that THC-O, specifically, “does not naturally occur in the cannabis plant and can only be obtained synthetically.” Id. at 186.
The Court leaned instead on the Ninth Circuit Court of Appeals’ 2022 decision in AK Futures LLC v Boyd St. Distro, LLC, 35 F.4th 682 (9th Cir 2022), a trademark infringement case in which the defendant used the illegality doctrine to assert that AK Futures’s trademark was invalid because its trademarked hemp-derived products were illegal synthetic cannabinoids. Id. at 189. In that case, the court determined it was not required to consider the DEA’s position on the legality of synthetically derived cannabinoids because the 2018 Farm Bill’s definition of “hemp” was “unambiguous” in its application to all products derived from the cannabis plant, as long as their delta-9 THC content was at or below the 0.3 percent delta-9 threshold. Id. at 187 (citing AK Futures, 35 F.4th at 690).
In Anderson, the Fourth Circuit followed suit, now with the U.S. Supreme Court’s Loper-Bright opinion shoring up its non-dispositive opinion (at least in this case) on the legality or illegality of the THC-O Plaintiff Anderson had consumed:
Between the DEA’s February 2023 letter and AK Futures, we think the Ninth Circuit’s interpretation of the 2018 Farm Act is the better of the two. And we’re free to make that determination ourselves, despite a contrary interpretation from the DEA, because we agree with the Ninth Circuit that §1639o is unambiguous . . . and because, even if it were ambiguous, we needn’t defer to the agency’s interpretation, see Loper Bright v. Raimondo, 603 U.S. 369, 394, 144 S. Ct. 2244, 2262, 219 L.Ed.2d 832 (2024) (“The APA, in short, incorporates the traditional understanding of the judicial function, under which courts must exercise independent judgment in determine the meaning of statutory provisions.”). Id. at 188.
So, where does this leave us? The true impact of Loper-Bright is being still being debated and, frankly, remains a wide-open question less than one year after the Supreme Court rendered its opinion on Chevron deference. Of course, as the Fourth Circuit noted, even if synthetic cannabinoids derived from hemp are not Schedule I controlled substances as DEA insists, Plaintiff Anderson did not get her job back. And while AK Futures triumphed over Boyd St Distro’s illegality defense in the Ninth Circuit in 2002, just earlier this year in a similar trademark infringement case against different defendants, the illegality defense prevailed. AK Futures LLC v TBH Supply, LLC., 2025 WL 1112659 (C.D. Cal. 2025). The defendants’ expert actually tested 19 of AK Futures’s delta-8 products and found all of them had greater than 1 percent delta-9 THC concentration – more than three times the threshold established for hemp in the 2018 Farm Bill. Id. at 2.
Is the DEA’s interpretation of Congress’s definition of hemp irrelevant post-Loper Bright? The smoke has still not cleared on that issue, either. But the proof of a product’s legality or illegality for Plaintiff Anderson and for AK Futures and for any other litigant surely lies in the actual THC content of the product itself. Show me the THC.
