The legal status of THC-O has been debated by courts, federal agencies, and hemp industry advocates.

In 2024, the U.S. Court of Appeals for the Fourth Circuit rejected part of the Drug Enforcement Administration’s interpretation of THC-O under the 2018 Farm Bill. However, the decision did not create a permanent nationwide ruling that every THC-O product is legal.

Federal legislation passed in 2025 also changed the legal framework. When the revised definition of hemp takes effect on November 12, 2026, products containing cannabinoids synthesized outside the cannabis plant are expected to fall outside that definition.

Therefore, businesses should not rely on the 2024 court decision as blanket authorization to manufacture or sell THC-O.

What Is THC-O?

THC-O-acetate, commonly called THC-O, is an intoxicating cannabinoid produced by chemically modifying another form of THC.

Unlike cannabinoids that occur naturally in the cannabis plant, THC-O is created through additional chemical processing. That distinction has played a central role in the disagreement between the hemp industry and the DEA.

The DEA has maintained that THC-O is a synthetic tetrahydrocannabinol and therefore a controlled substance. Hemp advocates have argued that products derived from federally compliant hemp fell within the broader hemp definition established by the 2018 Farm Bill.

How the 2018 Farm Bill Created the Dispute

The 2018 Farm Bill removed qualifying hemp from the federal Controlled Substances Act.

Under that law, hemp included cannabis and its derivatives containing no more than 0.3% delta-9 THC by dry weight. The definition referred broadly to derivatives, extracts, cannabinoids, isomers, acids, salts, and other plant components.

That wording created disagreement over intoxicating and chemically converted cannabinoids.

The DEA interpreted federal law to mean that synthetically derived tetrahydrocannabinols remained controlled substances. Hemp businesses argued that the Farm Bill’s plain language protected hemp-derived cannabinoids as long as the final product remained within the delta-9 THC threshold.

What the Fourth Circuit Actually Decided

The Fourth Circuit considered THC-O in Anderson v. Diamondback Investment Group, an employment dispute decided in September 2024.

The employee argued that she had been terminated for using lawful hemp products outside work. Those products reportedly included CBD, delta-8 THC, delta-10 THC, HHC, and THC-O.

The court’s majority rejected the DEA’s interpretation that THC-O was automatically excluded from hemp simply because it required chemical processing. Instead, the majority concluded that the 2018 Farm Bill’s definition could cover hemp-derived THC-O when the product satisfied the federal delta-9 THC limit.

The decision relied partly on a Ninth Circuit ruling involving delta-8 THC. It also reflected the Supreme Court’s rejection of the Chevron doctrine, which previously directed courts to defer to reasonable agency interpretations of ambiguous laws.

However, the Fourth Circuit did not determine that the employee’s products were lawful. She failed to provide evidence showing that they met the required delta-9 THC threshold. The court ultimately ruled in favor of the employer for that and other reasons.

The complete Fourth Circuit opinion demonstrates why the decision was more limited than headlines suggested.

The Decision Was Not Nationwide Product Approval

The Fourth Circuit’s ruling applied within a particular judicial context and interpreted the law that existed at the time.

It did not:

• Approve THC-O for sale throughout the United States
• Override state restrictions
• Establish that every THC-O product meets the hemp definition
• Require banks or payment processors to support THC-O businesses
• Determine that THC-O is safe for consumption
• Prevent Congress from changing the federal hemp definition

One judge also declined to join the majority’s THC-O analysis. The judge argued that the court did not need to decide the question and that determining whether THC-O qualified as a plant derivative was more complicated than the majority suggested.

Businesses therefore faced significant legal uncertainty even after the decision.

Congress Changed the Federal Hemp Definition

In November 2025, Congress enacted Public Law 119-37. Section 781 amended the federal definition of hemp, with the changes scheduled to take effect on November 12, 2026.

The revised definition makes several important changes.

Total THC Replaces Delta-9 THC

The new framework considers total THC, including THCA, rather than focusing only on delta-9 THC.

Certain Synthetic Cannabinoids Are Excluded

The law excludes hemp-derived products containing cannabinoids that cannot be produced naturally by the cannabis plant.

It also excludes naturally occurring cannabinoids when they are synthesized or manufactured outside the plant.

Because THC-O does not naturally occur in the plant and requires chemical processing, it is expected to fall outside the federal hemp definition once the amendment becomes effective.

Finished Products Face a Package Limit

The revised law excludes final hemp-derived cannabinoid products containing more than 0.4 milligrams per container of combined total THC and other cannabinoids with similar effects.

The enacted legislative text defines a container as the innermost package in direct contact with the retail product.

The Congressional Research Service provides an additional summary of the hemp definition changes.

What the New Law Means for THC-O Businesses

The 2024 court decision remains relevant when examining how the 2018 Farm Bill was interpreted. However, it does not prevent Congress from adopting a narrower definition.

Businesses involved with THC-O should prepare for the November 2026 changes by reviewing:

• Product formulations
• Manufacturing methods
• Certificates of analysis
• State and local restrictions
• Supplier contracts
• Inventory plans
• Product liability coverage
• Marketing materials
• Banking relationships
• Payment-processing agreements

Companies should consult qualified legal counsel before manufacturing, distributing, or selling THC-O. State laws may impose restrictions before the federal amendment takes effect.

Payment Processing Considerations

A product’s possible classification as hemp does not guarantee access to payment processing.

Banks and processors establish their own risk policies. They may decline products involving intoxicating, synthetic, or chemically converted cannabinoids even when a merchant believes those products are federally compliant.

Merchants must disclose their complete product catalog during underwriting. Concealing THC-O products or misrepresenting the nature of the business can lead to frozen funds, account termination, or other consequences.

Businesses should also notify their processor before adding new cannabinoid products. Prior approval for CBD or conventional hemp products may not cover THC-O, delta-8 THC, HHC, or similar products.

The Future of Hemp-Derived Cannabinoids

The THC-O dispute illustrates how quickly hemp law can change.

Courts interpreted the broad language of the 2018 Farm Bill, while the DEA continued to maintain a more restrictive position. Congress then responded with legislation designed to narrow the hemp definition and restrict intoxicating and synthetic cannabinoid products.

Further legislation may still amend, delay, or replace portions of the 2025 law. State governments may also adopt different rules.

Businesses should follow enacted laws rather than relying on proposed bills, industry commentary, or old court headlines.

Conclusion

The Fourth Circuit’s 2024 decision rejected the DEA’s position that hemp-derived THC-O was automatically illegal under the 2018 Farm Bill. However, the court did not declare every THC-O product lawful, and the employee involved in the case ultimately lost.

More importantly, Congress has since rewritten the federal hemp definition. Beginning November 12, 2026, the law is expected to exclude THC-O and many other synthesized or intoxicating cannabinoid products from the definition of hemp.

Hemp businesses should review their products, legal exposure, financial relationships, and inventory before the new provisions take effect.

Businesses seeking payment guidance for hemp-derived products can contact PayRio to discuss their product catalog and processing needs.

This article provides general information and does not constitute legal advice. Businesses should consult qualified legal counsel regarding federal, state, and local requirements.

Frequently Asked Questions

Is THC-O currently legal under federal law?

Its status remains complicated. The Fourth Circuit rejected the DEA’s interpretation in a 2024 case, but that decision was not nationwide product approval. The DEA has maintained that THC-O is a controlled synthetic cannabinoid, and state laws vary.

What happens to THC-O in November 2026?

The revised federal hemp definition takes effect on November 12, 2026. It excludes cannabinoids that cannot be naturally produced by cannabis and cannabinoids synthesized outside the plant. This is expected to exclude THC-O from legal hemp.

Did the Fourth Circuit declare all THC-O products legal?

No. The court concluded that hemp-derived THC-O could fit the 2018 definition under certain conditions. It did not establish that the products used in the case complied with the THC threshold.

Can a hemp merchant process payments for THC-O?

Payment eligibility depends on the provider, banking partners, products, jurisdiction, and underwriting rules. Merchants should obtain explicit approval and fully disclose every cannabinoid product they sell.