On November 12, 2025, as part of the spending package to reopen the federal government (H.R. 5371), Congress enacted significant changes to the federal definition and regulation of hemp. These amendments amount to the most consequential shift in federal hemp policy since the 2018 Farm Bill legalized hemp and hemp-derived cannabinoids.
The legislation narrows what qualifies as federally legal hemp, effectively prohibiting most intoxicating hemp products currently sold in the U.S. marketplace (e.g., hemp-derived tetrahydrocannabinol (THC) gummies and beverages). Although the law includes a one-year transition period (i.e., the ban does not go into effect until November 2026), industry participants must prepare immediately for significant operational, financial, and regulatory changes.
One of the major questions coming out of this ban is: Will it actually be enforced? As many in industry know, the U.S. Food and Drug Administration (FDA or the Agency) has been saying since before the 2018 Farm Bill was enacted that adding THC to food and beverage products is illegal. However, absent aggravating circumstances like making robust therapeutic claims, marketing to children, or copycatting popular food product brands, most hemp-derived THC brands have not heard from FDA. It remains to be seen whether the federal government will actually enforce this new ban or, if similar to the marijuana industry, regulation and enforcement will be left to the states.
KEY PROVISIONS OF THE NEW LAW
Redefinition of "Hemp": Hemp is no longer assessed solely by its delta-9 THC concentration. Instead, Congress adopted a "total THC" standard. In other words, all THC — regardless of form or whether it converts into delta-9 THC — now counts toward federal limits.
Implementing a Strict THC Cap for Finished Consumer Products: Any finished product intended for ingestion, inhalation, or topical application must contain no more than 0.4 milligrams of total THC per package. This threshold is so low that nearly every intoxicating hemp product currently sold at retail — including edibles, beverages, smokable products, vapes, oils, and capsules — will exceed it and will therefore be banned.
Banning Synthetic or Converted Cannabinoids: Congress also excluded from the definition of hemp any cannabinoid that is not naturally derived from the plant. This effectively eliminates the legal status of converted cannabinoids such as delta-8 THC, delta-10 THC, HHC, THCP, and similar compounds that are typically produced from CBD isolate through chemical conversion.
Restricting on Intermediate Materials: Work-in-process hemp extracts and intermediate materials with THC concentrations above the hemp threshold may no longer be handled or transferred under the hemp framework if they are intended for consumer products. This portion of the law tightens the supply chain and imposes new restrictions on extractors.
One-Year Transition Period: The changes are not immediate. The "ban" becomes fully effective one year from enactment (unless amended), giving the industry a transitional window through late 2026.
IMMEDIATE IMPLICATIONS FOR THE INDUSTRY
A Substantial Portion of the Hemp Market Is Implicated: The U.S. hemp industry has grown rapidly since 2018 on the back of hemp-derived intoxicating cannabinoids. Some estimate the intoxicating hemp market to be a $30+ billion industry The newly adopted definitions effectively unwind this segment of the hemp industry.
Most existing intoxicating hemp products will simply not be able to meet the new THC limits. In particular:
- Edibles and beverages routinely contain multiple milligrams of THC per serving.
- Vape cartridges and smokable products typically include THC concentrations far above the new federal threshold.
- THCA flower, which converts to delta-9 THC when decarboxylated (i.e., heated), will no longer fall within the hemp definition once total THC is considered.
Increased Regulatory and Enforcement Risk: As these products lose their status as federally legal hemp, they may be treated similarly to federally illegal marijuana. States may choose to ban these products, or may choose to regulate them similar to existing state-licensed marijuana products. Although enforcement actions may vary across jurisdictions, the risk profile for manufacturers, distributors, and retailers could increase immediately and will continue to escalate as the effective date approaches. As noted above, though, an open question is whether this latest ban will actually be enforced.
Financial and Supply Chain Disruptions: Businesses that specialize in high-potency hemp-derived cannabinoids will face the greatest disruption. Extractors, manufacturers, wholesalers, and retailers may experience:
- Loss of major product lines
- Contract renegotiations or terminations
- Reduced access to banking and insurance
- Potential declines in valuation or investment
- Reduced access to or increased cost of capital
States that have relied on the economic activity and tax revenue from the hemp-derived cannabinoid sector may also experience financial impacts.
Political and Public Health Drivers: The federal shift reflects a growing political concern regarding the rapid expansion of intoxicating hemp products, particularly those marketed in formats appealing to younger consumers. Congress appears focused on tightening gaps between hemp and marijuana laws and enabling greater regulatory oversight over psychoactive products.
LONG-TERM INDUSTRY IMPACT
Reshaping of the Hemp Sector: The law will likely reduce the size of the consumer-facing hemp industry, especially in states that allowed broad commercial activity with intoxicating cannabinoids. Many companies may transition to one of the following models:
- Production of non-intoxicating hemp products such as most CBD, CBG, CBN, and wellness-oriented formulations
- Diversification into industrial hemp, including fiber and grain markets
- Entry into state-regulated marijuana markets that permit adult-use or medical marijuana
Effects on Cannabis Industry: Licensed cannabis businesses may see increased demand as consumers who previously bought intoxicating hemp products turn to state-regulated marijuana channels. However, that shift is not guaranteed. If federal and state rules remain restrictive, an illicit market could expand to meet consumer demand.
Constraints on Innovation: The ban on converted cannabinoids limits the research and commercialization of many emerging compounds. Novel cannabinoid development will likely slow unless future legislation carves out a pathway for research institutions and regulated laboratories.
Fragmentation Across States: States will likely need to update their own hemp programs to match federal definitions. Some states may move quickly; others may delay or resist. This will create a patchwork of enforcement until the new federal standards fully take effect.
OPPORTUNITIES AND NEXT STEPS FOR HEMP OPERATORS
Although the legislation poses clear challenges, businesses that act strategically can position themselves for long-term stability. There are a number of steps hemp operators can take during the transition period:
Conduct a Full Product Review: Assess every product to determine:
- Total THC per package
- Whether any active ingredients are converted or synthetic
- Whether production processes involve intermediate materials that will no longer be permissible
Businesses should begin planning now for product discontinuation or reformulation.
Reevaluate Business Models: Companies could also consider diversifying into:
- Non-intoxicating hemp products, wellness formulations, and CBD categories
- Industrial hemp fiber and grain, which remain unaffected
- State-regulated cannabis markets, if licensing and operations are feasible
Strategic pivots may require new capital, operational restructuring, or modified supply-chain relationships.
Strengthen Compliance Infrastructure: The new framework will require:
- Updated standard operating procedures (SOPs) for extraction and manufacturing
- More rigorous testing and documentation practices
- Revised labeling, marketing, and packaging standards
- Reassessment of inventory management and distribution practices
Operators should consider implementing transitional compliance measures now, rather than waiting for the effective date.
Get Involved in Legislative and Regulatory Advocacy: The industry will likely pursue legislative amendments or regulations in an effort to avoid a complete intoxicating cannabinoid prohibition by the end of 2026. Operators should work with trade associations, state regulators, legislators, and legal counsel to:
- Advocate for reasonable THC thresholds
- Encourage age-gating, testing requirements, and packaging standards as alternatives to outright bans
- Support pathways for safe, regulated access to lower-dose products
Many within the hemp industry have already begun to advocate for regulation as opposed to the total prohibition created by this action.
Prepare for Financial and Contractual Adjustments: Businesses should:
- Revisit revenue projections for 2026 and beyond
- Address potential contract changes with suppliers and distributors
- Communicate proactively with investors and lenders
- Evaluate potential claims or exit strategies in long-term agreements tied to now-restricted products
- Review lease considerations that may be impacted by a pivot or reduction in business
Mitigate Legal Risk: As the effective date approaches, companies should:
- Develop plans for dealing with remaining non-compliant inventory
- Reassess interstate shipment practices
- Evaluate exposure under federal controlled substances laws
- Closely monitor state enforcement trends
CONCLUSION
Congress's adoption of stricter definitions and prohibitions surrounding intoxicating hemp products represents a fundamental realignment of federal hemp policy. For many operators, the changes will require substantial strategic and operational adjustments. At the same time, the one-year transition period gives businesses a critical window to reorganize, pivot, and advocate for more workable regulatory approaches.
Our team is available to discuss how these changes affect your specific product lines, operations, and future plans, and to assist with compliance, advocacy, restructuring, or transitions into regulated cannabis markets.
