The 2018 Farm Bill Apparently Legalized THC
This weekend, I had the pleasure of being keynote speaker at the Godfrey conference at the University of Georgia, my alma mater. It was wonderful to be back home like that. But I wanted to share something that happened on the way back because I am frankly stunned. Did you know that the 2018 Farm Bill legalized THC, the active compound in cannabis? Furthermore, did you know that it was accidental? Six years now, THC has been legal. Not decriminalized. At the federal level, the 2018 Farm Bill removed hemp-based THC from Schedule I.
I learned this because I was walking through the Atlanta airport and heard someone at a nice looking boutique airport store say the words “We have THC” or something. And I stopped and looked over my shoulder and it was this CBD boutique store. CBD stores seem so much more common these days. I see them all the time, and I cannot for the life of me figure out why they exist. Not trying to start a fight, but to me CBD is like the snake oil of herbal medicine. I can’t figure out why it’s so popular. Well, it may be because the 2018 Farm Bill legalized hemp-based THC, and it’s primarily being distributed and sold through I think smoke shops and CBD stores. I mean I’m just wondering now if this is true - but for years, I have seen smoke shops becoming more common in Waco Texas where cannabis is illegal. And I’ve seen more and more CBD stores. Why?
Well, I don’t know if this is why, but check this out. In the 2018 Farm Bill, the legislators (it was Republicans that passed it) removed hemp from Controlled Substances. Hemp had been, I guess, Schedule I, and it was no longer which created a new market for famers (I’m guessing).
But, hemp does produce THC, the active compound in marijuana. But I don’t think as much is the thing as cannabis. So legislators addressed that — no more than 0.3% THC per dry weight. What does that mean? Well, it means they legalized THC in edibles is what it means. 0.3% THC in an edible gummy is a TON of THC. So this store in Atlanta was outrightly selling THC in a state that does not have legalized cannabis. So I asked him, “are you pulling my leg? You’re saying I could buy THC from you right now and get on that airplane?” His response was so convincing that I sat down and googled for a half hour. I had no idea. So here’s what I have:
Saul Elbein article from March 30th, 2024 at The Hill entitled “In 2018, Republicans accidentally legalized cannabis. Now 22 AGs want them to undo it” tells the history of this loophole. The letter by the 22 state attorney generals is here, and guess which states are on there: California (legalized adult use cannabis), Colorado (legalized adult use cannabis), Oregon (legalized adult use cannabis), and more. What’s going on here? This is what is going on here:
From 2020 to 2023, these hemp-derived products has grown from 200 million to 2.8 billion USD. The two key forms of THC here are something called Delta-8 and Delta-9. Delta-9 is effectively identical to the THC compound found in cannabis. And of these products above, $1.2 billion in 2023 sales came from hemp-based THC. This is non-trivial and has most likely caused a major dent in these states’ markets for cannabis. So the 22 state AGs is probably, if I had to imagine, got some “baptists and bootleggers” stuff going on. Baptists and bootleggers was a phrase that the economist Bruce Yandle coined in an old article for Regulation magazine. The idea is that opposition to markets and demand for regulating them oftentimes brings diverse stakeholders to the table. The “baptists” do so on the basis of taking a moral high ground, and the “bootleggers” do so because they don’t want the competition, and you can sense probably both at work in the opposition by these states.
Now, here’s the thing. Everything I’m reading has people insisting this is not legal. Listen to this 2021 statement by the DEA:
“There's tons of this stuff being sold over the internet, and with the idea that it's legal under the hemp bill [2018 Farm Bill],” Russo says of Delta-8-THC. “That is totally wrong.”
When asked if that’s because of language from the Drug Enforcement Administration (DEA) that states that tetrahydrocannabinols are illegal when synthetically produced from cannabis, he said, “Right, that’s true. Additionally, there is this nasty little law ... called the [Federal] Analogue Act, which says, basically, if you've got a drug that's chemically closely related to something that is Schedule I, ... it's Schedule I and illegal as well.”
Now I’m only two days into learning about this, and have been texting and emailing economists and I have been astonished, to be honest, that there is so little concrete understanding about this among drug experts. But the fact that a firm would operate openly selling THC products in the Atlanta international airport (a firm with something like 300 franchises around the country) has me thinking that the DEA was wrong. What I have been able to find so far is this:
So long as the product adheres to the letter of the law in the 2018 Farm Bill, it is legal to produce and distribute it. And I mean at the federal level, it sounds as though the 2018 Farm Bill legalized THC. And it has been largely quiet.
Here’s my point: I think some enterprising graduate students in economics need to immediately start researching this and seeing how they might go about studying it. Because I have a hunch this is carving a nice little hole in the tax revenue generated in those states from cannabis. The 2018 Farm Bill pit brother against brother — hemp vs cannabis. Now, this is a federal event — not a state event. So straightforward difference-in-differences may not be the most convincing. But smart, curious economists will figure out something, and I just wanted to put this on your radar because I know some of you are looking for projects. Here is a 2017 article in Review of Economic Studies by Olivier Marie and Alf Zölitz entitled “High Achievers? Cannabis Access and Academic Performance” as well as Mark Anderson and Dan Rees review of the public health consequences of legalized marijuana. Rhet Smith, a UGA alum, has also been cranking a lot of great health related work on legalized cannabis too. These might be good places to start for thinking of questions.
But you shouldn’t limit yourself just to public health and education. You might even consider the public finance angles that I alluded to by emphasizing the Bootleggers and Baptists angle in the letter I linked to. For instance, look at this 2020 Journal of Public Economics by Ben Hansen, Keaton Miller and Caroline Weber entitled “Federalism, Partial Prohibition and Cross-Border Sales: Evidence from Recreational Marijuana” as well as Ben, Keaton, Caroline and Boyoung Seo’s other paper in The National Tax Journal entitled “Taxing the Potency of Sin Goods: Evidence from Recreational Cannabis and Liquor Markets”.
Everyone has been studying medical marijuana and then legalized recreational marijuana. But this surprising “accidental” legalization contained in the 2018 Farm Bill may very well be an untapped potential set of projects that could be very exciting work. And I just wanted to throw this out there for readers as I cannot get it out of my mind.