So Much for “Closing the Loophole”: How the Entire Hemp Industry Got Rolled and What Comes Next
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Shock. Grief. Dismay. Desperation. Just a few of the emotions I have encountered during countless phone calls and meetings with stakeholders in the hemp industry since the federal government enacted a law that would essentially ban all of the consumable hemp industry.
I have heard for years that Congress needed to “close the loophole” created by the 2018 Farm Bill. We’ll discuss the s0-called loophole below, but the short answer is that the new law goes further than simply closing the perceived loophole and, if it takes effect, would drastically limit the type and amount of consumable hemp that can be sold in America. Let’s discuss.
What Happened?
We previously described the recently passed Agriculture, Rural Development, Food and Drug Administration, and Related Agency Appropriations Act of 2026 (the “Agriculture Bill”):
[The Agriculture Bill] defines hemp as Cannabis sativa L. and any part of that plant, including seeds, derivatives, and extracts, with a total concentration of 0.3% THC (including — but not limited to — Delta 8, Delta 9, Delta 10, THCA, and THCV).
Unlike hemp’s definition under the 2018 Farm Bill, however, the Agriculture Bill expressly excludes certain intermediate and final versions of hemp-derived products. Legal hemp does not include hemp products that are not in their final form (intermediate products), or that are in final form (final products), and that 1) contain cannabinoids that are not capable of being naturally produced by a Cannabis sativa L. plant; or 2) contain cannabinoids that are capable of being produced naturally by a Cannabis sativa L. plant but were synthesized or manufactured outside of the plant.
For intermediate products, a total THC content of more than 0.3%, including any other cannabinoid that has an intoxicating effect on humans as THC, will take it outside of the legal protections afforded to hemp. The law prohibits the sale of intermediate products with a total THC content of more than 0.3% directly to consumers as a final product.
For final products, any direct-to-consumer packaging (such as cans, bottles, bags, or boxes) cannot contain more than 0.4 milligrams of total THC, including any cannabinoid that has or is marketed to have intoxicating effects on humans. Thus, not only must final products be below the 0.3% THC content restriction, they must also meet packaging restrictions, which will substantially impact THC contents and the final products’ production process.
Critically, the hemp provisions of the Agriculture Bill do not take effect for 365 days following enactment (i.e., November 11, 2026).
How Did This Happen?
If you haven’t heard the expression “close the loophole” when it comes to the hemp industry, I’ll provide a brief explanation from what we have previously written:
At the federal level, the Controlled Substances Act has defined “marijuana” for more than 50 years as:
The term [marijuana] means all parts of the plant Cannabis sativa L., whether growing or not; the seeds thereof; the resin extracted from any part of such plant; and every compound, manufacture, salt, derivative, mixture, or preparation of such plant, its seeds or resin. Such term does not include the mature stalks of such plant, fiber produced from such stalks, oil or cake made from the seeds of such plant, any other compound, manufacture, salt, derivative, mixture, or preparation of such mature stalks (except the resin extracted therefrom), fiber, oil, or cake, or the sterilized seed of such plant which is incapable of germination.
In the 2014 and 2018 Farm Bills, Congress created a legal definition of “hemp”:
the plant Cannabis sativa L. and any part of such plant, whether growing or not, with a delta-9 tetrahydrocannabinol concentration of not more than 0.3 percent on a dry weight basis.
Shortly after Congress created this separate definition of hemp, savvy (and, in some instances, unsavory) operators concluded that Congress had created a loophole of sorts that would allow for products that contained cannabinoids from the cannabis plant – even those with psychoactive or intoxicating effects – as long as the concentration of delta-9 THC on a dry weight basis is not more than 0.3%. It was this interpretation of the Farm Bill, replicated in the 2018 version, that led to the proliferation of consumable products containing delta-8 THC, delta-10 THC, and the like.
Ergo, the loophole.
“The loophole” has been widely incorporated into the cannabis vernacular. We expressed our opinion about whether the admittedly peculiar text of the prior Farm Bills created a loophole or was actually Congress’ intent:
In this author’s opinion, Congress did not intend in 2018 for the intoxicating hemp boom as we know it today. I also believe the Farm Bill on its face allows for many of the intoxicating hemp products we now see today, be it at a dispensary that resembles an Apple Store to a row of shelves at a gas station. I further believe that most legislators probably didn’t have the first idea of what they were voting on in 2018. Maybe that makes me a simpleton or maybe someone who can keep more than one idea in my head at the same time.
Those dual concepts pose an interesting challenge to those who consider whether one should look to the words of a statute or the intent of those who enacted the law. As a general principle, I tend to look to the former, but I certainly understand those who take the position that an unintended loophole should not be used to end-run legislative intent.
I guess there are some people out there who could argue that Congress knew it was creating an expansive legal hemp market, but (1) I haven’t seen many people whose opinion I value seriously press that argument, and (2) I would have expected Congress to create a regulatory framework to accompany this broad new category of intoxicating products.
Put simply, and this truly is not intended as a pun, the hemp industry got rolled. Actors in Congress (led by Mitch McConnell), encouraged by the marijuana and alcohol industries’ unease with the rise of hemp as well as those who believe for ideological reasons that hemp should not be available in intoxicated forms at traditional retail establishments, put language in the Agricultural Appropriations Act (which includes things like farm subsidies and SNAP benefits) and basically dared members of Congress to keep the government shut down to protect hemp interests. Of course, very few members of Congress were willing to do so.
Rand Paul tried, proposing an amendment that would strip out the hemp language from the appropriations bill. That amendment was tabled by a vote of 76-24. Minutes later, the Senate passed the Agriculture Bill. Two days later, it passed the House and was signed by the president only hours later.
What, If Anything, Can Be Done? Time Is of the Essence
For anyone looking to refine the Agriculture Bill – and to be clear, there are many who are perfectly happy with the existing language – that will require an act of Congress.
The clock is ticking. There’s just one year before the law takes effect. Is that enough time to convince Congress to change the law? Technically yes, as Congress can act quickly when it wants to. But there are a few complicating factors.
First, although the law will not take effect until November 2026, as a practical matter we can expect to see a dramatic reduction in the amount of hemp grown in 2026 if hemp farmers aren’t assured they will have buyers for their harvest in Fall 2026. That means that a change needs to take place by Spring 2026 in order to avoid substantial supply chain interruptions.
Second, is there the political appetite and will to take up the issue of hemp again in the coming month? Congressional staff has been inundated with meetings and information about hemp for nearly two years as part of the Farm Bill debate. It will take a major effort to get Congress to engage on this issue again so soon, but if enough members would like the opportunity to debate the issue without the sword of a shutdown hanging overhead, that may be enough to overcome institutionalized inertia.
Third, can the hemp industry come together to make a specific “ask” for what a legislative change should look like? Congress seems unlikely to allow high-THC products, and that could pit low-dose operators against those seeking high-dose products. It will be interesting to see if a sizeable group of operators can get together to push for a federal hemp program that is more regulated and less open than the industry is used to.
Fourth, can the hemp industry bring together additional stakeholders and fend off well-funded and well-organized challengers? The alcohol industry will be important to watch here given that many manufacturers are opposed to intoxicating hemp products they view as competitive to alcohol, which has been on a steady decline of late. Alcohol distributors, on the other hand, have with increasing frequency taken on hemp customers as a way to offset the decline in alcohol sales. And what, if anything, will marijuana operators agree to allow?
A Proposed Solution
The most straightforward way to simply “close the loophole” would be to do what the Agriculture Bill did in counting the THC content by measuring “total THC” but not the additional provision limiting products to a total THC content of 0.4%. The first provision is all it takes to close the loophole, which was widely understood to be a loophole that allowed THC other than delta-9 THC to be included in a product but not counted against the 0.3% THC on a dry weight basis. The second provision fundamentally alters the hemp landscape by essentially making it impossible to manufacture consumable hemp products, including broad spectrum CBD. That can only be considered closing the loophole to those who believe the 2018 Farm Bill was never intended to allow for any consumable hemp products and it contradicts statements of supporters of the Agriculture Bill who claimed that CBD would remain legal.
Conclusion
I’m not entirely sure a “loophole” ever existed but I think that it’s probably fair to say that it did. And based on that I believe it was reasonable for Congress to bring clarity to the issue, either by “closing the loophole” or codifying the hemp industry that had blossomed under the auspices of the prior Farm Bills, loophole and all. But Congress did not simply close a loophole when it passed the Agriculture Bill; rather, it overcorrected, and its provisions threatened to decimate the consumable hemp industry.
Maybe it’s because I loathe disingenuity, but something about this rubs me the wrong way as a matter more of process than substance. Congress used the appropriations process and the threat of keeping the government shutdown as a way of forcing through the hemp provisions of the Agriculture Bill. If Congress wants to make a policy change of that significance, it should go through the authorizing process, hear debate on all sides of the issues, and then have an up or down vote on the fate of an industry that impacts millions of Americans.
And, if it’s going to happen, it needs to happen fast.
Thanks for stopping by.
So Much for “Closing the Loophole”: How the Entire Hemp Industry Got Rolled and What Comes Next