A federal spending bill slated for a congressional subcommittee hearing Thursday in the Republican-controlled U.S. House of Representatives would effectively ban the multi-billion-dollar intoxicating hemp market.
The move would signal a major policy shift that cannabis industry experts say would have immense ramifications for cannabis companies across the country if it becomes law.
New York lawmakers have yet to take up the issue of intoxicating hemp products, but the burgeoning hemp trade has made its mark on the Empire State cannabis industry regardless, with former hemp farmers upstate pivoting into the relatively new adult-use marijuana market and out-of-state hemp products also posing a competitive threat to the nascent trade.
While cannabis has been legalized state-by-state and is heavily regulated, a loophole in the 2018 Farm Bill opened the door to businesses across the U.S. to legally grow hemp — the less intoxicating version of the cannabis plant — and process it to extract THC and use it to create products that compete and undercut legal cannabis markets.
The proliferation of unregulated hemp-derived THC products — often sold directly to consumers or over the counter at convenience stores — has been a thorn in the side of the legal cannabis industry, as hemp-derived THC products skirt costly rules, testing and taxes.
Closing the hemp loophole
The bill, which is on the docket for a Thursday hearing in the House Appropriations subcommittee on agriculture, “supports the Trump Administration and mandate of the American people by … closing the hemp loophole that has resulted in the proliferation of unregulated intoxicating hemp products, including Delta-8 and hemp flower, being sold online and in gas stations across the country,” according to a congressional summary released this week.
The move comes as a wave of states across the country have been enacting either bans or new regulations for such goods, which proliferated after Congress legalized hemp with 0.3% THC by dry weight in 2018 with the federal Farm Bill.
There’s now a patchwork of business rules in different states as lawmakers have reacted to the hemp boom, with some opting for complete bans — such as one that was just approved by the Texas Legislature — while others have established strict new regulations for intoxicating hemp products, such as age-gating sales, marketing and labeling restrictions, and safety testing requirements.
The intoxicating hemp market in the U.S. is worth between $28 billion and $35 billion, most of it sold through fully legal channels such as gas stations, convenience stores, online and in bars and restaurants, said Beau Whitney, the founder of Oregon-based Whitney Economics. That’s roughly the same national value as the state-legal marijuana market, which spans 39 states, three U.S. territories and the District of Columbia, Whitney said.
“This is going to have a profound effect on the U.S. economy” if signed into law, Whitney said, noting that the industrial hemp market — not including the intoxicating hemp goods in question — is worth at least $500 billion globally.
To erase the intoxicating hemp sector completely would eliminate up to 400,000 jobs, Whitney estimated, and would also likely chill investment in the industrial side of the hemp sector, which is more focused on producing grains, seeds and fibers that are used in commercial manufacturing, such as for European car parts.
Whitney also noted that there’s been an explosion of traditionally marijuana companies — including publicly traded business such as Chicago-based Green Thumb Industries and Connecticut-based Curaleaf, which both have cannabis operations in multiple states — that have branched out and invested heavily in intoxicating hemp products, as a means of offsetting financial losses in the more-restricted marijuana industry.
That means that such a ban wouldn’t only prove beneficial to marijuana companies which may recapture some lost market share; it would also directly harm much of the cannabis sector.
Swift reaction
Hemp businesses immediately decried the proposed federal ban, and said it was championed by anti-cannabis U.S. Rep. Andy Harris of Maryland, a Republican who has for years introduced various bills to block or roll back marijuana and hemp reforms. Harris’s office used the same summary language in a press release.
“It’s another bill to destroy the hemp industry,” said Art Massolo, the founder of Cycling Frog, a Colorado-based hemp THC beverage company, after speaking at a cannabis business conference in New York City on Wednesday. “The fact of the matter is that THC hasn’t killed one human being on the planet, ever. So what are worried about? What are people so afraid of?”
Jim Higdon, the founder of Kentucky-based Cornbread Hemp, said most Americans want a regulated national THC market, not a return to the days of cannabis prohibition.
“This amendment proposed by known anti-cannabis zealot, Rep. Andy Harris, would be a huge step backwards for the American farming economy and the American consumer. The American people have spoken repeatedly: they want legal, regulated cannabis products, not the sort of 1980’s-style prohibition proposed by Rep. Andy Harris,” Higdon said in a text message.
Some members of the marijuana industry said the proposed intoxicating hemp ban would likely benefit the marijuana sector, at least in the short term, by eliminating major competition for state-licensed cannabis shops.
“Overnight, it’s great news,” said Vince Ning, owner of cannabis distributor Nabis, which operates in California, New York and Nevada. “I think it’d be good news for us. It gives us more work to do.”
But others decried such a proposal as short-sighted and potentially harmful in the long run for anyone in either the marijuana or hemp trades.
“What I fear is, this reaction isn’t coming from prohibitionists or those who hate the industry. I see this happening in a lot of states, that members of our industry who are trying to eliminate competition, are educating those who still believe in prohibition, to crack down on what we call ‘hemp,’” said Demitri Downing, co-founder of the Marijuana Industry Trade Association of Arizona.
“It would be a net positive for those people who are participating in the THC licensed market, because it limits the competition and it limits the supply chain to them,” Downing said. “At a higher level, it’s a negative, because it sends the message out to the community that there’s something dangerous about this plant. That message in general isn’t one our industry shouldn’t be supporting.”
Whitney said a hemp ban would provide a “plus to the marijuana industry,” but warned that the policy would probably be a “net neutral” because large multistate operators have put so much money into intoxicating hemp already.
When Whitney was researching the issue in 2023, he said, “there was hundreds of millions of dollars being derived by MSOs in the hemp space that would also go away. So they’ll lose the revenue from hemp that they’re going into these markets on. I mean, just think of Curaleaf in Florida, they just basically closed down a bunch of their medical dispensaries in favor of hemp.”
A federal hemp ban, if signed into law, “sets a dangerous precedent against the marijuana industry, because they’re advocating for all of these different policies to really box in hemp. And those very same policies could be applied to the marijuana industry, which would be devastating to them,” Whitney warned.
