McConnell's Loophole Closure Threatens $28 Billion Hemp THC Market

A federal ban on consumable hemp THC products threatens to erase $28.3 billion in annual retail revenue, eliminate 225,000 jobs and strip $2.1 billion from state sales tax collections, according to a Whitney Economics report released last month.

The ban, signed by President Donald Trump last month as part of legislation that ended the longest government shutdown in U.S. history, limits THC content in hemp products to 0.4 milligrams per container. President Trump delayed the effective date from November 12 to December 11, buying Congress time to consider narrower regulation.

What triggered the ban?

Kentucky Republican Sen. Mitch McConnell championed industrial hemp in the 2018 farm bill to give farmers a new cash crop. The law defined hemp as cannabis containing less than 0.3% delta-9 THC by weight — a threshold beverages and edibles could meet while still delivering an intoxicating dose.

That definition, which McConnell inserted into a government shutdown measure, opened the door for unregulated vape oils, gummies, seltzers and other products sold in convenience stores and gas stations. Dozens of states have since moved to regulate or prohibit the category. McConnell closed the loophole late last year.

How big is the industry at stake?

Whitney Economics, which studies the cannabis market, projects the cap would wipe out more than $28 billion in retail revenue. Kentucky's Cornbread Hemp illustrates the stakes: 105 employees, distribution in 18 states, projected $65 million in revenue this year.

"If it goes through in December, this place is toast — it's gone," said co-owner Eric Zipperle. Zipperle and co-owner Jim Higdon said they would accept a 5-milligram per-package cap to keep the business alive. The 0.4-milligram threshold, by contrast, would prohibit even some topical CBD lotions, according to Jonathan Miller, general counsel of trade group U.S. Hemp Roundtable.

Who is fighting the ban?

The industry is lobbying for a compromise that restricts products to buyers 21 and older, caps per-package THC and bars imported cannabis compounds. Alcohol retailers including Total Wine & More have joined the defense, citing falling alcohol sales that cannabis seltzers have partly offset.

Opposition runs in the opposite direction. Public health advocates and state-licensed cannabis operators both want the ban intact. The regulated marijuana industry views hemp THC as a tax-advantaged competitor that has eroded licensed dispensary sales.

"I have sympathy for people losing their jobs, but I also have sympathy for the many, many more people whose lives are affected by this," said Kevin Sabet, CEO of Smart Approaches to Marijuana.

Cory Harris, a lobbyist for state-legal cannabis operators, argued that industry warnings about the ban's impact are overstated. THC drinks could continue moving in states where they are produced, Harris said, and more states could adopt legal hemp frameworks.

"If you go from having virtually no rules to suddenly having an awful lot of rules, that's a buzzkill," Harris said. "Welcome to our world. But if you establish your whole business within a legally questionable loophole, that's just sort of the risk you take."

Which companies are already pulling back?

Wisconsin-based Drinkin' Buds has halted production. Co-founder Matt Swanson took himself off the payroll last Thursday.

"There's just so much uncertainty," Swanson said. "I'm actively looking for employment."

In Clayton, North Carolina, Nicholas Hohns runs Deutermann Farms, a commercial kitchen operation that makes THC gummies out of a blue-green compound he pours into gridded molds. Hohns entered the category after losing his personal-trainer job during the COVID-19 pandemic and has kept capital spending minimal in anticipation of regulatory reversal.

"When I started seeing THC edibles being sold … I was like, I got 18 months to two years to make money in this industry," Hohns said. "No way is the government just going to sit here and let us do this when this was supposed to be for fiber, plastics, building materials, rope."

That calculation is now four years old. Hohns said he has explored alternative products such as creatine gummies if federal rules force him out of the THC business entirely.

What happens next?

The short-term funding bill gave lawmakers until December 11 to draft an alternative path. Industry lobbyists are pressing for a federal framework that mirrors state recreational marijuana rules — age gates, dosage caps, import restrictions — rather than the near-zero threshold McConnell wrote into law. With hemp-derived products already in stores including Target, the political map may be redrawn before the deadline or shortly after.