This audio is generated automatically. Please let me know if you have any comments.
U.S. lawmakers on Wednesday closed a legal loophole that allowed food and beverage companies to offer hemp-derived THC products. It’s a win for the beer and spirits giants, which have been fighting a fledgling industry to maintain sales as alcohol consumption declines.
The new regulations severely limit the levels of THC, the main psychoactive ingredient in marijuana, allowed in hemp-derived products. Starting November 13, 2026, cannabis products can only be sold if they contain 0.4 mg or less of THC per container.
The move would mean eliminating 95% of the products produced by the $28.4 billion hemp industry, according to the U.S. Hemp Roundtable. Most hemp products on the market exceed the 0.4 mg threshold, and the trade group says products with lower THC levels are “very rare.”
Congress decriminalized hemp-derived products as part of the 2018 Farm Bill. It removed hemp from the list of controlled substances to increase farmers’ incomes and expand production of the plant, which can also be used in textiles and cosmetics. Food and beverage companies such as Cann and Wynk have used the law to flood the market with products containing delta-9-THC, a popular cannabis derivative made by chemically converting the CBD found in hemp into psychoactive THC.
The 2018 law stated that hemp could not contain more than 0.3% delta-9 THC on a “dry weight” basis, but did not specify what that term means for products such as gummies or beverages. As a result, a 12-ounce bottle of seltzer containing 10 mg of THC remains within the legal limit and still qualifies as hemp because it makes up just 0.3 percent of its weight, according to the Cato Institute.
Although some states have since decided to ban these derivatives, the delta-THC market is still much larger than traditional cannabis, which remains illegal for recreational use in 26 states. According to Brightfield Group, the U.S. hemp-derived psychoactive cannabinoids market was valued at just $200 million in 2020, but is expected to reach $3.8 billion by 2025.
The industry’s growth has come at the expense of the alcohol sector, which has suffered from declining consumption. More consumers have expressed concern about the negative health effects of alcohol and are now turning to mood-altering substances such as cannabis and other products with functional ingredients.
Some alcohol giants attempted to enter the THC market shortly after deregulation in 2018, but many have since pulled out due to complex regulations and lower-than-expected revenues. For example, Modelo brewer Constellation Brands distanced itself from cannabis grower Canopy Growth last year after investing $4 billion in the brand in 2018.
But those who remained in the space eventually began to gain momentum. This is especially true as more distributors and retailers, including Target, begin to carry the product. Canadian cannabis giant Tilray, which recently expanded its presence in hemp-derived beverages, reported record first quarter sales after years of struggles.
Tilray said it currently holds a 60% market share of hemp-derived products in North America and is the leader in Delta-9 THC beverages in the United States. The company is lobbying with other retailers to push for less restrictive limits on these products, saying hemp-derived THC provides low-dose options for consumers and encourages responsible consumption.
“We believe that bans and overly restrictive measures are ineffective because they push products and American consumers into the shadows and empower unregulated actors who sell high-dose, untested and unsafe products while undermining responsible operators who maintain consumer trust and product safety,” Tilray said in a statement.
Alcohol groups have been pushing hard for restrictions on hemp-based THC derivatives, with companies and trade associations organizing a lobbying blitz over the summer while lawmakers debated restrictions. The Beer Institute and other groups representing alcohol producers have urged lawmakers to close the loophole or legalize the product with stricter regulations and higher taxes.
“We stand ready to work with Congress and the Administration to enact regulations that protect consumers and ensure a safe and orderly market for these addictive products,” it reads.
