Unless you’ve been living under a rock, you know that “THC beverages” derived from hemp have exploded across America (at least in states where they are allowed by law). Time and again, due to the legal ambiguities and limitations posed by the 2018 Farm Bill, the THC beverage industry has advocated for regulation at both the state and federal levels. While certain states are eager to regulate this segment of the cannabis industry (see Minnesota, for example), others are not, and Congress has yet to take meaningful action on regulation.

However, we’re now seeing increased advocacy from certain factions of the alcohol industry when it comes to proposing federal regulation for THC beverage makers and sellers. At this point, it is anyone’s guess whether Congress will take action on THC beverages, or whether the federal government will continue to allow states to take the lead (we hosted both Adam Terry, CEO of Cantrip, and Chris Lindsey, Director of State Advocacy and Public Policy for the American Trade Association of Cannabis and Hemp, on the Cannabis Law Now podcast, and they offered differing opinions on how Congress might proceed). In any case, many THC beverage companies aim to operate and be treated similarly to those in the alcohol industry, so they would be wise to pay close attention as alcohol wholesalers, distributors, and retailers walk the halls of Congress promoting federal frameworks that could significantly impact their business models.

The WSWA and Federal Cannabis Regulation

The Wine & Spirits Wholesalers of America (WSWA) maintains a standing post on its website under the “federal issues” tab discussing regulation of the “adult-use cannabis supply chain.” In that post, the WSWA released a set of “Principles for Comprehensive Federal Legalization and Oversight of the Adult-Use Supply Chain,” dated March of 2023. The WSWA’s general stance is that the shared state-federal framework that governs alcohol and promotes product safety, industry innovation, and consumer choice is a great fit for adult-use cannabis. The WSWA proposes a basic federal permitting system guided by four principles:

1. The permitting of cannabis producers, importers, testing facilities and distributors;
2. The approval and regulation of cannabis products;
3. The efficient and effective collection of federal excise tax; and
4. Effective measures to ensure public safety

Notably, the WSWA’s 2023 principles do not specifically address regulation for hemp-derived THC beverages.

A Federal Proposal for the Regulation of THC Beverages

In April, however, the WSWA lobbied Congress specifically for the regulation of hemp-derived THC beverages. In a press release, the organization takes the position that “a comprehensive federal regulatory structure is critical to ensuring public safety, setting industry guardrails, and establishing a level playing field for all stakeholders.” As part of its advocacy, the WSWA stressed to members of Congress the need for an alcohol-like distribution system for THC beverages.

The WSWA also seeks to establish “a prohibition on synthetic hemp-derived THC intoxicating products; federal standards for testing and labeling hemp-derived beverages; and state authority to regulate distribution and retail sales.” The WSWA advocated that the next version of the Farm Bill should “explicitly allow for the production of only naturally derived THC products from hemp (specifically Delta-9) while explicitly granting individual states primary authority to regulate distribution and retail sales, including state level prohibition, to consumers over the age of 21 within their own borders.”

This isn’t the first time WSWA has advocated for federal reform and THC beverages. For example, when the “Mary Miller Amendment” to the Farm Bill emerged in the summer of last year, the WSWA quickly supported regulation over prohibition for intoxicating hemp products.

THC Beverages Exist in a “Regulatory No-Man’s Land”

The WSWA represents only a portion of the alcohol industry, so it does not speak for all stakeholders when it comes to intoxicating hemp. However, the WSWA ultimately feels that adult use cannabis and intoxicating hemp products should be treated the same under federal law, advocating for a state-federal framework similar to that of alcohol. This may indeed represent the future of the THC beverage industry. At Access Live (a wine and spirits trade show) in January of last year, in response to THC beverage companies attending and showing their products, Francis Creighton, who has led the WSWA since September 2022, was quoted in a Q&A interview saying:

“Our beverage alcohol industry is the most innovative in the world. We respond to consumer cues and anticipate its needs. And in a world where hemp and cannabis products are becoming more and more accepted, we have to roll with those market changes.

Now, hemp-derived beverages sit in a regulatory no-man’s land. To be clear, we believe all cannabis and hemp products should be regulated in the same way alcohol products are — and especially for public health and public safety reasons, we should have some regulatory certainty.”

Other Alcohol Industry Advocacy on THC Beverages

The WSWA is not the only alcohol industry trade group with a strong opinion on THC beverages (and adult-use cannabis). The Beer Institute and the American Beverage Licensees (ABL) have also made their voices heard on Capitol Hill when it comes to regulating THC beverages.

As the THC beverage industry continues to grow and innovate (assuming Congress does not completely upend the industry with the next Farm Bill), it is likely that more alcohol industry lobbying groups will take public stances on the matter. Between individual state organizations and national groups, there are likely hundreds of alcohol industry advocacy organizations in the U.S. While the WSWA, Beer Institute, and ABL do not represent the entire alcohol industry, there is emerging consensus among them that a federal framework similar to alcohol regulation should be imposed on the THC beverage industry. They argue that principles such as public health and safety, strict government oversight, and consumer confidence should guide the way.

Best Practices for THC Beverage Companies

Existing THC beverage companies are already navigating state-specific regulations as they emerge. At the same time, if a state has no regulation or maintains a very loose regulatory framework, these companies are likely already borrowing best practices from the alcohol industry when it comes to packaging, labeling, and consumer transparency and safety. Still, best practices are not usually a band-aid or defense from consumer protection claims, products liability, or government audits and investigations.

If you’re engaged in the production and/or sale of THC beverages, you’d be wise to ensure that you first comply with applicable state laws but also that your “best practices” aren’t creating unintended liabilities just because you’re borrowing from the alcohol industry. While certain trade groups in the alcohol industry lobby for THC beverage regulation at the federal level, unless and until that actually lands, THC beverage companies are on their own legally speaking in the regulatory no-man’s land described by Mr. Creighton and should approach their operational and legal practices with caution.

For more information about legal planning for your THC beverage business, contact Hilary Bricken, Brent Salmons, or your Husch Blackwell cannabis attorney to help you navigate the evolving legal landscape and its implications for cannabis and hemp businesses.