Hemp Industry Faces Existential Threat From Looming Federal Ban

America's burgeoning market for hemp-derived THC products, valued at approximately $28 billion, stands on the precipice of elimination as Congress moves to close a federal loophole that has fueled its growth. The potential ban, set to take effect December 11, threatens to dismantle a sector that has rapidly expanded since the 2018 farm bill legalized industrial hemp.

The 2018 farm bill defined hemp as cannabis containing less than 0.3% of delta-9 THC by weight. This definition inadvertently created a loophole, allowing manufacturers to produce intoxicating products like gummies, seltzers, and even smokable flower that, while derived from hemp, contain significant amounts of THC. These products have proliferated across the country, appearing in gas stations and convenience stores and often bypassing the regulations and taxes imposed on state-legal marijuana.

In response to the unregulated spread of these products, many states began enacting their own regulations or outright bans. However, the federal government's stance is now shifting. Late last year, a measure intended to end a prolonged government shutdown included a provision to ban these impairing hemp products, limiting THC content to 0.4 milligrams per container.

This impending ban has sent shockwaves through the industry. Businesses that invested heavily in this sector now face significant financial losses and potential closure. Nicholas Hohns, who operates Deutermann Farms in North Carolina, expressed uncertainty about his future. "It's such a weird spot to be in," Hohns said. "You worked 100 hours a week for the past four years, and, yeah, you made some money. But now you might have nothing to show for it."

Industry advocates and some lawmakers are actively working to find an alternative to a complete ban, proposing measures such as restricting sales to individuals 21 and older, capping THC content per package, and banning imported cannabis compounds. Owners of Cornbread Hemp, Eric Zipperle and Jim Higdon, stated that while they are willing to cap their products at 5 milligrams per package, the proposed 0.4-milligram limit would effectively destroy their business, which employs 105 people and sells products in 18 states.

Jonathan Miller, general counsel for the U.S. Hemp Roundtable, noted that the proposed 0.4-milligram cap is so low it could even impact non-intoxicating CBD products like lotions.

The economic impact of the ban could be substantial. A report by Whitney Economics estimates that the ban could reduce retail revenues by $28.3 billion, displace 225,000 jobs, and decrease state sales tax revenue by $2.1 billion.

Opponents of the hemp-derived THC products, including organizations like Smart Approaches to Marijuana, argue that the products pose risks and affect many lives. Conversely, the regulated legal marijuana industry views hemp THC as unfair competition and generally supports the ban, though some acknowledge that certain products might find a place within state-legal markets.

For businesses like Drinkin' Buds, a cannabis beverage company in Wisconsin, the uncertainty has already led to difficult decisions, with co-founder Matt Swanson taking himself off the payroll and actively seeking other employment.

As the December 11 deadline approaches, the fate of the multibillion-dollar hemp THC industry hangs in the balance, with stakeholders lobbying for a regulatory framework that could preserve businesses and jobs while addressing concerns about product safety and regulation.