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Cloud Looming Over Hemp-Derived THC Market

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In the first days of the cannabis and hemp industries, there was a line drawn between the two–and that line was THC. While legal cannabis manufacturers focused their efforts on products that traditionally contained THC, the hemp side of the industry was built around the concept of creating CBD-infused products that didn’t contain any traces of THC, and therefore were not risky for consumers who worried about drug tests.

That has dramatically changed in the last year or so, with the growing popularity of the Delta-8 molecule. Naturally found in the hemp plant in small amounts, this component has similar high-inducing properties as Delta-9 THC, most Delta 8 in the market today is a lab-created isomer extracted from hemp-derived CBD.

While Delta-9 is highly regulated, Delta-8 is not…and therein lies the controversy. As the hemp industry seems to be side-stepping regulations while remaining legal, the cannabis industry is bracing for more regulations and rules to be instituted in the coming months to curb this new trend. These fears come as Congress begins to discuss the Farm Bill for 2023, and state legislatures hold annual sessions to revise laws.

Read on to find out more about the twists and turns of the hemp-derived THC market.

Hemp-Derived THC Market Sales Are Booming

In response to restrictions on lab-created delta-9 THC products, hemp manufacturers have concentrated the delta-8 THC found naturally in the hemp plant to create intoxicating foods, vapes, and tinctures. THC–containing hemp products, in an ironic twist, are frequently sold online and delivered across state borders with little of the taxes or safety standards required by marijuana manufacturers. 

“Being on the hemp side of the regulation, we’re able to operate in markets that are currently underserved due to lack of regulations,” Chris Fontes, CEO of Trojan Horse Cannabis in Commerce City, Colorado, explained. In other words, intoxicating hemp products are skirting the rules imposed on cannabis manufacturers and can reach new and untapped markets. This ability to work with–and around–the current regulatory framework allows them to stay in business.

The Clash of Delta-8 and Delta-9

The unexpected market success of delta-8 THC, an isomer of the more well-known delta-9 THC molecule generated when raw cannabis is burned, can be related to the emergence of intoxicating hemp products.

Many cannabis businesses were caught off guard by the D-8 explosion.

It also inspired a growing number of hemp growers to find possibilities in a cannabinoid they had previously dismissed. Hemp extracts naturally include delta-8 THC, albeit in far lower concentrations than marijuana extracts.

As mentioned previously, many hemp extractors traditionally remove THC from CBD products to emphasize CBD’s non-intoxicating properties and to appeal to customers who may be subjected to THC drug testing. But for some, the delta-8 THC explosion shifted their perspective.

Throughout 2021, states and marijuana advocates slammed delta-8 THC products as dangerous since they’re frequently made without regulatory monitoring through chemical CBD conversion. That got some in the hemp industry thinking: why not just concentrate and market the naturally occurring delta-8 THC in hemp extracts?

After all, a 5-gram gummy may contain 15 milligrams of hemp-derived delta-8 THC while still complying with federal regulations requiring no more than 0.3 percent THC by dry weight. And with CBD sales down, this new THC frontier for hemp products would ensure that hemp companies continued to stay in business and grow their target market.

Cannabis Industry Pushback

As hemp producers jumped on this golden market opportunity, there was pushback from the cannabis industry. The highly-regulated cannabis industry started feeling the competition–and saw the major discrepancy between their experience and the hemp market. 

Many marijuana businesses would love to sell their products online and send them across state lines without having to deal with the taxes and regulations that come with working with higher-THC varieties of the same plant.

Cannabis operators, like many others (including the aforementioned lawmakers), believed there was a significant difference between cannabis and hemp. And now they’re coming to terms with the fact that hemp is actually cannabis.

High marijuana taxes are keeping the black market alive. They put marijuana businesses under strain, preventing them from performing at their best. Meanwhile, the hemp industry isn’t feeling the same pressure.

RELATED READING: Clearing the Haze: Does the 2018 Farm Bill Legalize CBD in all 50 States or Not?

How Did This Loophole Happen?

On December 20, 2018, President Trump signed the Agriculture Improvement Act of 2018 (also known as the 2018 Farm Bill) into law. The 2018 Farm Bill included a broad range of provisions, including the federal legalization of hemp growing and sales, which took effect on January 1, 2019. This had far-reaching consequences not only for the hemp industry in the United States but also for cannabidiol-related businesses (CBD).

However, based on the assumption that the hemp industry’s focus remained on CBD and due to lawmakers being uneducated about the processes, the Farm Bill’s provisions remained very broad and didn’t account for the emerging trends in the hemp industry, including Delta-8 THC. Legislators didn’t look for input from existing operators during the regulatory process–and that is why they’re now in this situation.

What’s Next?

While marijuana operators want Congress to make some adjustments, providing hemp entrepreneurs a level playing field, they are concerned that marijuana opponents will push for a prohibition on any intoxicants derived from hemp. Instead of imposing the same taxes on hemp and marijuana, they suggest that a better alternative is to cut the tax on marijuana and make it more reasonable.

Hemp growers that produce delta-8 THC appear to be resigned to facing new restrictions on their operations.

When Congress changes the Farm Bill in 2023, it will be the first time the agricultural law has been updated since it approved statewide hemp cultivation in 2018. Any action by Congress on intoxicating hemp products would be an admission that not everyone who supported the 2018 Farm Bill foresaw how low-THC cannabis plants may be used.

Several states have already passed legislation requiring THC-derived hemp products to be regulated and taxed similarly to high-THC marijuana.

There will most definitely be changes made in the upcoming year in terms of regulations imposed on the hemp industry. THC-derived hemp products may take quite a hit. In the meantime, regulations are being changed and enforced at the state level. This should serve as a warning for businesses selling hemp D-8 products through the mail to carefully analyze each state’s legislation because there is no fast end to the confusing patchwork of state interpretations on how hemp can be used.

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