U.S. Hemp and THC Product Market Faces Imminent Federal Ban
A looming federal ban in the United States threatens to wipe out the booming hemp and THC-infused product market, endangering billions in revenue and thousands of jobs.
In a commercial kitchen near Raleigh, North Carolina, Nicholas Huns is mixing a bluish-green substance into a mold. The result will be one of his company's flagship products: potent THC gummies containing the primary psychoactive compound in cannabis. However, this business may soon become illegal.
The American market for hemp products currently includes edibles, beverages, vape oils, and even smokable hemp flower. Such items are sold even in states where recreational marijuana is illegal, frequently appearing in gas stations and convenience stores. According to AP, a looming federal ban could wipe out a significant portion of this industry.
The Roots of the Loophole
The origins of this issue lie in the 2018 federal Farm Bill. Republican Senator Mitch McConnell of Kentucky was one of the primary proponents of legalizing industrial hemp, partly to provide farmers with a new commercial crop. Marijuana and hemp are essentially the same plant—cannabis—but hemp has traditionally contained very little THC and was grown primarily for fiber, food, and wellness products.
However, the wording of the legislation specified that hemp is legal as long as it contains less than 0.3% delta-9 THC by weight. This definition created a substantial loophole: a beverage, snack, or candy could comply with the 0.3% threshold while still containing enough total THC to induce a psychoactive effect.
Growth and Crackdown
Within years, a massive market emerged for products that did not necessarily undergo the same testing, taxation, and regulatory pathways applied to legal marijuana in states where it was authorized. Some companies even sold cannabis flower under the claim that it primarily contained THC-A, a compound that converts into intoxicating delta-9 THC only when heated or burned.
Dozens of states have already responded with their own restrictions or bans. Late last year, McConnell himself helped close the loophole he once helped create: a provision included in federal legislation stipulated that hemp products would be restricted to a maximum of 0.4 milligrams of THC per container. The implementation of the ban has recently been pushed to December 11, leaving the industry a narrow window to lobby for changes.
Economic Impact and Industry Pushback
Opponents of these products argue that the loophole created an unregulated market with inadequate oversight, which also allowed minors to gain access. Established companies operating within the legal marijuana market also support closing the loophole, arguing that hemp competitors enjoy an unfair advantage by not being subject to the same taxes and rules.
According to a report published last month by Whitney Economics, the ban threatens to wipe out $28.3 billion in retail revenue, impact roughly 225,000 jobs, and reduce state sales tax revenue potential by $2.1 billion.
Industry representatives are offering a compromise: restricting product sales to individuals aged 21 and older, establishing a cap on THC content per package, and banning the use of imported cannabis compounds. The owners of Cornbread Hemp in Kentucky, which employs 105 workers and sells hemp beverages in 18 states, say they would also agree to a limit of 5 milligrams of THC per product if it allows them to stay in business. But a cap of 0.4 milligrams, they argue, would destroy the company.
A cap of 0.4 milligrams is so low that it could effectively ban non-intoxicating CBD products, including topical creams, according to the U.S. Hemp Roundtable.
Adapting to an Uncertain Future
Huns entered the industry after losing his job as a personal trainer during the COVID-19 pandemic. North Carolina does not permit medical or recreational marijuana use, yet some of the products he manufactures are more potent than items sold in states where cannabis is legal.
Anticipating early on that the loophole would not remain open indefinitely, he avoided heavy capital investments. If the ban takes effect, he is considering shifting to manufacturing other goods, such as creatine gummies. Other producers are already preparing for the worst: Wisconsin-based cannabis beverage company Drinkin' Buds has frozen production, and one of its co-founders has stopped drawing a salary to look for outside work.
The industry has also found surprising allies. Alcohol retailers, including Total Wine & More, support preserving the market, partly because sales of cannabis beverages help offset declining alcohol sales.
Some sectors of the legal industry believe predictions of the total annihilation of the hemp market are exaggerated. Certain products may transition into state-regulated markets where they were produced, while other states might establish their own legal frameworks. Yet for thousands of businesses built around the existing law, the decision in Washington may determine whether a market that grew almost overnight must vanish just as quickly.
