Oregon’s New Artificially Derived Cannabinoid Rules Began July 1

Artificially derived cannabinoid (ADC) products are leaving Oregon grocery stores and convenience stores beginning July 1, 2022. Following the effective date, only licensed marijuana dispensaries can sell ADC products, and only if the product complies with the requirements of OAR 845-025-1310. Oregon’s impending ban comes just months after the United States Court of Appeals for the Ninth Circuit (whose jurisdiction includes Oregon) ruled that Delta-8 THC (an ADC) is legal under federal law.

Special regulations apply for products containing CBN. While CBN products will leave Oregon grocery and convenience store shelves on July 1 of this year, the regulations under OAR 845-025-1310 will not apply to CBN products at OLCC retailers until July 1, 2023 (i.e., allowing sales in marijuana dispensaries for at least one more year). CBN is currently the most popular ADC and many consumers take the product as a sleeping aid. Consumers are expressing dismay over the impending ban, and industry leaders are considering whether it is time for their business to leave the Oregon market all together. This blog post will explain how we got here, how the industry is responding, and how other states might follow Oregon’s lead.

Timeline Leading to the Ban

One of the main reasons the Oregon legislature passed House Bill 3000 in 2021 was to regulate Delta-8 THC and other ADCs that were previously outside OLCC’s regulatory jurisdiction, and therefore available for sale outside licensed dispensaries and to persons under the age of 21. ADCs are most often created by putting hemp-derived CBD through a chemical process to develop new cannabinoid compounds, some of which are intoxicating and some of which are not. Early drafts of HB 3000 focused specifically on “intoxicating” cannabinoids, but the final version of the bill reframed the regulations to include both intoxicating cannabinoids (“adult use cannabinoids”) and nonintoxicating ADCs.

OLCC held its first rules advisory committee (RAC) hearing on September 30, 2021 to discuss the new regulations for ADC products. A notable aspect of the regulations was they did not call out ADCs by name, but rather, defined what qualifies as an ADC according to the process used to create the product. The central inquiry in the first proposed rules, which largely carried over into the finalized regulations, was whether producers used a chemical reaction to change the molecular structure of any chemical substance derived from the cannabis plant. RAC members representing Oregon’s cannabis industry voiced dissent that OLCC was proposing a blanket ban on all ADCs (including CBN) and failed to follow what industry believed was the intent of HB 3000 in regulating intoxicating derivatives like Delta-8 THC. Indeed, the OLCC RAC package was titled “Delta-8-THC and Other Artificially-Derived Cannabinoids”.

OLCC finalized and implemented its new ADC rules in January of 2022. Instead of implementing the blanket ban as originally proposed, OLCC promulgated OAR 845-025-1310 to create a process that allows some ADC products to stay on dispensary selves. While the rule gives some room for licensees to produce and sell ADC products, the approval process is very onerous and capital-intensive, leaving many companies to conclude that the cost of approval is not worth the headache for many ADC products.

Impact on Industry & CBN

CBN products will likely stay on dispensary shelves past July 1, 2023, as the product’s popularity will lead some producers to go through the approval process laid out in OAR 845-025-1310. An important step in the approval process is found in subsection (1)(c) of the rule, which requires that the manufacturer of the ADC either:

• Make a “Generally Recognized as Safe” (GRAS) determination for the ADC and supply a copy of that determination to OLCC;
• Provide OLCC a Food and Drug Administration (FDA) letter responding to a “Generally Recognized as Safe” (GRAS) notice for the ADC manufactured by the same method that the manufacturer uses, affirming that FDA has no questions about the notice; or
• Provide OLCC an FDA letter of acknowledgement with no objections in response to a New Dietary Ingredient notification for the ADC manufactured by the same method that the manufacturer uses.

Producers hoping to make a GRAS determination will need to go through toxicology and safety trials to secure approval for their CBN ingredients and any other ADC product. Approval under OAR 845-025-1310 further requires that the ADC be reported as a naturally occurring component of the cannabis plant in at least three peer-reviewed publication, and OLCC must determine in their own judgment that the ADC is not impairing or intoxicating.

Complying with the onerous requires of OAR 845-025-1310 will create an economic hardship for the entire industry. Wyld is the nation’s leading edible company and their Elderberry THC:CBN gummy is the company’s most popular edible (and currently the #1 selling edible in the world). According to Wyld’s general counsel Gabe Parton Lee, about 20-25% of the company’s revenue from marijuana sales comes from THC:CBN gummies and 30% of their hemp gummy revenue comes from CBD:CBN gummies. The new regulations will burden Wyld and other companies with new expenses they must pay to keep CBN on dispensary shelves.

Conclusion

While at least seventeen other states recently passed bans of some form on “synthetic cannabinoids” or ADC products, most of these regulations focus on products like Delta-8 THC that are intoxicating, getting into the hands of minors, and undercutting the legal marijuana marketplace. Oregon is a trend setter in legalization and cannabis regulation, so we may see other state legislatures consider similar regulations or outright bans.

ADC products already possess an important place in the Oregon marketplace, and the new regulations only affect sales within and import into the state. By banning these products, OLCC is essentially creating a new prohibition on ADC products. History teaches us that prohibition does not work, and the developing issues show that industry and OLCC. must work better to protect consumers while ensuring Oregon’s cannabis industry succeeds and is posed to stake its rightful place in an eventual national and international marketplace.