Widespread Regulation of Delta-8 Is Less a Question of If Than When, New Frontier Data Predicts

More such state regulations can be expected soon. The reason: concern about Delta-8’s untested and unregulated effects, which could pose potential dangers to users – even though delta-8 is less potent than delta-9. Then there’s the fact that though delta-8 is a naturally occurring cannabinoid, much of what’s sold under that product name is synthetically derived. That fact, according to some legal sources, means those products violate the Analogue Act, which holds that drugs similar in chemical makeup and effect to controlled federal substances are also controlled federal substances.

All of which has hardly dampened enthusiasm for Delta-8, according to the cannabis analytics organization New Frontier Data, which has issued blog posts and a new report on the subject.

“Delta-8 THC emerged through a legal loophole in the 2018 Farm Bill to fill a void in the market and rapidly exceeded $10 million in sales in 2020,” said a spokesman for the company. “A glut of biomass, a simple chemical process to convert CBD to into isolate delta-8 and a currently legal market have buoyed sales and driven prices down.”

Added John Kagia, chief knowledge officer for New Frontier, by email: “Delta-8 has been a boon for growers and processors who are sitting on excess CBD inventory.”

Indeed, the price of delta-8, tracked since August 2020 through January 2021, has fallen 45 percent even as demand has soared. And that has been a recipe for increased sales of delta-8 at gas stations and convenience marts where prices are far less than those at dispensaries, and where access is easier.

Accordingly, widespread regulation of Delta-8 is less a question of if than when, says a New Frontier Data blog released this month. “The strong likelihood that delta-8 THC will ultimately be classified as an analog of delta-9 THC (and thereby subject to the same restrictions), underscores the importance of closely monitoring the regulatory environment and preparing one’s business for policy changes,” wrote New Frontier Data managing editor J.J. McCoy.

“In the case of D8, producers will enjoy a brief period of limited regulation, high prices, and strong consumer demand,” McCoy cautioned. “However, once fully regulated, opportunities will likely be limited if not prohibitive, with significantly higher barriers to entry.”

McCoy was referring to a new report from his organization about the regulatory landscape for cannabis, whose key findings showed that:

• Consumer sentiment will influence regulations. Some 66 percent of cannabis consumers surveyed agreed that legal cannabis is safer than illegal cannabis. But 77 percent of consumers also cited potency as a “very” or “extremely” important driver in purchasing decisions.
• Potency caps in future legislation will likely include limits on THC to protect younger and inexperienced users. In the absence of a unified regulatory structure, states are evaluating potency caps individually.
• Inconsistent CBD regulations in Europe are a model for the U.S. to avoid. These differing regulations have created a patchwork landscape for CBD products in a region where average per capita annual spend on CBD was projected to reach €21bllion in 2020.

Regulatory efforts began last year, the New Frontier Data editor said. In August 2020, the Drug Enforcement Agency released an Interim Final Rule for hemp, which appeared to ban delta-8 and other variations of psychoactive tetrahydrocannabinol (THC) molecules. Yet, states’ differing regulations and uneven enforcement of the DEA rule have resulted in legal challenges questioning the DEA’s authority to legislate via policy in the first place. The Biden administration’s tolerance for cannabis, meanwhile, has also slowed enforcement by the agency.

The result has been the surge in delta-8 and its continuing production, as well as legal sales, possession and consumption in 34 states as of late July. Another argument, by supporters, is the text of the 2018 Farm Bill itself (which legalized hemp) defining hemp as “not containing any delta-9 THC.” That text allows delta-8, supporters argue.

Yet concerns persist about possibly adulterated delta-8 products. The Chicago Tribune, for instance, reported that tests by the U.S. Cannabis Council (USCC) and Bloomberg News had found high levels of intoxicants and some heavy metals in several of these products. On its website, the USCC states that, “The fact that [delta-8] is being sold outside of the regulated marketplace with no oversight or testing and is readily available to children is alarming, and it presents a public health risk of potentially wider impact than the vape crisis.”

Meanwhile, the New Frontier Data report points out that the DEA’s Interim Rule is open for review until October this year. At the same time, “The Delta-8 market continues to surge, as consumers embrace the less psychoactive alternative to delta-9 THC,” the report says. Still, even with the lack of federal government guidance, “many” states are moving to regulate delta-8 on their own, including banning it outright.

As Kagia, of New Frontier Data, pointed out, “While some states are outright banning Delta-8, medical and adult use markets will likely regulate the compound under the same rules that govern Delta-9, thereby restricting the wide-open access seen to date, but enabling the sector to grow within the regulated cannabis economy.”