Lawmakers strike deal to ban intoxicating hemp 🛑

HEMP
Congress strikes deal to ban hemp 🌿

What happened: Congressional lawmakers struck a deal on Sunday to re-open the government after the longest shutdown in history.

The deal includes language that would effectively ban intoxicating hemp, by closing the “loophole” in the 2018 Farm Bill that allows THC products to be created from federally legal hemp and sold in stores around the US.

The Senate voted on the deal Sunday night. It wouldn’t immediately open the government, but is a clear first step. (This was written at 9 PM Sunday night). 

What’s in the bill: The bill would ban the sale of intoxicating hemp-based products, including Delta-8, from being sold anywhere. It would preserve, by the bill’s language, most CBD products but many CBD brands say that most full-spectrum CBD products would exceed the legal THC limit.

Hemp, under the Farm Bill, is classified as cannabis containing less than 0.3% THC. But many companies are able to make THC-containing products like gummies and beverages using hemp as the raw material. 

Now, any cannabis products containing greater than 0.3% THC would be considered hemp under the new language. 

The bill would also explicitly ban intoxicating Delta-8 and other “gas station” cannabis products, which are mostly synthetically created with little attention paid to consumer safety. 

What they’re saying: “This is a dark day for anyone who hopes for a future when cannabis is descheduled in America. If we can’t keep full spectrum CBD products legal, then the future of cannabis reform seems even more distant with an emboldened alcohol industry that now has a proven playbook for killing cannabis,” Cornbread Hemp Co-Founder Jim Higdon said. 

And: “For months, industry and agricultural groups have been calling for those safety regulations, not prohibition. But banning legitimate hemp products won’t stop bad actors, it will only drive the market underground and further erode consumer safety,” Thomas Winstanley, the GM of Edibles.com said. 

“Now Congress faces a choice: repeat the mistakes of prohibition or create a rational regulatory framework that ensures product safety, protects consumers, and preserves the economic promise of hemp.”

And: “In short, every state program that has codified Hemp products will shutter. Hemp farmers will go out of business. 330,000 Americans will lose their jobs. There is no "state legal" hemp,” Cantrip CEO Adam Terry said on X, responding to a question about what happens next. 

On the other hand: “We applaud lawmakers for taking this critical step to clarify Congress' intent in the 2018 Farm Bill. Willful misinterpretation of the Farm Bill led to the proliferation of unregulated synthetic THC products widely available for sale to minors,” Chris Lindsey, Director of State Advocacy and Public Policy, ATACH (American Trade Association of Cannabis and Hemp) said. 

“The bill clearly distinguishes between intoxicating and nonintoxicating products, synthetic and natural products, and industrial and consumer products. These distinctions create regulatory lanes for hemp-derived products and address perceived loopholes.”

Why it matters: If passed, the language would effectively shutter the exploding hemp beverage market and route all legal cannabis sales back into dispensary channels. That comes as big box retailers like Target and Total Wine have put these products on store shelves. Disentangling all that is going to be messy.

The hemp industry is valued at $30 billion and supports over 300,000 jobs, according to industry reports. Cannabis beverages are sold in stores around the country. Venture capital has flowed into many of these startups after avoiding anything cannabis related for years.

It’s unclear what’s going to happen to brands like Cornbread Hemp, Cantrip, and Edibles.com which derive much of their revenue from hemp THC beverages and products. Many brands in the hemp industry are doing things right: Creating safe, tested products that consumers love. 

Others are far less scrupulous, the manufacturers and sellers of so-called gas station weed. But by banning hemp outright, the language effectively bans both groups.

Still, many in the regulated cannabis industry cheered the legislation as they say it’s unfair they’re forced to comply with burdensome state regulations and pay the federal 280E tax, while their hemp counterparts don’t. But many publicly traded cannabis companies, including Trulieve, Curaleaf, and RYTHM offer hemp products as well, so the legislation would put those product lines in jeopardy.  

Our take: Lawmakers are painting too broad of a brush, here. 

More effective legislation would ban Delta-8 and synthetic products from being sold in gas stations, and then direct Congress to create regulations for lower dose, hemp-derived THC products to be sold in any stores that choose to do so, while leaving higher dose products to dispensaries.

Many hemp THC brands will likely pivot to regulated dispensaries and compete with more traditional cannabis brands. But that market is far smaller than holding shelf space in Total Wine and Target, and it’s also harder to justify the expenses that go into producing beverages and selling them at a reasonable price. Expect a lot of jobs, and a lot of capital, to be lost by this move. 

I tend to believe simple regulations are the most effective and generate the most compliance with less cost. Of course, one set of federal rules governing the production and sale of THC is the most optimal for businesses and consumers. But full legalization may be a fantasy as long as President Trump remains in office. Reclassifying cannabis to Schedule III would be a step in the right direction, but still brings up a whole new series of regulatory questions. 

In the meantime, it seems that state-regulated dispensaries will be the only path moving forward, if this legislation remains intact. 

What’s next: All of this still isn’t a done deal, but it’s right at the precipice. We’ll be covering all of this in the coming days and weeks, so stay tuned.

-JB

“Nebraskans overwhelmingly approved medical cannabis last November, yet the administration has pursued litigation and commission actions that frustrate voter intent and depart from Nebraska law and the sponsors’ stated purpose,” said John Cartier, attorney general for the Omaha Tribe. Cartier's statement was made in response to threats from Nebraska Governor Jim Pillen to prevent any citizens of the state from accessing cannabis on tribal land. 

Local Omaha news affiliate WOWT 6 has more on the political dispute.

Ohio lawmakers shoot for hemp fix by Thanksgiving 🦃

Lawmakers in Ohio are hoping to pass new hemp regulations by Thanksgiving, as they face a Dec. 2 deadline for the governor's executive order on hemp takes effect. Governor Mike DeWine ordered a ban on intoxicating hemp products in October, but that was suspended by a court order after a judge found that it improperly superseded the authority of the legislature. Dayton Daily News has more. 

Missouri proposes new regulations to fight predatory license deals 📜

Ahead of the state's third round of microbusiness license lotteries, the state's Department of Health and Senior Services is proposing new rules that would set a 60-day window for licenses to be more easily revoked and greater subpoena power for the agency when investigating the legitimacy of license winners. The state had to revoke dozens of licenses between the first two rounds of lotteries after it was determined that many of them were won by out-of-state investors that did not actually qualify for social equity status. 

Lighter base federal sentencing guidelines for dealers 🧑‍⚖️

The United State Sentencing Commission has changed sentencing guidelines for drug trafficking to reduce base level sentences for street-level dealers. Sentencing guidelines are used as a starting point when courts are calculating a convict's full sentence, and can be reduced or lengthened at the judge's discretion though they have to be justified by the court. The new amendment calls for the consideration of a convict's role in a larger drug operation, rather than the quantity of product they may have moved. Read more in Filter. 

Massachusetts mulls public consumption 😮‍💨

The Massachusetts Cannabis Control Commission (CCC) is set to consider issuing public consumption licenses for cannabis. The proposed plan would include 3 types of licenses including supplemental (for existing cannabis businesses), hospitality (for non-cannabis businesses like movie theatres), and event organizer licences for temporary on site consumption. The issue is set to be addressed by December and would initially only be accessible to those eligible for the CCC’s social equity or economic empowerment programs.

Adults drink less when they live near dispensaries 🌿

Adults drink less alcohol when they live near cannabis dispensaries, according to a new study published inAmerican Journal of Preventative Medicine. The study, which involved 60,000 Oregon residents, found that they were more likely to use legal cannabis regularly but less likely to report heavy drinking. Read more.

Cannabis earnings season continues:

Canopy Growth $CGC ( ▲ 4.7% ) reported a $1.6 million loss on $67 million in revenue. The company saw a 12% jump in cannabis revenue compared to the same quarter last year. Those increases were primarily from the Canadian market, while the company saw a 39% decline in international sales due to supply chain challenges and a 10% decline in the company's vaporizer and accessories products. 

RYTHM $RYM reported a $10.6 million loss on $4 million in revenue. RYTHM, a company that owns the licensing rights to products made by Green Thumb Industries, was formerly known as Agrify before that company purchased Green Thumb Industries' brand portfolio. RYTHM also produces hemp beverages. 

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