Will Hemp "Loophole" in Farm Bill Get Closed?

The 2018 Farm Bill legalized the production and sale of hemp and hemp-derived products in the U.S. An important element of the legislation set the limit for THC, the psychoactive chemical in cannabis, at no more that 0.3% of any hemp product’s volume.

The distinction from marijuana, which remains a controlled substance due to its elevated THC content, has helped the industrial hemp market grow to an estimated $1.63 billion in 2023, according to Grand View Research.

But here's a growing issue that many have framed as a loophole: Select chemical processes can convert otherwise compliant hemp into psychoactive THC. This has resulted in:

• Untested and unreliable cannabis-like products in the market from producers regulated by the U.S. Department of Agriculture—not the U.S. Drug Enforcement Administration
• A proliferation in all states of hemp-derived THC edibles
• Deceptive labeling of cannabis products as hemp products in states where cannabis is not legal

The heightened buzz around the issue stems from a September 30 deadline for the U.S. Congress to pass a new Farm Bill, an outcome that is clouded by government misalignment:

• The U.S. House Committee on Agriculture passed a 2024 Farm Bill that established restrictions on psychoactive THC from hemp
• The U.S. Senate Committee on Agriculture, Nutrition, and Forestry’s proposed 2024 Farm Bill did not add any new restrictions on hemp-derived products
• States including California, Florida, South Dakota, and Texas have stepped into the regulatory void with proposed or passed legislation that aims to ban/restrict hemp-derived THC products
• With no action—always a possibility in an election year—the 2018 Farm Bill authority will be extended until September 30, 2025

As federal legislators work through the new version of the Farm Bill (or not), we are constantly gauging the impact on operators and investors, and welcome you to contact us with questions.

In this webcast, co-founders Steven Ham and Patrick Kim introduce you to this high-growth-potential industry, drawing upon their career paths and experiences in working with industry operators. Watch now →