NC businesses may be forced to shut down if new hemp rules aren’t changed
Looming changes to federal regulations of hemp products would likely shutter North Carolina-based businesses that’ve found success in the burgeoning industry in recent years.
Since federal legislation effectively legalized products infused with certain cannabis derivatives in 2018, the retail hemp market has grown into a $28 billion industry, CNBC reported.
But the funding bill that ended the federal government shutdown earlier this month included a provision cutting the amount of THC — the psychoactive compound responsible for a high — legally allowed in increasingly popular products such as drinks and gummies.
“It would eviscerate those industries,” said Phil Dixon, Jr., an attorney and professor with the UNC School of Government whose field of expertise includes hemp and cannabis law, of the changes.
Charlotte-area businesses are grappling with what’s next for their operations and lobbying legislators to find a middle ground before the new regulations take effect next year.
“If it’s not tweaked, you’ll see 300,000 people in the industry lose their jobs,” Delta Beverages founder and CEO Jack Sherrie said.
Government funding bill’s ban on many THC products
The 2018 Farm Bill passed by the U.S. Congress legalized hemp, a derivative of cannabis, for industrial purposes. But, the bill summary notes, the way the law was written opened the door for products with “less than 0.3% delta-9 THC but a total THC concentration that exceeds 0.3%.”
That allowed businesses to start producing and selling THC-infused drinks, gummies, vapes and more despite marijuana still being illegal at the federal level and in many states, including North Carolina. Dozens of smoke shops and dispensaries opened in the Charlotte area in the following years, selling hundreds of cannabis-infused products despite unanswered questions for law enforcement and business owners.
“We have these dual markets, one for illegal marijuana and then one for all these legal products, many of which act just like marijuana,” Dixon said.
The government funding bill passed this November includes an amendment set to take effect in a year that will ban products containing more than 0.4 milligrams of total THC per container. Supporters in Congress say closing the loophole created by the 2018 bill is necessary to restrict an “unregulated” industry.
But the new regulations are “extremely restrictive,” Dixon said.
“Pretty much all of these products would be illegal under federal law,” he said of the industry that’s sprung up around hemp since 2018, predicting “a massive contraction of the national hemp industry.”
Charlotte businesses brace for big impacts
Sherrie’s business was among those that sprung up in the wake of the 2018 legislation.
He started Delta Beverages in 2019, pitching local businesses such as Rhino Market to start carrying his seltzers. Since then, the business has outgrown its original 5,000-square foot set-up and another 20,000-square foot warehouse.
It now operates out of a 55,000-square foot facility in Charlotte with 25 to 30 employees that are part of a nationwide staff of 45 to 50 people. Delta Beverages’ canned seltzers come in flavors including “bright berry,” “pink lemonade” and “blueberry acai” with THC levels ranging from 5 to 20 milligrams.
“We concentrate the THC to get to the levels that we need to for consumers to feel the therapeutic effects,” Sherrie said.
His seltzers, sold in more than 8,500 retailers nationwide, have a “positive impact” on consumers, Sherrie said. He cited the example of veterans who are struggling with anxiety or post-traumatic stress.
But if the new ban takes effect, Delta Beverage’s seltzers would be above the legal limit.
Bill Tice’s “small but mighty” North Carolina-based beverage company would be in the same situation. His business, Grind with Gratitude, sells its cans, bottles and shots with a maximum of 10 milligrams of THC in 14 states.
“Everything that we make, it would be illegal under this ban,” Tice said.
Will federal law change again?
With a year to go until the new ban takes effect, Sherrie said he and others in the industry are trying to lobby legislators to further tweak federal regulations to preserve at least some hemp products. He suggests raising the THC limit from 0.4 milligrams to the “5 to 10 milligram range.”
“Giving us 365 days, I think that was the purpose. I’m extremely positive,” Sherrie said.
Tice emphasized he and many others in the industry are open to more federal and state regulation, such as age restrictions and differentiating between naturally derived and synthetic THC.
“The consumer has spoken. They want these products, and they want these products sold in an environment where they can buy them conveniently and safely,” he said.
Both Sherrie and Tice said they’re hopeful the attention on the new federal restrictions will encourage consumers to reach out to their representatives to push them to preserve THC-infused products.
Dixon predicted there will be “a massive lobbying effort” by the hemp industry to get Congress to “dial this back some.” But, he added, Congress is often “unpredictable,” so it’s unclear what they will or won’t do.
“My guess is we’re not going to see this just completely repealed and return to the days of no regulation at all,” he said.
