Spending bill passed to end government shutdown threatens to decimate the existing intoxicating hemp industry
Overview and Key Changes
On November 12, 2025, President Trump signed legislation that effectively bans most consumable hemp-derived THC products nationwide, effective November 12, 2026. The provision, which was included in the appropriations bill that ended the government shutdown last week, redefines what “hemp” means under federal law and creates an existential threat to the United States’ existing $28.4 billion intoxicating hemp industry.
The intoxicating hemp industry in the United States developed after the 2018 Agricultural Improvement Act (the Farm Bill) removed “hemp,” defined as Cannabis sativa L. containing under 0.3% delta-9 THC by dry weight, from the definition of “marijuana.” Marijuana - commonly referred to as cannabis and referred to as such herein – remains a Schedule I drug under the Controlled Substances Act. It is important to note that many states currently have some form of legal cannabis market that allows individuals to possess and consume cannabis if they are prescribed to do so or are over the age of 21.
The key change to the definition of “hemp” giving rise to this potentially cataclysmic industry event is adjusting the prior maximum concentration of cannabinoids from 0.3% delta-9 THC by dry weight to 0.3% total THC. While delta-9 THC is the primary psychoactive cannabinoid found in cannabis, many hemp products contain other psychoactive cannabinoids like delta-8 THC to create intoxicating effects for users. Many hemp products – like gummies, drinks, and vapes – contain high concentrations of such alternative psychoactive cannabinoids. Under the new definition of hemp, however, all isomers of THC will be factored into hemp’s THC concentration, thus eliminating the ability for hemp product manufacturers to meet the current THC threshold for sale of federally unregulated “hemp” products while infusing their products with concentrations of other THC isomers far above that threshold.
The legislation also establishes new THC limits of 0.4 milligrams of total THC per container, creating an additional limiting factor on the potential sale of these products. Many hemp products available to consumers today far exceed that limit, with some products containing thousands of milligrams. Such products would be illegal under the new legislation.
Impact
The new legislation will have broad implications for the hemp industry when it goes into effect. Initial estimates by hemp industry economists and executives suggest that 95% of the industry as it exists today would be eliminated. Many hemp product firms focus entirely on the manufacture and distribution of products that will become illegal. As stated above, the industry is currently valued at $28.4 billion and is estimated to provide jobs for over 300,000 Americans. Further, states that have implemented some form of hemp industry tax will lose an estimated $1.5 billion in tax revenue.
Many states have implemented regulatory regimes that provide sensible guidelines around the manufacture and distribution of hemp products in the years since the 2018 Farm Bill initially amended the federal definition of hemp and gave rise to the current hemp industry. Some states – like Tennessee – allow the sale of hemp products to consumers provided that the retailer verifies that the consumer is over the age of 21. Other states – like Minnesota – have folded regulations concerning hemp products into the state’s cannabis (in this case, high-THC cannabis) industry. The changes to federal law (which will preempt state law) threaten to throw existing state regulatory regimes into disarray and will undo the hard work done by state regulators and hemp industry firms to create and follow those guidelines.
On the other hand, many states also have some form of adult-use or medical cannabis program in place. Those programs, while federally illegal due to cannabis’ status as a Schedule I drug, are not expected to be impacted by the new legislation. Such programs are permitted to exist despite the federal illegality of cannabis due to a long-standing non-enforcement policy by the United States Department of Justice (the DOJ). Whether the new legislation affects the non-enforcement policy remains to be seen, but such a change would be a remarkable departure from the decade-plus attitude of permission towards state-level cannabis programs. The new legislation is, however, likely to create consumer confusion on a nuanced topic.
Looking Forward
While some businesses participating in the hemp industry as it currently operates will be unlikely to survive the new legislation once it goes into effect, there are still some ways the new legislation could positively impact both hemp industry firms and consumers.
First, hemp industry businesses can, and now likely should, participate in state-level cannabis markets. While the regulations and licensing requirements under state-level cannabis programs are often more onerous than those currently imposed on the hemp industry, hemp industry brands do have the ability to pivot to manufacturing and distributing cannabis products to consumers in most states. Over the last five years, licensing arrangements for intellectual property and bespoke product formulations have become increasingly popular across state-level cannabis markets. As a result, existing operators in those industries should be amenable to working with hemp industry brands.
Second, the new legislation may herald a unified regulatory scheme at the federal level for cannabis, including the long-promised rescheduling of cannabis from Schedule I to Schedule III or lower by President Trump. Consumer sentiment in the United States is clear: a large swath of the population desires access to cannabis and cannabis products. What is not clear is how federal laws intersect with state laws, and how consumers may reasonably obtain cannabis and cannabis products. While the new legislation does, in a sense, provide some clarity by removing hemp products from the equation, it does not create reasonable avenues for consumers to access cannabis products, upon which a burgeoning industry had been started. That may change in the not-so-distant future.
Third, the new legislation will create a massive incentive for the hemp industry to rally around proposing unified regulations for federal-level acceptance. While the new legislation has already been signed into law and is set to go into effect in just under a year, there remains an opportunity to pass further federal legislation to reasonably regulate, and not outright ban, the hemp industry as it exists. To date, the hemp industry has been divided on the best regulatory scheme that could reasonably be implemented at the federal level, with special interests generally taking precedence over sensible propositions. This new ban may well create an incentive for the hemp industry to lobby sensible regulations in place of outright extinction.
What Hemp Industry Firms Can Do Today
The call to action created by the new legislation is clear: adapt and overcome. So what actions can hemp industry firms take today to prepare, adapt, and overcome?
- Ensure existing inventory that will no longer be legal once the new legislation is effective is distributed quickly.
- Begin developing product formulations that can survive under the new legislation once it becomes effective.
- Otherwise develop business models that can survive under the new legislation once it becomes effective.
- Begin developing relationships with state-licensed cannabis companies that can provide new market opportunities and allow hemp product brands to survive the ban. In the alternative, seek licensure under existing state-level cannabis programs.
- Collaborate with other hemp industry firms to propose sensible alternatives to the new legislation and take action in making their voices heard by their representative politicians.
- Monitor developments related to the new legislation, including agency action and state-level responses, to continue to adapt to changes rapidly and effectively.
In sum, hemp industry businesses should not sit back and wait for the new legislation to take effect. Instead, they should take what actions they can now to prepare, and, if possible, influence the new legislation before it becomes effective.
