Opening the Government, Closing the "Hemp Loophole"

Published in the National Law Review, December 15, 2025

Introduction: Marijuana and Hemp Distinguished

The legal landscape of cannabis in the United States has undergone dramatic changes over the past three decades. Central to these developments is the distinction between marijuana and hemp—both varieties of Cannabis sativa L.

The Controlled Substances Act of 1970 (CSA) classified all cannabis as Schedule I 'marijuana,' a substance deemed to have high abuse potential and no accepted medical use. Despite this, state-level reforms began in 1996 with California’s legalization of medical marijuana, eventually leading to widespread legalization for both medical and recreational use across much of the country. The cannabis industry has become a major economic force, generating billions in revenue, supporting hundreds of thousands of jobs, and contributing substantial tax income to states.¹

A pivotal moment arrived with the 2014 Farm Bill, which introduced a legal definition for 'industrial hemp' as cannabis containing no more than 0.3% delta-9 THC by dry weight. This allowed limited cultivation under state pilot programs, but true nationwide change came with the 2018 Farm Bill. This legislation removed hemp from the CSA, legalizing its cultivation and sale across the U.S., provided it met the 0.3% delta-9 THC threshold. The bill’s definition of hemp was broad, encompassing all derivatives, extracts, cannabinoids, and isomers, under the presumption that these substances were non-intoxicating. The intent, as articulated by Senator Mitch McConnell, was to foster an agricultural hemp industry—not to enable the proliferation of intoxicating, lab-made substances.²

The Hemp Loophole and Rise of Hemp-Synthesized Intoxicants (HSIs)

In the immediate aftermath of the 2018 Farm Bill, the market for products containing non-intoxicating hemp-derived cannabidiol (CBD) surged. Sales of CBD products skyrocketed as mainstream retailers embraced CBD-infused goods. The FDA, exercising 'enforcement discretion,' allowed the sale of CBD products as long as companies avoided egregious health claims or safety violations. However, the market quickly became saturated, leading to falling prices and the exit of many smaller companies. By 2020, thousands of CBD brands competed for market share, but consolidation and financial losses soon followed. Major players reported revenue declines and layoffs, and by 2022, the FDA had called on Congress to create a new regulatory pathway for hemp-derived cannabinoids, having declined to issue comprehensive regulations itself.³

As the CBD market cooled, manufacturers sought new opportunities to capitalize on the hemp market by chemically converting CBD into intoxicating THC isomers such as delta-8, delta-10, THC-O acetate, and HHC. These 'hemp synthesized intoxicants' (HSIs) were produced through processes like isomerization and acetylation and marketed as federally legal under the 2018 Farm Bill’s broad definition of hemp. HSI product manufacturers claimed Congress unwittingly or intentionally legalized HSIs under the Farm Bill by defining hemp as including hemp derivatives, extracts, cannabinoids, and isomers. Thus, even though hemp was legalized on the presumption that it was not intoxicating, a market for intoxicating hemp products emerged.

By 2022, HSI products—gummies, vape cartridges, beverages—were widely available, especially in states without legal marijuana markets. Gummies, often brightly colored and flavored, became the top-selling product, with packages containing up to 1,000 mg of total THC. THC-infused beverages also gained popularity, with the market for THC seltzers alone projected to surpass $2.6 billion by 2030.⁴

Federal agencies responded with little interest. The FDA issued warnings about the safety of delta-8 THC and other HSIs, noting the lack of evaluation or approval for safe use. The DEA clarified that only tetrahydrocannabinol derived directly from the cannabis plant—not synthetic THC—was excluded from control as hemp under the 2018 Farm Bill. Despite these warnings, enforcement was sporadic, and the HSI market continued to grow.⁵

Manufacturers and advocates challenged state bans on HSIs, arguing that the 2018 Farm Bill preempted state regulation. However, federal appellate courts consistently upheld the right of states to impose additional restrictions on hemp-derived products. The Fourth Circuit declined to enjoin Virginia’s regulation limiting total THC to 0.3% and banning HSIs; the Eighth Circuit reversed an injunction of an Arkansas statute banning HSIs; and the Tenth Circuit upheld a Wyoming statute banning synthetic hemp and products with more than 0.3% total THC.⁶

The 2025 Legislative Changes: Closing the Loophole

The proliferation of HSIs and regulatory ambiguity led to a bipartisan push for federal action. In October 2025, a coalition of 39 state and territory Attorneys General sent a letter to Congress urging immediate clarification of the federal definition of hemp, citing the risks posed by intoxicating hemp-derived products and the lack of testing and age limits.⁷

The government shutdown in late 2025 provided an opportunity for Congress to address the issue. The appropriations bill passed in November 2025 included a new definition of hemp, explicitly excluding synthetic cannabinoids and imposing stricter limits on total THC content in hemp products. The new law, effective November 2026, prohibits HSIs and restricts the amount of naturally occurring THC in finished hemp products.⁸

The new definition of hemp has been criticized by HSI manufacturers and some industry advocates, who argue that it will devastate the market for hemp-derived intoxicants and harm hemp farmers. However, the legislation does not ban hemp outright; products containing naturally occurring cannabinoids within the new THC limits remain federally legal.⁹

Conclusion: Toward a New Regulatory Era

The 2025 legislative changes mark a significant shift in federal hemp policy, reflecting a consensus among lawmakers, regulators, and industry stakeholders that the 'hemp loophole' posed unacceptable risks to public health and safety. The new law provides a clearer framework for distinguishing between industrial hemp and intoxicating substances, but its ultimate impact will depend on enforcement and the development of additional regulations at both the federal and state levels.¹⁰

Endnotes

1. The 2025 Jobs Report, Vangst, https://www.vangst.com/2025-jobs-report. Lyle Daly, Marijuana Tax Revenue by State, The Motley Fool, Nov. 21, 2025, https://www.fool.com/research/marijuana-tax-revenue-by-state/.
2. Agricultural Act of 2014, Pub. L. 113-79, 128 Stat. 649 § 7606 (defining “Industrial Hemp”). Mitch McConnell, Growing Kentucky’s Economy with Hemp, Richmond Register, Apr. 20, 2018, https://www.richmondregister.com/opinion/mcconnell-growing-kentucky-s-economy-with-hemp/article_8c446f7c-4758-11e8-aea2-5fddfd73e0bc.html (“[B]ecause hemp only has negligible levels of THC, which is the compound which produces the ‘high’ associated with marijuana, the two plants are actually quite different . . . . This legislation only legalizes hemp with a THC concentration of 0.3 percent or less, far below the THC concentration in marijuana.”). Tony Lange, Intoxicating Hemp Product Ban Included in Deal to Reopen Government, Cannabis Bus. Times, Nov. 10, 2025, https://www.cannabisbusinesstimes.com/hemp/news/15771427/hemp-product-ban-included-in-deal-to-reopen-government (quoting McConnell, “my 2018 hemp bill sought to create an agricultural hemp industry, not open the door to the sale of unregulated, intoxicating, lab-made, hemp-derived substances with no safety framework.”).
3. Janet Woodcock, M.D., FDA Concludes that Existing Regulatory Frameworks for Foods and Supplements are Not Appropriate for Cannabidiol, Will Work with Congress on a New Way Forward, FDA, Jan. 26, 2023, https://www.fda.gov/news-events/press-announcements/fda-concludes-existing-regulatory-frameworks-foods-and-supplements-are-not-appropriate-cannabidiol.
4. Rob Mentzer, A loophole in federal marijuana law has led to the creation of new THC product, NPR, January 4, 2022, https://www.npr.org/2022/01/04/1070338052/a-loophole-in-federal-marijuana-law-has-led-to-the-creation-of-new-thc-product. Hilary Bricken, Cannabis Drinks Hit Total Wine, Husch Blackwell, Nov. 6, 2023, https://www.cannabislawnow.com/2023/11/cannabis-drinks-hit-total-wine/. Javier Hasse, Weed in a Can: How Cannabis Drinks Are Changing The Ritual Of Drinking, Forbes, May 19, 2025, https://www.forbes.com/sites/javierhasse/2025/05/19/how-cannabis-drinks-are-reshaping-booze/ (valuing THC seltzer market at over $2.6 billion by 2030).
5. 5 Things to Know about Delta-8 Tetrahydrocannabinol, FDA, May 4, 2022, https://www.fda.gov/consumers/consumer-updates/5-things-know-about-delta-8-tetrahydrocannabinol-delta-8-thc. DEA Concludes Delta-8 and Delta-9 THC-O are Controlled Substances, Center for U.S. Policy, Feb. 28, 2023, https://centerforuspolicy.org/dea-concludes-delta-8-and-delta-9-thc-o-are-controlled-substances/.
6. Northern Virginia Hemp and Agriculture, LLC v. Virginia, 125 F.4th 472 (4th Cir. 2025). Bio Gen LLC v. Sanders, 142 F.4th 591 (8th Cir. 2025). Green Room LLC v. Wyoming, 157 F.4th 1196 (10th Cir. 2025).
7. Attorney General letter urging reform. Hyperlink to 39 State and Territory Attorneys General Call for Clarification of Federal “Hemp” Definition, Nat’l. Assoc. of Attys. Gen., Oct. 24, 2025, https://www.naag.org/press-releases/bipartisan-coalition-of-39-state-and-territory-attorneys-general-urges-clarify-federal-definition-of-hemp/.
8. Continuing Appropriations, Agriculture, Legislative Branch, Military Construction and Veterans Affairs, and Extensions Act, 2026, Pub. L. 119-37, § 781 (codified at 7 U.S.C. § 1639o) (the “Appropriations Bill”).
9. Nathaniel Weixel, Hemp industry battles to save THC products from ban: 5 things to know, The Hill, Nov. 14, 2025, https://thehill.com/policy/healthcare/5606807-hemp-loophole-government-funding-bill/ (quoting Senator Paul as saying “This is the most thoughtless, ignorant proposal to an industry that I’ve seen in a long, long time”). It Ain’t Over for Hemp, U.S. Hemp Roundtable, Nov. 13, 2025, https://hempsupporter.com/news/it-aint-over-for-hemp/ (arguing calls for bans are based on misinformation and bans would prohibit most non-intoxicating products).
10. Kyle Jaeger, It's 'Unclear' How Feds Will Enforce Hemp THC Product Ban, Congressional Researchers Say, Citing Limited FDA And DEA Resources, Marijuana Moment, Dec. 5, 2025, https://www.marijuanamoment.net/its-unclear-how-feds-will-enforce-hemp-thc-product-ban-congressional-researchers-say-citing-limited-fda-and-dea-resources/.