New law killing "THC loophole" could hurt state programs and businesses, advocates say

Congress rallied to pass a spending bill that ended the record-long government shutdown, but it came with a price: much of the legal cannabis industry. The big picture: A last-minute provision in the spending bill criminalized many hemp-derived products, despite the objection of businesses, lobbying groups, and lawmakers with stakes in the $28 billion industry. Several states use hemp taxes to fund addiction services, county budgets and public health programs, industry experts told CNBC this week. Driving the news: The provision reversed the legal sale of hemp products outlined by the 2018 Farm Bill, which included many THC-infused products.Sen. Rand Paul (R-Ky.) waged a last-minute fight against it, threatening to hold up the bill until he got a vote on an amendment to strip the THC language, but Republicans were largely united on ending the shutdown. The other side: Sen. Mitch McConnell (R-Ky.) authored the 2018 Farm Bill but has been a leading proponent of closing the THC loophole, arguing that companies have exploited it to create intoxicating substances.39 state attorneys general signed a letter on Wednesday asking Congress to outlaw intoxicating hemp products at the federal level.Public health officials have argued that the products' lack of oversight and regulation pose risks to minors. Here's what to know about the money from the legal hemp industry: What to know about the ban Catch up quick: The Farm Bill loophole allowed intoxicating THC to be sold in low doses, Carol Moss, a cannabis attorney for Hellmuth & Johnson, told Axios this week. The shutdown deal banned those THC products and also non-intoxicating CBD products, Moss said.The new provision "prevents the unregulated sale of intoxicating hemp-based or hemp-derived products, including Delta-8, from being sold online, in gas stations, and corner stores, while preserving non-intoxicating CBD and industrial hemp products," per a Senate Appropriations Committee summary.Legal hemp products vary by state, but typically include food and beverage products, balms or lotions, tinctures, and pills.What we're watching: There is a one-year implementation delay for the hemp ban, which allows the USDA, the FDA, and states to update their rules before enforcement begins in late 2026.It also gives Congress time to debate the provision further and walk some of it back. "Our new mission, friends: 365 days to regulate, NOT ban," trade group U.S. Hemp Roundtable said this week. How much the industry is worth By the numbers: The national intoxicating hemp market is worth about $28 billion, industry sources told Crain's Chicago Business. 300,000 jobs have emerged in the sector since hemp was legalized in 2018, sources told Crain's. Euromonitor data in a JPMorgan study estimated that hemp-derived beverages could reach retail sales of around $1.4 billion in 2025, Bloomberg reported.That figure could grow to $4.1 billion by 2028 if the Farm Bill loophole remained open, according to the study. Potential impact to businesses, farmersWhat they're saying: "The bill, as it now stands, overrides the regulatory frameworks of several states, cancels the collective decisions of hemp consumers and destroys the livelihoods of hemp farmers," Paul said on Senate floor prior to the Tuesday vote. "It couldn't come at a worse time for America's farmers."A study from the USDA's National Agricultural Statistics Service (NASS) said that the value of U.S. hemp production totaled $824 million in 2021. Zoom out: Several states have seen substantial hemp industries since the Farm Bill's passage. Zoom in: Low-dose THC seltzers have been a lifeline for struggling craft breweries in Minnesota, for instance, Axios' Nick Halter writes. And a 2021 law led to a boom of companies that grow, manufacture and sell edibles.The loophole reversal "is a poison pill for Minnesota," said Moss.Businesses could apply for one of the state's limited number of new adult-use licenses, Moss said, but that would mean much higher taxes in addition to banking hurdles. Missouri state officials estimated in 2024 that over 40,000 businesses were selling products that would be banned under the new federal regulations.Potential impact to state programs Restricting legal markets will "likely reduce tax revenues generated for the programs" that tackle addiction, Tax Foundation analysts wrote this year.Those programs are much more effective than "any reductions in that consumption resulting from prohibition," they argued. "Whether for hemp or marijuana, prohibitions or excessive regulations risk undermining public health and economic growth." Eleven states and the U.S. Virgin Islands dedicate a fraction of broader marijuana taxes to general funds, according to the nonpartisan National Conference of State Legislatures. New Mexico dedicates all cannabis tax revenue to its general fund. "Other common recipients of cannabis tax revenue include state and local governments, substance misuse treatment programs, education and public safety," per the NCSL. Go deeper: The bill to reopen the government would shut down these THC products

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