This story was republished with permission from Crain’s Cleveland Business.

Ohio is among a minority of states that have yet to regulate the sale of intoxicating hemp products, but there could be some growing momentum behind changing that.

These products include items like vape cartridges, edibles or gummy candies purportedly infused with compounds like Delta 8 THC extracted from legally grown hemp – the less intoxicating cannabis relative of marijuana – and THCA flower, all of which can be commonly found today at retail stores ranging from smoke or wellness shops to gas stations and purchased online.

Production of hemp, which is defined as having a concentration of less than 0.3% THC on a dry weight basis, was effectively legalized in the U.S. with the 2018 Farm Bill.

As Craig Schluttenhofer, a research associate professor at Central State University who specializes in hemp, explains, to make products with an intoxicating effect, manufacturers increase the volume of hemp-derived THC in those products to a level that could make the person using or consuming them feel a “high” that can be similar to the effects felt from marijuana.

Hemp-derived flower intended for vaping or smoking, meanwhile, often marketed as THCA flower, is a unique animal in its own right.

THCA is a compound – which can be extracted from hemp – that converts to THC once heated or combusted. But because current federal regulations do not consider THCA levels as a distinguishing factor between hemp or marijuana, these products exist in a legal gray area, enabling their sale by common retailers outside of the licensed marijuana industry.

Marijuana companies tend to want restrictions on intoxicating hemp because those products may undermine sales in their own industry, which is heavily regulated and intrinsically expensive to operate within.

The absence of relevant federal regulations or comparable state laws means that these intoxicating hemp products are not subject to the same testing and oversight compared to the licensed marijuana cultivators, processors and retailers.

There are also no age restrictions on these unregulated products, something that has been a concern for some lawmakers and Gov. Mike DeWine, who called for “quick action” to restrict the sale of intoxicating hemp to children nearly a year ago.

Jana Hrdinova, administrative director for the Drug Enforcement Policy Center at Ohio State University’s Moritz College of Law, which recently published a report with considerations for regulating intoxicating hemp in the state, feels like some regulations should be put in place to prevent minors from buying these products and to generally protect consumers as there presently no rules requiring hemp products to be tested to verify their contents or the presence of potentially harmful additives.

“At a minimum, we need to take care of the minimum age, and we need to take care of product safety, marketing to children and child-resistant packaging,” Hrdinova said. “To me, those are the basic four things the Ohio legislature needs to act on.”

Ohio is, in fact, behind on doing something here. According to the Reason Foundation, a California-based think tank, Ohio is among 21 states that don’t have some regulations on intoxicating hemp products. Those regulations vary by state and range from outright prohibition to regulating them similarly to marijuana.

“It is important that (intoxicating hemp products) stay out of the hands of minors, especially because, while we’re beginning to have some understanding of the long-term effects of THC, we don’t have that with these products,” Schluttenhofer said. “And it’s a very high risk for age groups that are still fundamentally developing physiologically as adults.”

There are currently four pieces of legislation in the Ohio statehouse aimed at regulating intoxicating hemp – two each in the House and Senate – but each varies in what they would accomplish.

One of those, Senate Bill 326, whose primary sponsor is Sen. Stephen Huffman, would outright ban the sale of intoxicating hemp in the state and set specific penalties for anyone caught selling the products to anyone younger than 21.

But Schluttenhofer cautions that an outright ban would have to be approached carefully as to not impact some other hemp-derived products.

“The challenge is, how do you balance (regulations) while – if they do decide to prohibit intoxicating products – not prohibiting some of these valid hemp products as well that people are buying and using for health purposes,” he said. “People don’t buy CBD products to get intoxicated, but for other health purposes.”

A group known as the Ohio Healthy Alternatives Association has voiced opposition to SB 326 based on concerns that it could impact small businesses and potentially result in the loss of some 20,000 Ohio jobs.

Not much is known about the OHAA, however. The organization seems to have only recently formed and has no website or readily available information about its purpose or members.

Crain’s reached out to the organization via email to learn more about it and request details around how it came up with its figures for potentially impacted jobs but has yet to hear back.

DEPC points out that there is “limited data on the intoxicating hemp industry in Ohio, though the Ohio Department of Agriculture reports that the number of farmers involved in hemp production is relatively small in the Buckeye State.”

And Schluttenhofer notes that while there are only a handful of hemp growers in Ohio, those who do grow the plant are primarily doing so for grain and fiber, not for the manufacturer of intoxicating products.

Whether any of the bills geared toward regulating intoxicating hemp gain traction before the end of this year, which will mark the conclusion of the current general assembly, is unclear.

“There are certainly competing interests in regulating hemp. You have a hemp industry and small businesses that sell hemp products, competing with a marijuana industry that sees themselves being undercut by intoxicating hemp products,” Hrdinova said. “But the thing I’m most concerned with is safety of products for anyone, whether 21 or 50 or 16. If you buy a product, it should be safe to use.”

CenTex CBD won its legal battle against LoneStar Farms and the jury gave the company even more than it originally asked for in damages. Law360 reported that the jury in the case sided with CenTex and awarded it more than $100,000 in damages when the company only wanted the $3,400 it spent with LoneStar returned.

The conflict began when CenTex, now known as Find Your Hemp, said it ordered 200 packages of cherry lemonade gummies from LoneStar with CenTex’s labels on the packages. CenTex says the order arrived in October 2022, but the product wasn’t as ordered. CenTex complained that the sugarcoating on the gummies was an “unusual green color” when it was supposed to be red. In addition, the testing on the gummies showed that the product had twice the THC potency that CenTex had ordered.

CenTex said in the complaint that it tried to return the product during the 10-day warranty period, but LoneStar stalled the response. Law360 reported that instead of accepting the return, LoneStar sent a cease-and-desist letter telling CenTex to only contact its legal counsel in November 2022, well outside the warranty period. That’s when CenTex filed a small claims court suit asking for the $3,400 it spent on the order.

LoneStar fought back

Rather than settle the claim, LoneStar filed a countersuit that said CenTex had violated terms of service and attempted to steal trade secrets by attempting to reverse engineer its gummies. Unfortunately for LoneStar, the jury believed CenTex. They found that LoneStar engaged in false and deceptive practices. The jury said that LoneStar caused CenTex damage and failed to comply with the warranty. They charged LoneStar for the following amounts to compensate CenTex for those damages:

• Loss of benefit for the bargain $9,994
• Out-of-pocket expenses $3,400
• Lost profits $6,594
• Conduct committed knowingly $95,722

Regarding the countersuit claims of trade secret theft, the jury found that LoneStar did not own the process for the rosin-based process used to design the gummies. Thus, CenTex could not have misappropriated LoneStar’s trade secret.

CenTex is owned by Judy Corrigan who has been practicing as a licensed professional counselor in Texas for over 20 years. According to the company’s website, after seeing how CBD helped her own mother, other family members, and friends, she developed a new passion for helping others with CBD. The website states that the products are carefully researched before they are offered in the store so that customers can have complete confidence in their purchases.

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CBD products were once buzzworthy in the hemp industry, but their lack of buzz has convenience stores and smoke shops shifting gears toward intoxicating hemp products, according to data from Management Science Associates.

MSA surveyed roughly 50 distributors and 15 of the top 21 wholesalers with information through October 2023.

CBD

CBD products exploded in 2021, but just as quickly came back down to earth in January 2022. The overall decline continued, despite a late bump in sales towards the end of 2022.

Between third quarter 2022 and third quarter 2023,  MSA found that CBD sales plunged by 68%. However, the number of stores carrying CBD products has grown from 80% to 83%.

Through October 2023, the top-selling CBD forms were gummies, vapes and topicals, accounting for 58% dollar share, according to the MSA data. “Moist/Snuff’s share has increased significantly vs 2022, while topicals and vape have declined,” the firm added.

The analysis from MSA suggests that consumers felt disillusioned by the grandiose promises of over-the-counter CBD. They purchased the products, but the items failed to resolve the issues that consumers bought them for. This hurt repeat business, and demand for CBD products dried up.

Deltas

Instead, stores have ramped up sales of intoxicating hemp products, characterized by Delta-8, Delta-9 and Delta-10 THC levels. In the same period analyzed above, total dollars for Delta-10 products via convenience stores and smoke shops grew by 57%. Delta-8 products grew by 58%, and hemp-derived Delta-9 products grew 450%.

The number of stores carrying these Delta-9 products has also grown. Just over one-quarter (26%) of the stores surveyed sold Delta-9 in 2022, but 33% of stores reported carrying the products by the end of the third quarter 2023.

This growth has attracted the attention of regulated cannabis companies who see the distribution channel as a great way to bring in additional revenue. Several have launched versions of these products through these channels while also selling regulated-THC products in dispensaries. Green Market Report previously wrote about companies that straddle both worlds, such as 1906 and Wana Brands, while the subject continues to divide the industry.

Independent stores lead the way for overall sales of intoxicating hemp products compared with chain stores. Chain stores beat independents when it comes to stocking CBD and Delta-10, but independents held a bigger share of the Delta-8, Delta-9 and THC-O products.

State sales

Sales for CBD products by state vary widely. For example, MSA reported that sales of the products in Louisiana grew by 150% and, in New York, they grew by 83%. In Rhode Island, however, they fell 215%, followed by Vermont, which fell by 130%, and Connecticut by 117%.

Texas was by far the leader with regard to sales in terms of units sold, followed by Kentucky in a distant. Ohio rolled in at third place – though whether it maintains that position with adult-use now legal remains to be seen.

Intoxicating hemp stores are seemingly everywhere in Texas, which has an extremely restrictive medical marijuana program. The state even allows minors to buy the intoxicating hemp products, while the politicians continue to fret over adult-use cannabis.

A ban on intoxicating hemp has been proposed in Texas, but it hasn’t progressed. In the meantime, these smoke shops and convenience stores are happy to ring up sales.