The proposed ban was included in the bill Congress passed to end the government shutdown. The Farm Bill had removed hemp as a controlled substance under the Controlled Substances Act (CSA). Since the bill’s passing, federal law has allowed for hemp that contains less than 0.3% of THC to be infused into products like cocktails and gummies, ushering in an explosion of new businesses. But now, brands across the category are preparing for potential shifts in their business models.

In the days since Congress passed these proposed changes, companies that sell THC-infused products have reacted in various ways. Some executives at these companies have expressed outrage over the crackdown, saying that their products will disappear overnight should the Farm Bill rollbacks go through. Others, however, find this year-long window as an opportunity to work with lawmakers to help regulate these products in a way that they believe will benefit the industry overall.

A ban that threatens a booming category

THC-infused aperitif brand Artet, founded in 2019, bills itself as the THC beverage built for the “modern bar cart.” The day after the proposed ban, Artet addressed its customers, stating that “it’s business as usual,” for now.

“Should the law take effect as it is written, brands will fold and disappear,” the company announced. “Laws like this signal the beginning of negotiations. The legislation that was signed last night is unreasonable, poorly-written, and disliked by elected officials on both sides of the aisle.” The company also assured customers that the ban is likely to be challenged and changed into a set of regulations that determine what kind of THC drinks can be produced and sold across the country.

Xander Shepherd, co-founder of Artet, told Modern Retail that the brand isn’t planning to rush into a non-THC-infused version of its aperitif simply to sidestep regulatory uncertainty.

“We’d need to be motivated by something more inspiring and positive than the prohibition of our active ingredient,” Shepard said. He added that the company’s goal for the rest of the year is to continue to educate customers on THC spritzes and aperitifs. “We feel that providing a good example for consumers and legislators is one way we can help undo this potentially looming prohibition,” Shepard said.

A ban on hemp-derived THC could also threaten the wellness industry, as many brands producing THC-infused products have positioned themselves as a healthier alternative to vices like alcohol and prescription medications.  

Jaime Alefosio, founder of THC-infused gummies brand Hey Mary Jane, believes the regulatory shift will have the biggest implications on small businesses and consumers interested in THC as a wellness solution.

“Natural full-spectrum hemp is not the problem,” Alefosio said. “Bad chemistry and bad actors are.” Alefosio said the new THC limits would punish companies that want to provide functional products because they would take market share away from alcohol and pharmaceuticals. “This is the wellness issue no one is talking about,” she said.

A chance to work with regulators 

Since the 2018 Farm Bill passing, critics have pointed to the lack of federal oversight of THC-derived food and beverages. Regulation of dosages has been largely left to states over the past few years. 

Indeed, some THC brand founders are welcoming the regulations of hemp-derived THC.  

1906, which sells both low-dose hemp and cannabis tablets and edibles, operates in state-licensed cannabis and hemp-derived product markets. The company currently sells in its licensed dispensaries in Illinois, Oklahoma, Missouri, New Jersey, New York and Massachusetts. 

Peter Barsoom, chairman and co-founder of 1906, said the company’s model is atypical, as most hemp-infused beverage and edibles brands do not also operate cannabis businesses with state-specific infrastructure. So, if the new hemp regulations go into effect, the company has state-licensed cannabis channels it can scale. 

“That said, this absolutely impacts us,” Barsoom said. For one, the state market isn’t a perfect substitute for hemp products, as it’s more expensive to operate in and has fewer consumer sales points. “To be direct, hemp represents over 60% of our revenue and is our primary growth driver,” Barsoom said. “It’s where consumer demand is strongest and where distribution is easiest.”

Barsoom also pointed to the support from alcohol distributors and wholesalers, which currently have more political capital to leverage than the cannabis industry. “More than 50 alcohol distributors and wholesalers have publicly opposed this ban and are urging Congress to regulate hemp like alcohol,” Barsoom said. Distributors and retailers like Total Wine that have taken on hemp-derived THC products in recent years will also be impacted by a sudden hemp ban, as this category represents a big growth opportunity for them.

Southern Crown Distributing, a wholesaler in the Southeast, published a letter to Congressional leadership urging members to keep THC beverages legal and regulated. The letter was co-signed by 54 beer distributors across 26 states, which Southern Crown Distributing says represents $13 billion in annual revenue and 20,000 employees.

THC cocktail brand Gigli, which has sold 6 million cans to date, is another brand that’s eagerly awaiting the official federal ruling on hemp THC products. The brand sells in 4,000 stores and 500 restaurants, including through national partners Target, Circle K, Total Wine and GoPuff. Gigli is on track to surpass $10 million in annual revenue this year, but its future business could be in jeopardy. 

However, founder and CEO Kam Talebi isn’t too worried about the so-called crackdown on products like Gigli. “I don’t see this as a ban,” but rather a year for the industry to work with legislators, Talebi said. According to Talebi, this is a chance for brands in the category to help develop and implement reasonable regulations that protect the category with safe products that maintain consumers’ trust.

1906’s Barsoom foresees the best outcome to be sensible federal regulation of hemp, which includes 21-plus ID checks, mandatory product testing and clear labeling. “Regulate us like alcohol, don’t ban us,” Barsoom said. “That protects farmers and consumers.”