Federal ban threatens to upend Minnesota hemp industry

Local entrepreneurs in the hemp THC market are bracing for a federal ban that could upend their industry.

Starting on Nov. 11, all products containing more than 0.3 percent hemp-derived THC will be considered marijuana under federal law, making it illegal.

Stakeholders and some members of Congress are attempting to delay or stop the ban from going into effect. The Trump administration is also lobbying Congress to delay the ban, and supports creating a framework to keep hemp THC products legal under federal law, according to several news reports.

“If November comes and you see no resolution, it will be bad,” said Todd Harris, co-founder of Plift, which makes low-dose hemp THC beverages. “Lots of people will lose jobs.”

Plift is based out of Austin, Tex. but has large operations in Minnesota, where Harris lives.

Tetrahydrocannabinol (THC) is the active ingredient in marijuana that causes intoxication. Hemp plants also contain THC, but at such low levels that they don’t cause intoxication on their own. However producers extract THC from hemp and create products that intoxicate.

Less than a decade since the federal government legalized hemp, Minnesota’s hemp-derived THC business blossomed into a $300 million a year industry employing more than 3,000 people, according to research from Whitney Economics. 

When the Minnesota Legislature legalized recreational marijauna in 2023, it also legalized and regulated hemp-derived THC products. That law will stay in effect after Nov. 11, but the federal ban will drastically change how the industry operates.

THC hemp products are ubiquitous in convenience stores, grocery stores, breweries and liquor stores in Minnesota. Marijuana products, however, are relegated to marijuana dispensaries. The ban may effectively push hemp products into the dispensaries, which Harris said would cut into hemp THC sales.

“While the market could still support it in theory, your retail channel dries up,” Harris told Sahan Journal. “The dispensary market does not have a big enough retail footprint to support the demand.”

The Minnesota Office of Cannabis Management, which regulates both hemp THC products and marijuana, does not track race or ethnicity  for businesses with cannabis or hemp licenses. But entrepreneurs of color like Harris, who is Black, said the lack of federal restrictions on hemp attracted them to the hemp industry.

Harris emphasized that hemp products like Plift beverages have lower dosages of THC than most marijuana products, appealing to consumers who don’t want higher-potency products like marijuana or alcohol.

“People enjoy having social alternatives to alcohol,” he said. “The realities of people drinking less still remain.” 

The federal ban came tucked in a spending bill last November to keep the federal government open. The provision to ban hemp came from Republican Sen. Mitch McConnell of Kentucky, who argued that the 2018 legalization of hemp created an unintended loophole legalizing intoxicating THC products. 

While McConnell has argued the ban is necessary for public safety, critics assert that it’s influenced by big players in the bourbon whiskey industry who are worried about competing with non-alcoholic drinks and other products made with hemp THC. 

Business incentives will disappear

Congress legalized industrial hemp in the 2018 Farm Bill. While this paved the way for the agriculture industry to grow hemp for products like clothing, paper and lotions, laboratory technology has advanced to the level where scientists and researchers are able to extract high levels of THC from hemp for recreational products. 

Hemp is a variety of the cannabis plant that carries just 0.3 percent of THC. In other words, hemp could not get people high by consuming the plant on its own. 

Unlike marijuana, hemp companies can sell their products across state lines and enjoy the same tax benefits that businesses can access for any legal product. That will change in November if the ban goes into effect. 

Should the ban go into effect, producers and retailers wouldn’t get to write off their expenses for tax benefits because hemp THC would be illegal, said Josh Collins, spokesman for the state cannabis office. 

Another hurdle that could arise is that banks are often hesitant to provide loans to businesses whose products are illegal under federal law. Banks are also unlikely to work with businesses that sell federally banned products, Collins added, meaning it’s likely that retailers won’t take credit card payments for hemp THC products, since banks have to process those payments.

Businesses that produce hemp THC products would also be barred from selling their merchandise outside of the state where they’re made. 

But Leili Fatehi, CEO of Crested River Cannabis Company in Morgan, Minn., which produces both hemp THC and marijuana products, isn’t worried about the ban.

“I’m not terribly concerned about a ban having a major impact on us for now,” said Fatehi, who was a lead lobbyist on the state’s marijuana legalization bill in 2023. “The majority of our business is in Minnesota. We have not been seeing retailers slow on purchase orders.”

The state cannabis office is preparing for a mass exodus of hemp license holders should the federal ban go into effect. The state license to sell THC products cost $250 per year, compared to $5,000 a year for marijuana retail licenses.

“We’re going to make it easy for them if they want out,” Collins said. “We’re going to have a simple way if they wish to surrender their license. If they need to show their bank they are no longer working with a hemp product, we’ll be happy to work with them to provide that.”

Large-scale alcohol distributors have lobbied for hemp THC bans, viewing the growth of non-alcoholic THC beverages and edibles as a threat to liquor sales. This comes at a time when adult alcohol consumers have fallen to 54 percent of the population, an all-time low. 

Yet, most microbreweries in Minnesota have the opposite stance. Recent trends against alcohol consumption and the rise in popularity of hemp THC products prompted many microbreweries to get into the industry. 

Roughly half of the 120 breweries that are members of the Minnesota Brewers Guild have joined the hemp THC business in recent years, either by producing their own THC beverages or selling third party THC beverages at their breweries, according to guild president Bob Galligan.

Minnesota’s microbreweries have not seen their beer sales return to prepandemic levels, and many rely heavily on hemp THC products, Galligan said. For example, Surly Brewing, one of the state’s most successful breweries, now produces more hemp products than beer products, and may have to close entirely if the ban goes into effect.

“That’s why we’re so gung-ho to protect it,” Galligan said of the hemp THC industry. “We’ve been lobbying much earlier than a lot of folks.” 

Bills in congress to delay ban

Industry players have been lobbying Congress to stop the hemp ban since it was signed into law last year. This culminated in a bill filed last month by Rep. Angie Craig and Kentucky Rep. Andy Barr. 

The bill would legalize and regulate hemp THC products similar to how the federal government regulates alcohol. That includes setting a minimum age of 21 for purchasing hemp THC products and letting the federal Bureau of Alcohol, Tobacco and Firearms and the Federal Drug Administration regulate aspects of the industry. 

The bill would also allow states to pass restrictions that are tougher than the federal regulations.

Barr’s support of the bill comes even as he touts himself as a champion of the country’s bourbon industry.

Both Barr, a Republican who represents central Kentucky, and Craig, a Democrat who represents the southern Twin Cities metro and parts of rural southern Minnesota, have hemp farmers in their districts who rely on the industry. 

“Minnesota farmers, businesses and consumers are already legally growing, manufacturing, selling and using hemp products,” Craig said in a prepared statement to Sahan Journal. “Minnesota led the charge in regulating legal hemp in a thoughtful and safe way, and now the federal government wants to pull the rug out from under them, putting thousands of Minnesotans out of work. That is unacceptable, and it is also bad policy.”

The Trump administration has signaled its support for Craig and Barr’s bill. Yet the bill has not had a hearing, and could face long odds to clear before the Nov. 12 deadline. 

In the meantime, U.S. senators placed language in a continuing resolution bill that would delay the federal hemp ban one month to Dec. 11. As of now, the U.S. House of Representatives companion bill does not include the same delay on the federal ban.

A continuing resolution bill must clear both chambers by Sept. 30 to prevent a federal government shutdown.