$30B Hemp-Derived THC Industry Due For Decimation Under New Federal Amendments

Summary

The U.S. Government has accomplished what seemed unfathomable mere months ago, passing legislation amending the 2018 Farm Bill to narrowly redefine legal hemp and sharply restrict hemp-derived THC products. Fueled by a sense of urgency felt by many legislators to end an unpopular government shutdown, the hemp ban was able to piggyback into law on a massive appropriations bill, encountering less resistance than a standalone bill banning hemp THC products would have faced.

Section 781 of the Continuing Appropriations, Agriculture, Legislative Branch, Military Construction and Veterans Affairs, and Extensions Act of 2026 (the "2026 Appropriations Act") amends 7 U.S.C. § 1639o to replace the former delta-9 THC metric with a total THC standard (including THCA), bans synthetic and converted cannabinoids from the hemp definition, regulates intermediate and final cannabinoid products, and imposes a 0.4 mg per-container cap on total THC-class cannabinoids. While the amendments don't take effect for one year after enactment (i.e., November 12, 2026), the impacts are already starting to be felt by the hemp-derived THC industry.

Key Changes

• Hemp must now have ≤ 0.3% total THC (including THCA) on a dry-weight basis. The prior definition only looked at delta-9 THC.
• Converted or synthetic cannabinoids (e.g., delta-8, delta-10, HHC, THCP, THC-O, etc.) are excluded from the definition of hemp.
• Intermediate cannabinoid materials (distillates, isolates, concentrates) are regulated and can be excluded.
• Final hemp-derived products intended for human or animal use are capped at 0.4 mg per container of THC-class cannabinoids.
• The term "container" is defined as "the innermost wrapping, packaging, or vessel in direct contact with a final hemp-derived cannabinoid product in which the final hemp derived cannabinoid product is enclosed for retail sale to consumers, such as a jar, bottle, bag, box, packet, can, carton, or cartridge," but excludes "bulk shipping containers or outer wrappings that are not essential for the final retail delivery or sale to an end consumer for personal or household use." Within 90 days of enactment (i.e., by February 11, 2026), the FDA is tasked with publishing "additional information and specificity about the term 'container'."
• HHS may treat additional cannabinoids as THC-like if they have—or are marketed as having—similar effects.

Practical Impacts

• High-THCA flower will no longer qualify as hemp under federal law.
• Synethically derived cannabinoids like delta-8, delta-10, HHC, THCP, and THC-O, lose hemp status and face controlled-substance risk.
• Hemp-derived THC beverages and edibles must fall under 0.4 mg per container, well below the THC concentration of intoxicating drinks on the market.
• Many full-spectrum CBD ingestibles will require reformulation or discontinuation.
• Industrial hemp (fiber, grain, seed, research) remains largely unaffected.

Who Is Affected

By banning a nearly $30B industry that had previously operated, well, legally, the 2026 Appropriations Act will be felt by so many businesses, including major retailers like Target, delivery services like DoorDash and Edibles.com, and most of the alcohol industry. Among others, the ban will impact:

• Brands and manufacturers of hemp-derived edibles, beverages, vapes, tinctures, topicals, and pet products
• Processors producing distillates, isolates, and converted cannabinoids – including craft brewers who had expanded their offerings in recent years to include hemp-derived THC beverages
• Distributors, wholesalers, and retailers of intoxicating hemp products, including many alcohol industry operators that expanded their product lines to include hemp THC beverages
• Testing laboratories and contract manufacturers
• Investors and lenders exposed to hemp-derived THC revenue streams

But Really, How Big Are the Risks for Operators?

As many commentators have pointed out, the 2026 Appropriations Act provides no funds for enforcing the new ban on the hemp-derived THC industry. Given that many in the industry already operated in a murky area where their products did not comply with the Federal Food, Drug, and Cosmetic Act (FFDCA) or with FDA guidance (largely relying on a lack of enforcement), what is actually changing?

Probably a lot is changing. Despite that non-compliance, the hemp THC industry was able to flourish because the 2018 Farm Bill removed many hemp-derived products—including all products derived from cannabinoids other than delta-9 THC and products with a delta-9 THC concentration of not more than 0.3% on a dry weight basis (thereby excluding most hemp beverages)—from the Controlled Substances Act. Legal challenges to products falling outside the 2018 Farm Bill's relatively narrow definition of illegal hemp kept failing, as court after court found the plain language of the 2018 Farm Bill preempted state efforts to exclude hemp-derived products. Unless hemp industry lawyers come up with some clever new arguments, perhaps around the definition of a container, those cases are going to start coming down the other way.

While enforcement may remain patchy, companies selling hemp-derived products that are slated to become illegal starting in November 2026 may find it harder to buy insurance, take out loans, or raise money. Larger alcohol and retail companies that previously were willing to dip a toe (or leg) into the hemp-derived hot tub may shy away from this industry. On the other hand, this is a $30B industry! Alcohol consumption is down and demand isn't going away. Multiple proposals on Capitol Hill would re-legalize hemp or even de-schedule cannabis entirely. We have a year until the ban takes effect, and only time will tell.

Action Items for Impacted Businesses (Next 3–6 Months)

1. Join industry organizations lobbying to reverse this ban.
2. Audit product lines and identify any intoxicating hemp products (THCA, delta-8, etc.).
3. Engage labs to re-test products under total THC (including THCA) standards.
4. Develop contingency plans to wind down or reformulate non-compliant SKUs before November 2026.
5. Amend supply and manufacturing agreements to require 2026 Appropriations Act compliance and indemnities.
6. Tighten marketing language to avoid "similar effect" THC claims.
7. Consider whether certain products should move into state-licensed cannabis channels instead of hemp.

If your business manufactures, distributes, or sells hemp-derived products, now is the time to assess how these federal changes may affect your operations.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.