Hemp THC industry braces for federal changes that would ban most drinks and edibles

A $180 million hemp industry creating THC drinks and edibles could come to a halt under a new federal law set to kick in this fall. Minnesota businesses say they are already bracing for impact while pushing Congress to reverse course. 

An agriculture spending package that was part of a deal to reopen the government last year removed products with more than 0.4 milligrams of THC — the psychoactive ingredient that produces a high — from the definition of hemp, which effectively puts a federal ban on the drinks and edibles available for purchase today. 

Most of what is available on store shelves in Minnesota has 5 milligrams per serving. A hemp-derived drink can have as much as 10 milligrams per container. 

Coming out of the pandemic, Jason Dayton, cofounder of Minneapolis Cider Company, got into the hemp THC business after a 2022 state law explicitly legalized the products with certain regulations. Four years prior, the 2018 federal Farm Bill removed hemp from the list of controlled substances, creating an opening for THC and CBD products across the country. 

"That transformed our business basically overnight," Dayton said of his THC drink brand Trail Magic. 

But the drinks face an uncertain future because of the federal law that will take effect in November unless something changes. If nothing does, it would bring hemp products more in line with marijuana products, meaning different rules and restrictions — even in states like Minnesota that have legalized cannabis for adult use.

Marijuana, because it's a Schedule I drug at the federal level, means cannabis businesses face steeper tax penalties and barriers to banking.  It cannot be shipped across state lines either. Minnesota also implemented stricter regulations around those products because of the federal prohibition, such as where consumers can buy them. Hemp THC drinks and gummies are more widely available.

"The law in Minnesota hasn't changed, and we'll still have hemp-licensed products, and you still have hemp product licensing in the Minnesota statute," Dayton explained. "The net effect of it is you won't be able to buy these products at your local liquor store, at your municipal store, at your favorite bar and restaurant, at our tap room. These products only become available in dispensaries."

That model might not work, he said, pointing to California where sales of such drinks in dispensaries account for 1% of total sales. Minnesota sold roughly $180 million in hemp THC drinks last year, according to Minnesota Department of Revenue and cannabis sales data.

"Cannabis beverages weren't new in 2022. We didn't invent them. What changed was where they were available," Dayton said.

Half of the Trail Magic business is out-of-state with the company shipping to 25 states across the country. The federal law would prohibit such sales and Dayton said even with products still legal right now, Trail Magic is already feeling the impact.  

"Retailers in other states are starting to make decisions for fall. What products are they going to carry in the fall? What does next year look like? This is an industry that always operates six to 12 months ahead of time, so when you see a product on [the] shelf, we've been working on that for about the better part of a year," he told WCCO in an interview. "So that's getting really hard to do. We don't know if we're still gonna be able to sell products in November, so that is starting to have an effect on the market."

Businesses start strategizing new drinks if THC hemp ban holds

Dayton is hopeful that advocacy in Washington to push Congress to change its mind and reverse the ban and implement nationwide safety guardrails for products will prevail. But in the event that lawmakers let the law stand, he said his business is already considering making Trail Magic 2.9% alcohol by volume — a less potent drink without THC that hopefully captures a similar consumer. 

"It's not perfect. It's not exactly what you know our consumers want in THC, but it's going to help us stay nimble as a business, which we have to do as a mall company, and keep the Trail Magic brand relevant and on shelves," he said. 

Nathan Schneider, president of Minnesota Craft Brewers Guild and owner of Voltage THC, told WCCO he dropped off his check and signed the paperwork to buy his business three days before Congress approved the change last November. He's already considering his own plan b: making drinks with adaptogens, plant-based compounds that don't get you high but health experts say may manage stress and have other health benefits.

"This is a way for me to continue doing the thing that I'm passionate about. It's not ideal, because I didn't want to have to pivot this quickly and then, like, you know, it feels kind of like an emergency at the same time. It seems smart, like it's regardless of what happens. I think it's a good space to start looking into," Schneider said. 

He, like Dayton, wants the law to change in the next six months before businesses would have to embrace a new reality. But he said the longer they are in limbo, the harder it will be, and the long-term effects could be devastating for brewers. 

"The concern for everybody is their business, their status, their jobs, their people. We will see breweries close, for sure, if this doesn't change," Schneider said.