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The Cannabis Civil War - Forbes

Published April 19, 2024

"With federal legalization of pot indefinitely stalled, hemp products have bloomed into a $28 billion gray industry determined to get America high—legally."

In a building formerly owned by the pharmaceutical company Roche, in an industrial neighborhood of Indianapolis, Indiana, a state where marijuana is still illegal, a former high school quarterback with a college degree in biochemistry is surveying his warehouse filled with millions of dollars’ worth of gummies and vaporizers. The products are packed with delta-9-tetrahydrocanninol (THC), the psychoactive compound in weed known for getting people stoned.

And while local police have raided vape shops selling these cannabis products, Justin Journay, the CEO and founder of 3Chi, insists that he is operating within the letter of federal law—despite the fact that the state’s Attorney General, Todd Rokita, believes companies like his are committing a felony.

That’s because 3Chi’s products are made from marijuana’s cannabis cousin, hemp. In 2018, the federal government legalized hemp and all its derivatives, isomers and extracts through the Agricultural Improvement Act, or what’s known as the Farm Bill. And since hemp and marijuana are different varietals of the same plant—cannabis sativa L.—they contain the same compounds and hemp can be used to make products of similar potencies, or even stronger, than those found in state-regulated marijuana dispensaries around the country.
So long as each 3Chi product is made from hemp—defined as cannabis that contains 0.3% of delta-9 THC or less—they are technically legal at the federal level. Armed with the Farm Bill, 3Chi and its competitors sell these products online, across state lines, at gas stations, convenience stores and other places where marijuana is still outlawed.

“The distinction between marijuana and hemp is ridiculous,” says 3Chi founder Justin Journay. “But we don’t mess with marijuana. We stay on our side.”

Many entrepreneurs like the 41-year-old Journay have had similar ah-ha moments, realizing that while federal legalization for weed has stalled, they can sell legal cannabis products that still get customers high, and all of this has resulted in hemp becoming a bigger industry than state-regulated marijuana. In 2022, hemp product sales reached $28 billion while legal marijuana products generated $26 billion in sales during that same period, according to cannabis data firm Whitney Economics.
“The distinction between marijuana and hemp is ridiculous,” says Journay, a mild mannered, blue-eyed Ohioan. “But we don’t mess with marijuana. We stay on our side. The federal government has set out rules around hemp and as long as you abide by those rules, you're a federally legal company.”

Meanwhile, the animosity between the hemp and marijuana industries—which could actually be considered one $54 billion industry fighting the government for full-blown legalization—is growing steadily. Cannabis companies and lobbyists are urging lawmakers to outlaw hemp products on the state and federal level, especially since hemp companies are subject to far less onerous regulations.
“It is, to an extent, a civil war,” says Journay. “They're using prohibitionist tactics to do to us that they had done to them by the government.”

Despite what the Farm Bill states, there is still plenty of debate about whether hemp-derived THC products are legal at the federal level. That’s because several things are true all at once: hemp-derived cannabinoids, including delta-9 THC, delta-8 THC (a less potent compound that is affectionately called “weed lite” or “decaf kush”) and others, are legal under the Farm Bill if those compounds are found naturally in the plant, meaning if a company takes a heap of hemp and extracts THC, that oil is legal if it contains 0.3% THC or less. In an opinion from the 9th Circuit Court of Appeals in 2022, judges ruled that cannabinoids derived from hemp are legal under the Farm Bill, even if the substances have psychoactive properties.

However, most intoxicating hemp products on the market, including 3Chi’s, are made by converting hemp-derived CBD isolate into delta-9 THC or delta-8 THC using a chemical process. The DEA’s section chief of Drug and Chemical Evaluation has said that synthetically derived THC—made through “a chemical reaction starting from CBD”— is a controlled substance and therefore illegal. The DEA, however, has yet to enforce that rule and its definition of “synthetic” has been inconsistent—the agency has also said that a cannabinoid is illegal if “synthesized from non cannabis materials” but hemp derived CBD is from cannabis. Almost 20 states have banned delta-8 and other hemp derived cannabinoids, including states like California, which views hemp products as a threat to its $5 billion marijuana market. The FDA has been granted authority over hemp and hemp derived cannabinoids, so what the DEA thinks could be irrelevant. But to make matters even more byzantine, the FDA says it needs an act of Congress to fully regulate hemp products.

The result is that the $28 billion hemp market is a giant gray economy, standing up precariously thanks to the Farm Bill. Chris Lindsey, a lawyer and director of state advocacy and public policy at the American Trade Association for Cannabis and Hemp, says that intoxicating hemp products are both legal and illegal at the same time. “In a world without federal enforcement, people are willing to gamble and take it as far as they can,” he says. “The reality is that there are no rules.”

Journay’s 3Chi, one of the country’s largest manufacturers of hemp-derived THC products, sits in the center of this Wild West economy. Thanks to the mantle of federal legality, 3Chi and other brands sell products in states where marijuana isn’t legal. And while 38 states have some form of legal cannabis sales, 3Chi’s largest markets are Indiana, Texas, Tennessee and North Carolina, all states that typically vote Republican and have held onto pot prohibition, resulting in hemp-derived THC products taking on the moniker “Red State Weed.”

Journay says 3Chi, which sponsors NASCAR driver Kyle Busch, is thriving among all the uncertainty. “We’ve been growing like a rocket ship,” he says from behind his desk, speckled with little vials of cannabinoid oils and terpenes, which give cannabis its flavor and aroma.


Founded in 2018, 3Chi generates more than $100 million in annual sales, according to Forbes estimates, by manufacturing and selling gummies, cookies, brownies, vaporizers, lotions, tinctures and even hemp flower. These products are packed with mind-bending levels of hemp-derived cannabinoids—everything from the well-known delta-9-THC and CBD to others like delta-8-THC, CBN, CBG, THCv, HHC and 44 other compounds—with intoxicating names like Awesome Sauce, God Mode, Space Cowboy, Comfortably Numb and Nirvana. And each package states that it is compliant with the Farm Bill’s limit of THC content, 0.3% THC on a dry weight basis.

Not everyone in the cannabis industry appreciates the ingenuity of entrepreneurs like Journay. And marijuana lobbyists, many politicians, law enforcement and state-licensed weed companies describe the federal legality of hemp-derived cannabinoids as an unintended “loophole.” In late March, 21 state attorneys general, including Indiana’s Todd Rokita—whom 3Chi is suing over his opinion that THC chemically derived from hemp is illegal—sent a letter to members of Congress asking them to remove the protections of hemp-derived cannabinoids from the Farm Bill the next time it is reauthorized. (That vote could happen this year if it is not stalled in Congress.) Rokita and the other attorneys argue that the Farm Bill is a “reckless policy” that unleashed a “flood of products that are nothing less than a more potent form of cannabis.”

Even large cannabis companies that operate legal dispensaries across the country want to see hemp products removed from the market. In early April, Edward Conklin, the executive director of the U.S. Cannabis Council, a trade organization whose members include publicly traded marijuana companies such as Ayr, Green Thumb Industries, Curaleaf, Cresco Labs, and Verano, sent a letter to Congress calling on lawmakers to treat intoxicating hemp products as controlled substances, the same as marijuana. Conklin describes the legalization of hemp-derived cannabinoids as a “national crisis.”

But, ironically, some of those same marijuana companies are also dabbling in the burgeoning hemp market. Massachusetts-based Curaleaf, founded by former billionaire Boris Jordan, is selling hemp-derived THC edibles online, shipping products to customers in 24 states, including Texas and Indiana.

Of course, not every brand has embraced the new revenue stream. John Mueller, co-founder and CEO of Greenlight, a vertically integrated cannabis company with 31 dispensaries and four cultivation facilities across Missouri, Arkansas, West Virginia, Illinois, Nevada, and South Dakota, half-jokingly says marijuana companies are the Union Army while hemp companies are the Confederates. He has been buying hemp THC products in stores across Missouri and getting them tested, finding that all the products were over the legal limit of 0.3% THC.
“We are combatting it,” says Mueller. “We have no problem with anything that complies with the Farm Bill, but we haven’t found any, and my contention would be the vast majority of these are black market products.”

Yet thanks to hemp’s federally legal status, hemp companies do not pay under the punitive federal tax code—U.S.C. 280e—that cripples the legal marijuana industry. This, and other factors, have convinced many marijuana companies to put down their weapons and join the other side.

In Alameda, California, Kristi and Scott Palmer, the founders of Kiva, one of the country’s biggest cannabis edibles manufacturers that generates more than $200 million in annual sales, say they have decided to expand into hemp.

“The cost of compliance and taxes, it feels like the chips are stacked against you in cannabis,” says Kristi, explaining that the company will continue to operate in the licensed marijuana market as well. “Whereas hemp, it feels like there's a there's a light, there's hope, it feels easier.”

Kiva sells marijuana gummies and chocolates through licensed dispensaries in 11 states. Due to marijuana being a federally illegal drug, Kiva must manufacture its products in each state it sells in. But after launching its hemp line, which it sells online directly to consumers, Kiva added 26 other states to its footprint and manufactures its hemp-derived THC products in Florida. (Kiva’s hemp gummies are made with THC extracted from the plant itself to avoid the DEA’s position on synthetically made cannabinoids.)

“It's an access play,” says Kristi. “We’re trying to attain nirvana, which for us [means] restaurants, the mini bar in your hotel room, everywhere you see alcohol—it would be nice to have THC there, too."

In San Francisco, Rose, a boutique edibles company, went a step further and quit the marijuana business and now credits its pivot to hemp for saving the brand. Scott Barry, who cofounded Rose with Nathan Cozzolino, says selling marijuana-derived edibles was a terrible business due to federal prohibition. Rose, which sells Turkish Delight-style treats with fancy ingredients from organic chokeberries to hibiscus flower, was making about $1 in profit on each box of edibles it sold through California’s legal dispensaries. After pivoting to hemp-derived THC last summer and selling its edibles online, Rose started making $30 on each box. “We were ready to shut down,” says Barry. “But hemp revolutionized the company.”
Back in Indiana, at 3Chi’s research and development facility, which stands near a Splenda factory, a cloudy solution spins inside a glass reactor—a minor cannabinoid Journay’s team is trying to synthesize for a new product. One of Journay’s chemists, who worked for the Indiana Department of Health, looks over a chromatography machine used to test the company’s products to ensure they are complying with the Farm Bill. When asked if he is concerned that his state’s top lawman doesn’t approve of his activities, he sighs.

“I don’t feel like an outlaw,” he says. “We’re the explorers, we’re the Magellan of cannabinoids—we’re going into uncharted territory, on the cutting edge of science.”

Writted by Will Yakowicz
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