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ACKRELL
CAPITAL
Cannabis Investment Report | December 2017

from being imported into the United States. However, because the production of such non-marijuana
products ordinarily involves possession of the entire cannabis plant, including parts deemed marijuana
under the CSA, the CSA effectively prohibits such production in the United States without DEA
registration.

Tetrahydrocannabinol (THC)
In addition to and separate from marijuana’s listing on Schedule I, tetrahydrocannabinol¹ (THC) has
been listed on Schedule I since the CSA’s enactment in 1970. From 1970 until 2003, DEA regulations
defined THC for purposes of its separate Schedule I listing as including only “synthetic equivalents”
of the THC found in the cannabis plant. In 2003, the DEA purportedly amended this regulatory
definition of THC to include both synthetic equivalents of THC and THC occurring naturally in the
cannabis plant. In its 2004 holding in Hemp Industries Association v. DEA, the U.S. Court of Appeals
for the Ninth Circuit enjoined DEA enforcement of this purported amendment and held that the
THC listed separately from marijuana on Schedule I includes only synthetic THC and that any THC
occurring naturally within the cannabis plant is controlled under the CSA only if it falls within the
CSA definition of marijuana.

Penalties for CSA Violations
Federal penalties for violating CSA provisions regarding marijuana or THC include fines and imprison-
ment. CSA violations may also result in federal seizure of cash and other assets related to the violations.
CSA penalties may apply to cannabis businesses that violate the CSA and also to individuals who own
or operate such businesses based on attempt, accomplice, conspiracy and criminal enterprise provisions
included in the CSA.

New DEA Registration Policy
For nearly 50 years, only one cannabis cultivation site in the United States has operated with the
required DEA registration. The site is operated by the University of Mississippi under a contract with
the National Institute on Drug Abuse to supply the country’s entire stock of federally legal cannabis,
which is used exclusively for research. In August 2016, the DEA announced a new policy designed
to increase the number of DEA-registered cannabis cultivators and permit-registered cultivators to
grow cannabis for privately funded commercial drug development projects. The DEA announcement
acknowledged the increasing interest in conducting cannabis research related to commercial pur-
suits, and indicated that the best way to satisfy the increased demand was to increase the number of
DEA-registered cultivators. The DEA has since accepted at least 25 applications for registration but has
not issued any new registrations.

¹CSA Schedule I uses the plural form “tetrahydrocannabinols” to describe a category of substances that includes chemical deriva-
tives and isomers. This report adopts the more commonly used singular form, “tetrahydrocannabinol.”

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© 2017 Ackrell Capital, LLC | Member FINRA / SIPC

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