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DEA’s CBD ruling reflects no changes on growing industry, experts say.

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In December, the DEA announced a new code, under the DEA’s Schedule I drug classification, for marijuana extracts and declared that extracts, including non- psychoactive cannabidiol (CBD) oil, are illegal. The announcement sparked some outrage, but fears of a federal crackdown are overblown, according to industry experts. “They’re just kind of reiterating what already existed, pretty much,” said Kenneth Morrow, founder of cannabis consulting firm Trichome Technologies. “Nothing really changed.”

Citing the UN Single Convention and a 2011 proposal, the DEA claims it is fulfilling legal obligations both domestically and internationally to comply with international drug law treaties. “The creation of a new drug code in the DEA regulations for marihuana [sic]extracts will allow for more appropriate accounting of such materials consistent with treaty provisions,” reads the announcement.

While the announcement was made quietly on the Federal Register, media outlets and organizations invested in CBD perceived it as the DEA making a rule change on the hemp industry. A Change.org petition (http://bit.ly/Change-petition), with 37,028 signatures as of this writing, asks the President of the United States to prevent the inclusion of CBD as an illegal Schedule I drug because of its medicinal uses. Others feared that cultivators who produce CBD extracts from hemp would have to apply for DEA licenses due to the announcement. However, others view it as a routine administrative change with little impact on current cultivators.

“This is for less than 1 percent of the industry,” said Richard Rose, hemp food industry pioneer and longtime marijuana advocate. “If it would have come and gone with no mention, it would have had zero impact on the industry.”

Principal David Bonvillain at Elite Cannabis Enterprises, which specializes in high-CBD cultivars, further pointed out that the new tracking code proposed by the DEA for extracts originated back in 2010 and passed in 2011.

“It’s just took this long to actually get it executed,” Bonvillain said. “This wasn’t like a new administration thing or anything like that.”

Since the DEA has put extracts under the same umbrella of scheduling as marijuana for over 50 years, working without federal regulation is an accepted fact of life for many cultivators.

“You’re dealing with second- or third-generation producers and cultivators,” said Morrow, when speaking about younger generations carrying on cannabis businesses from their parents. “They grew up in an environment where it’s always been federally illegal. So they don’t take much credence to those three letter agencies.”

While Morrow says that cultivators have nothing to worry about regarding the DEA ruling, others think potential patients may be scared off from getting CBD medications.

“The more the average retailer or consumer thinks CBD is illegal or Schedule I, or whatever cloud is in their mind about it, will have a devastating effect on the demand and thus the market for CBD,” Rose wrote in an email to Cannabis Business Times. Rose railed against any fear mongering, promising that this ruling changes nothing.

The DEA offers registration for cultivators to legally manufacture cannabis for research, but most cultivators do not have the DEA registration that the new specifications are meant for. The registration is often granted to universities and specific research labs. Due to marijuana’s federally illegal status, most cultivators are considered to be working on the black market, which means that the DEA specification for CBD is inconsequential.

The DEA thus far has not been actively shutting down professional cultivators, nor has it indicated it will do so, despite its public stance. Morrow says that unless the DEA begins cracking down, most enterprises will continue to operate independently of federal regulations.

However, the announcement on extracts can still cause concern for labs, even DEA-licensed facilities, according to Bonvillain. “They are a little bit concerned about it because [the] research lab [that] used to test some of my hemp for CBD ... [doesn’t] want to do it anymore because they feel they have to file under that code,” Bonvillain said. “Which I understand completely.”

Richard Rose said the 2004 case of the DEA vs. HIA (Hemp Industries Association) is a precedent preventing the DEA from harming the hemp industry. The 2004 ruling declared that the DEA cannot regulate non-psychoactive hemp because it is not cultivated for THC.

One concern for small cultivators is how the pharmaceutical industry may make inroads to industrializing cannabis production. The DEA and FDA have both stated that no cannabis products have been found safe or effective for medical usage. However, the FDA did approve GW Pharmaceuticals’ continued testing of Epidiolex, a drug that uses CBD to treat childhood epilepsy.

While the extract code is all encompassing and does not provide a specific classification for each compound, it does lay a foundation of classifications that could be used to potentially regulate the cannabis industry on the federal level. If federal legalization were to occur, this ruling would ease the transition for larger companies to enter the market and have something to patent against, Bonvillain noted.

“To me that’s the impending ax on the horizon,” Bonvillain said. “Pharma can start playing this game, and I think that’s more relevant for the industry, honestly.”

The DEA’s ruling went into effect Jan. 13.

Sam Fiske (left) and Sean Froelich (right) are freelance reporters and producers in Chicago. Along with their colleague John Rosin, they team a production crew and create videos covering politics, tech, business and culture. They currently produce web shows and podcasts for Technori, a startup showcase, and are published on WGN radio. The team also creates dozens of videos for their original news network, Toughington Post.