Delta-8 THC: What Banks and Credit Unions Need to Know

Delta-8 Tetrahydrocannabinol (THC) is one of many active chemical compounds found in cannabis (like CBD). What makes it notable is that many believe Delta-8 THC is legal because the distinction made by the federal government between “marihuana” and “hemp” is based solely on the concentration of a separate tetrahydrocannabinol: Delta-9 THC. Because Delta-8 THC isn’t included in the federal definition of marijuana some believe that as long as a business can demonstrate that their Delta-8 products are derived from legal hemp they must, in turn, be legal. You’ll often hear this assertion repeated in the press:

“Under federal law, psychoactive Delta 9 is explicitly outlawed. But Delta-8-THC from hemp is not, a loophole that some entrepreneurs say allows them to sell it in many states where hemp possession is legal.”

This has led to a boom in the sale of Delta-8 THC products, both online and in brick-and-mortar stores, so it’s likely your bank or credit union will be approached about opening commercial accounts for one of these businesses – if you haven’t been already. When making your decision you should be aware that this entrepreneurial “loophole” isn’t as strong as many would have you believe. Where things become uncomfortably subjective is that the DEA’s list of controlled substances includes in its list of alternative names for “Tetrahydrocannabinols” (DEA #7370) “THC, Delta-8 THC, Delta-9 THC, dronabinol and others”. Tetrahydrocannabinols remain a Schedule I controlled substance, like Marihuana (DEA #7360) and Marihuana Extract (DEA #7350).

In August 2020 the DEA published in the Federal Register an “interim final rule […] to codify in the Drug Enforcement Administration (DEA) regulations the statutory amendments to the Controlled Substances Act (CSA) made by the Agriculture Improvement Act of 2018 (AIA), regarding the scope of regulatory controls over marihuana, tetrahydrocannabinols, and other marihuana-related constituents.”

At first this guidance seems to support the idea that delta-8 THC is legal:

“[The] AIA limits the control of tetrahydrocannabinols (for Controlled Substance Code Number 7370). For tetrahydrocannabinols that are naturally occurring constituents of the plant material, Cannabis sativa L., any material that contains 0.3% or less of Δ9-THC by dry weight is not controlled, unless specifically controlled elsewhere under the CSA.”

However there is a significant caveat:

“The AIA does not impact the control status of synthetically derived tetrahydrocannabinols (for Controlled Substance Code Number 7370) because the statutory definition of “hemp” is limited to materials that are derived from the plant Cannabis sativa L. For synthetically derived tetrahydrocannabinols, the concentration of Δ9-THC is not a determining factor in whether the material is a controlled substance. All synthetically derived tetrahydrocannabinols remain schedule I controlled substances.”

Why does this matter? The issue is that the DEA does not clearly define what “synthetically derived” means. It’s possible that some methods of extracting Delta-8 THC from legal hemp would qualify as “synthetic,” as Nathalie Bougenies, a lawyer that specializes in hemp and CBD, explains:

“Delta-8 THC, which is not expressed in sufficient concentrations in most hemp cultivars to make its extraction economically viable, is produced through a chemical reaction initiation by a catalyst that converts hemp-derived CBD (Hemp CBD). As such, Delta-8 THC would be a “synthetically derived THC” substance, in accordance with the Rule.”

One of the issues the article highlights is the potential public health implications of producers believing that Delta-8 THC is fully free of regulatory oversight:

“[Josh Swider from InfiniteCAL, a testing lab] explained that the process of synthesizing Delta-8 from CBD is done using hazardous chemicals. Without proper manufacturing procedures and clean-up, consumers could be inhaling more than they know. […] “We don’t even know what’s in there,” Swider cautioned as he spoke of certain products they tested. “It’s a mess of chromatography that would take a half-million dollars in testing to uncover.””

Those selling Delta-8 THC products have so far largely been able to operate relatively openly and freely because federal regulatory authorities haven’t provided the needed clarity on its legal status. Of particular note is the DEA’s failure to clarify the phrase “synthetically derived”.

In the face of this federal ambiguity, an increasing number of states have been motivated to address the issue. Today Delta-8 THC is either banned outright or incorporated into a state’s legal marijuana program.  For instance, Oregon has recently updated their cannabis laws to clarify Delta-8 THC’s status as a regulated “adult use cannabinoid”:

(1) “Adult use cannabinoid” includes, but is not limited to, tetrahydrocannabinols, tetrahydrocannabinolic acids that are artificially or naturally derived, delta-8-tetrahydrocannabinol, delta-9-tetrahydrocannabinol, the optical isomers of delta-8-tetrahydrocannabinol or delta-9-tetrahydrocannabinol and any artificially derived cannabinoid that is reasonably determined to have an intoxicating effect.”

As the Delta-8 THC loophole is starting to close one naturally wonders what’s next. Connecticut is already looking past Delta-8 and have expanded their definition of THC to include Delta-7 and Delta-10 as well:

“THC” means tetrahydrocannabinol, including, but not limited to, delta-7, delta-8-tetrahydrocannabinol, delta-9-tetrahydrocannabinol and delta-10-tetrahydrocannabinol, and any material, compound, mixture or preparation which contain their salts, isomers and salts of isomers…”

So… can a financial institution bank a Delta-8 THC business?

It is always the right of a bank or credit union to decide whether or not to open an account based on their evaluation of the attendant risks and their ability to effectively mitigate them. When doing so I encourage you to consider the following:

  • It’s unclear whether it is legal federally due to ambiguity in the DEA’s definition of “synthetically derived”
  • The DEA may clarify its position on Delta-8 THC at any time in a way that forces states to prohibit its production and sale
  • In many states it is either explicitly illegal to sell these products or they are regulated as part of a legal marijuana program
  • If the business has an online presence they may ship to states where it is illegal or tightly regulated
  • Should the status of Delta-8 THC change, either through federal or state-level action, a financial institution may find themselves unintentionally banking a marijuana business in violation of their policies