The federal funding bill’s hemp ban could end Minnesota’s THC edibles and beverages industry

A provision in Congress’s proposed deal to end the government shutdown could upend the intoxicating cannabis products industry. (Photo: Nicole Neri/The Minnesota Reformer)

A provision in the federal government’s spending package ending the shutdown would be a huge setback for Minnesota’s THC industry if enacted.

While the federal government is unlikely to start busting down the intercept door on low-THC food and beverage products, a novel federal law against hemp-derived THC products would create novel logistical hurdles for the burgeoning industry and could cripple what has become $140 million retail segment it even made it to Target liquor stores.

This position was supported by Senator Mitch McConnell, who sparred with Senator Rand Paul – his Republican colleague from Kentucky – on the section reversing the rule inadvertently legalizing THC derived from hemp in the 2018 Farm Bill.

To encourage more commercial exploit of industrial hemp, the 2018 Farm Bill removed hemp from the list of controlled substances and defined hemp as any cannabis plant or product containing 0.3% or less of tetrahydrocannabinol, or THC, a psychoactive drug derived from the plant.

It turns out that this is enough to produce products that will allow people to get high.

Together with A Act of 2022 Passed by the Minnesota State Legislaturea 2018 law created a legal gray area for cannabis-based THC-containing intoxicating products and paved the way for Minnesota THC beverage and food industry.

McConnell led the hemp-related effort in 2018, and now he wants to plug the “gap” that allowed the hemp-derived THC industry to flourish under his legacy of agricultural policy before retiring next year, Policy reported. The novel ban introduces an upper limit of 0.4 mg of THC per package, effectively banning intoxicating THC-containing drinks and edibles that, even at the lowest doses, contain at least 2 mg of THC.

A coalition of 39 attorneys general, including Minnesota Attorney General Keith Ellison, wrote a letter to key members of Congress in which they called for the repeal of the 2018 law: “Clear guidance from Congress is needed to shut down this industry before it becomes an even greater threat to public safety than it already is.”

The industry currently has little federal regulation, leading to state adoption a patchwork of regulations regarding hemp-derived products. In 2022, Minnesota passed a law allowing the production, distribution and sale of 5 mg beverages and edibles to adults over the age of 21, making it a “leader in ushering in the THC beverage revolution,” said Jason Tarasek, a cannabis lawyer at Vicente LLP. Among other safety regulations, products cannot be sold to children and retailers in Minnesota must obtain a permit license sell it.

Paul opposed McConnell’s outright cannabis ban, calling it “the most thoughtless and ignorant proposal for the industry I’ve seen in a long, long time.” But most senators sided with McConnell — on Monday, the U.S. Senate voted 76-24 to reject Paul’s amendment to reverse the provision, sending the cannabis prohibition provision along with the rest of the government funding bill to the House of Representatives for an immediate vote. Wednesday.

The rule, if passed, would go into effect in a year, giving suppliers a chance to sell their product.

Hemp-derived THC products are sold in liquor stores, breweries and other retail stores, making them a popular choice among consumers who don’t want to buy on the black market or visit dispensaries. now I sell recreational weed.

“People who would never bust out a bong feel more comfortable with a low dose,” Tarasek said.

Steven Brown is the CEO of Nothing But Hemp, the state’s largest supplier of low-THC hemp, according to the company’s website. Brown said his brick-and-mortar store customer base, mostly people 55 and older, “doesn’t want to come into a clinic.”

“They want to come in and have a normal retail experience, like going to a liquor store or a cannabis store,” Brown said.

A federal hemp ban that restores hemp to the same federal status as cannabis would effectively shut down the industry if it passes and persists over time. Business owners say that even if the federal government largely left states alone when it came to regulating hemp, as it currently does with cannabis, prohibition would create problems that would make the hemp industry virtually unprofitable.

Minnesota’s low-dose cannabis business would become more like its cousin, the cannabis industry, which is legal in two dozen states but remains illegal at the federal level, creating a host of business complications.

First, liquor stores and breweries selling products containing THC would have to pay much higher taxes due to a section of the federal tax code that prohibits companies from selling illegal substances as well as obtaining tax deductions for business expenses. They also couldn’t work with credit card companies or many banks, forcing cannabis stores to primarily exploit cash.

“A lot of breweries will close their doors,” said Bob Galligan of the Minnesota Craft Brewers Guild.

Additionally, since hemp-derived THC comes from immature cannabis plants with more non-THC biomass, its production is less productive compared to cannabis. Galligan said federal legalization of hemp would pose fewer headaches compared to higher-potency marijuana, but a federal hemp ban would reverse that calculus.

“The THC category, which we founded two and a half years ago, has grown and now represents almost 15% of our overall business,” said Jon Halper, owner of Top Ten Liquors, which Halper said is one of the two largest hemp-derived THC retailers in Minnesota. Halper attributes this year’s sales enhance to top 10 sales of THC.

Halper said that if a ban goes through, he would have to phase out the sale of beverages and edibles containing THC, and he expects virtually all liquor stores to do the same.

“Most brands will go out of business because they won’t have places to sell,” Halper said. “The industry will just collapse overnight.”

Five alcohol trade organizations were dispatched letter echoing Ellison and the other 38 attorneys general, although there are plenty of them alcohol wholesalers they followed up the letter and condemned the ban, calling instead for federal regulation. For the most part, alcohol retailers and wholesalers support the cannabis industry, but alcohol producers are more divided, Halper said.

Ellison seemed unaware of the potential impact of a federal ban on the industry.

“Even before Minnesota legalized cannabis, our state legalized the sale of certain food products containing hemp-derived THC – provided those products met important consumer protection and quality control standards,” Ellison said in his report Fasting at the stake. “I support this law and have no intention of in any way restricting the sale of products that comply with this law.”

But a federal hemp ban would actually severely limit sales of hemp products that are legal in Minnesota, industry experts say.

However, not all of them are yet in the doom and gloom and anticipate the possibility of a sturdy political response.

This provision “may encourage reform because there is a huge nationwide industry that will kill it,” Tarasek said. “When there’s so much money and so much consumer interest in these products, I just don’t think they’re going to go away quietly.”

Brown added: “We are still fighting.”