The Federal Redefinition of Hemp: Impacts, Uncertainty, and Next Steps for Businesses
Congress has now effectively closed the “hemp loophole” that enabled an explosion of hemp-derived products — particularly beverages — falling outside traditional cannabis regulation. For companies manufacturing hemp beverages or other hemp-derived consumables, this legislative shift represents the beginning of the end of largely unregulated hemp products and thus marks a critical transition point. While the full implications will unfold over the next year, businesses should begin reassessing product portfolios, labeling strategies, supply chains, and long-term plans.
The 2018 Farm Bill and the Wild West Stampede
Under the 2018 Farm Bill, “hemp” was defined as follows:
“Hemp — the plant species Cannabis sativa L. and any part of that plant, including the seeds thereof and all derivatives, extracts, cannabinoids, isomers, acids, salts, and salts of isomers, whether growing or not, with a total delta-9 tetrahydrocannabinol concentration of not more than 0.3 percent on a dry weight basis.”
This definition carved hemp out of the Controlled Substances Act and allowed widespread commerce in hemp-derived products, including beverages containing cannabinoids other than delta-9 THC. Entrepreneurs quickly learned they could produce intoxicating effects using compounds like delta-8 THC, delta-10 THC, THCA, and semi-synthetic derivatives without violating the delta-9-only threshold, and began to aggressively market products containing these compounds.
The rise of these products dovetailed with a decrease in demand for alcoholic beverages — especially among younger cohorts — and sales flourished to the point where THC-infused beverages are now available in many traditional retail outlets nationwide. State regulators, caught flat-footed by the sea change, in many cases did not have the legislative authority, the enforcement resources, or the political capital to crack down on a burgeoning industry benefiting (in many cases) small-business entrepreneurs, despite valid safety concerns about certain “fly by night” products marketed to children or in other dangerous or misleading ways (e.g., products that claimed to be able to cure or otherwise address medical conditions).
The 2025 Appropriations Bill: A New Sherriff Comes to Town
The revisions to the 2018 Farm Bill definitions — snuck into the appropriations bill that reopened the federal government — are explicitly aimed at closing the perceived “loophole” that permitted the rise in THC beverages and similar products. The revisions did not change the basic definition of hemp but added several key exclusions to the definition. Now, hemp does not include:
(1) viable seeds from Cannabis sativa L. plants that exceed total THC concentrations of 0.3% in the plant on a dry weight basis;
(2) intermediate hemp-derived products that contain any of the following: (i) cannabinoids that are not naturally produced by the Cannabis sativa L. plant; (ii) cannabinoids that can be naturally produced by the Cannabis sativa L. plant, but that are synthetized or manufactured artificially (i.e., outside of the plant); or (iii) more than 0.3% of total THC or any other cannabinoids that have similar effects as THC;
(3) intermediate hemp-derived cannabinoid products that are marketed or sold as a final product or directly to an end consumer for personal or household use; and
(4) final hemp-derived cannabis products that contain any of the following: (i) cannabinoids that are not naturally produced by the Cannabis sativa L. plant; (ii) cannabinoids that can be naturally produced by the Cannabis sativa L. plant, but that are synthetized or manufactured artificially (i.e., outside of the plant); or (iii) more than 0.4 mg combined total per container of total THC or other cannabinoids that have similar effects as THC.
Importantly, the term “hemp-derived cannabinoid product” includes “any intermediate or final product derived from hemp” containing cannabinoids and intended for human or animal use by any means of application or administration, including inhalation, ingestion, or topical application.
This revision has two key effects. First, the law shifts from measuring only delta-9 THC to “total tetrahydrocannabinols,” including THCA, significantly reducing the number of products that can qualify as hemp. Second, it excludes cannabinoids synthesized or chemically converted outside the plant, which directly impacts delta-8 THC and other semi-synthetic cannabinoids that form the backbone of many intoxicating hemp beverages.
For hemp beverage companies in particular, the consequences are substantial. Many popular beverages currently rely on low delta-9 THC content but include other intoxicating cannabinoids to deliver psychoactive effects. Under the revised definition, these products may no longer be considered “hemp” at all and could instead be treated as controlled substances under federal law. This creates potential issues for interstate transport, distribution relationships, retail placement, and future manufacturing.
At the same time, FDA continues to maintain that CBD is not a permitted ingredient in foods or dietary supplements without further rulemaking. FDA and FTC have issued multiple joint warning letters targeting hemp-derived edibles and beverages — particularly those making health-related claims or using youth-appealing branding. As a result, companies now face pressure from both the narrowed hemp definition and the existing FDA regulatory framework for foods and beverages.
State law adds yet more complexity. Even before Congress acted, states were enacting rules governing intoxicating hemp products. California, for example, prohibits industrial hemp foods, beverages, and supplements with detectable THC from being sold outside the regulated cannabis market. Other states have adopted potency caps, licensing structures, age gating, and retail restrictions.
The new federal law does not entirely preempt these state schemes; instead, it raises the federal floor, meaning that some products may now be unlawful nationwide even if a specific state has historically tolerated them. Indeed, at a November 18 Attorney General Alliance conference in Scottsdale, AG presenters made clear that they intend to increase enforcement against hemp products being sold at retail outlets that do not conform to the new federal definition, with a particular focus on consumer protection advertising efforts. In a similar vein, the changes at the federal level have prompted several states — including Ohio and Illinois — to scrap proposed hemp THC regulations in favor of outright legislative bans.
How should industry players respond to the changes?
Against this backdrop, hemp product manufacturers should, at the very least, pause to reassess strategy for both the near-term and long-term. As things stand, the changes to the law are due to take effect November 12, 2026 to allow industry a runway to come into compliance. There is some argument for a “wait-and-see” approach: Congress is already under pressure from agricultural groups, hemp industry advocates, and certain state regulators to revisit the language or implement a more nuanced framework. Federal enforcement against intoxicating hemp beverages has been mainly limited to youth-appealing products or explicit disease claims. And the current market for hemp-derived THC beverages is profitable and growing. For some companies, continuing to sell during the transition period while preparing for potential reformulation or reclassification may be a commercially rational choice.
However, this approach is not risk-free. As noted above, state enforcement priorities appear to be shifting quickly, major retailers may begin delisting SKUs, and the supply of hemp and intermediate hemp products may decline in response to the changes at the federal level. Accordingly, a hybrid strategy — maintaining revenue-generating products in the short term while preparing long-term compliance options — may be the most sustainable path. To that end, there are several actions that companies in this space can take in the interim period:
- Conducting a portfolio audit, cataloging all cannabinoid content, calculating total THC/THCA per serving and container, and identifying any synthetically converted cannabinoids. Companies should assess which SKUs can plausibly remain within the revised federal definition and which will need reformulation or migration into regulated cannabis channels.
- Conducting a review of all marketing and labeling materials, removing therapeutic claims, implied mood or intoxication claims, and any youth-oriented packaging.
- Reassess supply chain and distribution agreements — with a particular eye toward termination-for-cause and force majeure provisions — as banks, insurers, major retailers, and logistics providers may revise their willingness to support hemp-THC operators.
- Closely monitor state-level developments, as states are expected to adopt a wave of new restrictions, testing requirements, taxes, and licensing obligations for hemp beverages over the coming year. For many companies, state rules — rather than federal enforcement — may become the immediate practical barrier to continued operations.
Finally, as this new change develops, rely on Foley to provide regulatory updates. Our attorneys can help guide business owners, investors and operators during these uncertain times.
