The U.S. hemp-derived cannabinoid market has swelled in total value, but the industry continues to face serious threats from a messy patchwork of state bans and regulations that are stunting growth and pushing production overseas, according to a leading cannabis economist.

“All this hysteria over cannabinoids is having a profound effect on the fiber and grain environment,” said Beau Whitney, founder of Whitney Economics, told Green Market Report in an interview.

Whitney’s analysis shows the hemp market, including CBD, THC, CBN, CBG and related compounds, has grown into a robust industry that now rivals legal marijuana markets. Two years ago, his firm calculated the total market for hemp-derived cannabinoids ranged from $21.3 billion to $35.8 billion, with a midpoint of $28.4 billion.

Of that total market, Whitney noted that “about $21 billion was available on the legal side and then about $7 billion was on the illicit side.”

Recent surveys conducted by Whitney in states, including Arizona, Illinois, Tennessee and Texas, validated these projections. “In states where I could get data and states that allowed for the sales, that’s where (the data is) really solid,” Whitney said. “They’re being confirmed as being conservative.”

While it isn’t an apples-to-apples comparison, since Whitney’s measuring total market potential for hemp against only legal sales in the marijuana world, the economist said it’s becoming nearly impossible to measure legal hemp sales accurately as state regulations constantly shift.

“Every time I turn around, a different state has a different proposal to ban all of this,” Whitney said.

As a result, Whitney’s firm focuses on measuring total market potential rather than solely legal sales. Still, he sees potential growth beyond current projections, especially with hemp-derived cannabis beverages making a splashy entrance to the market.

“Hemp-derived cannabis beverages, Delta-9 beverages, are coming on in a big way,” he said, noting these products are breaking out of traditional CBD shops and into “bars, liquor stores, restaurants and grocery stores.”

According to Whitney, legislative approaches to hemp cannabinoids have had unintended consequences across the broader hemp industry. The confusion also affects hemp fiber and grain sectors that have nothing to do with intoxicating products.

“Banks are debanking hemp fiber and hemp grain companies,” Whitney claimed. “Investors are pulling back on investment into the infrastructure.”

Whitney calculated that “the lost economic potential because of these legislatures was between $20 (billion) and $25 billion dollars.” He added that he’s “taken (his) acreage forecast through 2030 down by over 4 million acres.”

Whitney estimated “an impact to farmers of between $1 (billion) and $3.5 billion in revenue” in lost opportunities.

Licensed hemp acreage plummeted from 525,000 acres in 2019 to just 30,000 acres last year. That decline means there isn’t enough domestic acreage to support the hemp cannabinoid industry, potentially pushing manufacturing overseas.

“It’s driving manufacturers to China and to South America and Canada and anywhere else that can get CBD or CBD biomass,” Whitney said, which creates additional public safety risks as “Chinese CBD is laden with heavy metals.”

He said that the irony is that policies ostensibly designed to protect public safety might actually be increasing risks. “The whole legislative goal of having increased public safety … all their policies are running against that, and they’re actually increasing the public safety risk rather than decreasing it.”

Whitney has long advocated for product-level regulation rather than wholesale bans, suggesting age restrictions, testing requirements and proper labeling would be sufficient, “if it’s intoxicating.”

“That’s all you need to do,” he said.

Additionally, current regulatory approaches, he argued, are creating a false binary.

“The dispensary model for marijuana is failed. It’s an abject failure because it’s limiting people’s access,” he said. “Not everybody wants to go in there.”

Whitney also noted that declining commodity prices for corn, wheat, soybeans and other staple crops have driven farmers to seek higher-revenue alternatives. Hemp represents not only potential increased revenue per acre but also agricultural benefits – if the industry is actually allowed to develop.

“Hemp is a great rotational crop because it helps with the soil, it restores certain aspects of the soil, and it takes impurities out of the soil,” Whitney explained. He added that using hemp in rotation can increase output for subsequent soybean crops “on a significant per bushel level.”

Despite the challenges, Whitney still forecasts potential growth, projecting “a million acres in 2030, which is twice the size of it at its peak.”

Many have attributed much of the regulatory confusion to federal inaction, particularly from the FDA, which has taken a hands-off approach and created much of the uncertainty. Whitney expressed hope that the upcoming farm bill might provide greater clarity, though he noted the legislation “has been pushed out a number of times.”

A small bipartisan group of U.S. House of Representatives members on Thursday reintroduced the long-stalled STATES Act, a pro-marijuana bill that would both nullify the hated 280E tax provision for cannabis companies and also exempt states that have legalized marijuana from federal interference.

The bill, this time called the STATES 2.0 Act, was introduced by U.S. Reps. Dave Joyce (R-OH), Dina Titus (D-NV) and Max Miller (R-OH). Joyce also introduced a separate bill co-sponsored by House Minority Leader Hakeem Jeffries (D-NY) dubbed the PREPARE Act, which is designed to pave the way for federal marijuana legalization.

The first bill’s full name is the Strengthening the Tenth Amendment Through Entrusting States (STATES) 2.0 Act. If approved by both chambers and President Donald Trump, it would effectively remove states that have legalized marijuana from the jurisdiction of the federal Controlled Substances Act, reconciling legal tension between federal cannabis prohibition and state marijuana legality.

The bill would also nullify the 280E provision of the federal tax code for licensed cannabis companies in states with legalized marijuana markets, thereby allowing the industry to claim standard business tax deductions and saving companies billions of dollars in taxes per year.

Under the legislation, federal regulation of the national cannabis trade would fall to the Alcohol and Tobacco Tax and Trade Bureau and the Food and Drug Administration, meaning there would likely be a new federal regulatory framework for businesses that would apply to every state and U.S. territory that has legalized cannabis.

“We can all agree that the current federal approach to cannabis policy is not working. As President Trump has acknowledged, the existing policy has caused unnecessary harm and squandered taxpayer dollars by diverting law enforcement resources from combatting violent crimes,” Joyce, the co-chair of the Congressional Cannabis Caucus, said in a press release. “The STATES 2.0 Act remedies this issue by bridging the gap between federal and state policy to create a more logical approach to cannabis regulation that allows each state to put the policies in place that work best for their communities.”

Titus, the other co-chair of the Cannabis Caucus, said the STATES Act “ensures the federal government does not interfere with states or tribes that have chosen to legalize cannabis.”

“It’s time for national policy to catch up with the states or at least get out of the way,” Titus said.

The bill would also allow for interstate cannabis commerce, according to Shanita Penny, executive director of the Coalition for Cannabis Policy, Education and Regulation (CPEAR). Penny said the bill would also provide safe harbor for financial institutions, opening access to broader capital markets for marijuana companies.

“We hit on all the typical business concerns” with the new STATES Act, Penny said, adding that if the bill was to become law it would make the SAFE Banking Act unnecessary.

“This is that overarching federal framework that is going to ensure consistency across states for not only businesses … it’s an exciting bill for everybody involved,” Penny said.

That said, the measure’s chances of getting through both chambers of Congress and all the way to the president’s desk are unclear. In past years, most pro-cannabis bills have died in the Senate, even if they made it through the House of Representatives. Penny also noted that so far there’s no Senate version of the STATES Act this year.

“We don’t have a Senate companion bill. So before we can even talk about giving them an opportunity to move forward with this … we still have some work to do there,” she said. “While we certainly haven’t had any indications from Trump that there’s going to be action on this, what we have right now is an opportunity to reengage members… to make sure that when the administration gives us the green light, that we have a bill we can get passed and get onto his desk.”