A new report by the libertarian nonprofit Reason Foundation blames “arbitrary” business model structures – and their resulting competition – for hemp and marijuana on illogical federal laws that conflate the two plants, which are essentially the same but with differing cannabinoid profiles.
“The proliferation of intoxicating hemp-derivative products like delta-8 THC stems primarily from the fact that hemp-derivatives are cheaper and more accessible because they are not federally prohibited and not yet burdened by state regulations to the same extent as marijuana,” the report states. “There is clearly a demand for intoxicating cannabis products, and consumers will continue to seek out such products whether they are defined as marijuana or hemp and whether they are legal or illicit.”
The report offers sweeping policy suggestions that – if implemented – could create a “level playing field” between the two sectors, which as of now is far more tilted in favor of hemp. Such businesses can sell products online and across state lines and in common retail outlets such as convenience stores.
“The market for intoxicating hemp derivatives … has grown sharply, with industry experts estimating its size at $28 billion to $36 billion in annual sales nationally, supporting nearly 330,000 workers across the country,” the report notes, insinuating that the hemp genie is out of the proverbial bottle, thanks to the 2018 Farm Bill.
Farmer income from hemp flower – from which intoxicating hemp goods can be made – also accounts for 95% of income from the plant, the report found.
The rise of the intoxicating hemp industry has also led to a corresponding rise in the number of new actions taken by concerned state lawmakers, the report noted, with 10 states passing some sort of hemp product regulations in the first half of 2024 alone.
The report found that 15 states have banned intoxicating hemp products altogether, another 21 have not regulated the products at all, and seven states have regulated intoxicating hemp as consumer packaged goods. Another seven states have regulated the products in the same manner as marijuana, an astonishing addition to the national patchwork of state marijuana laws.
But the federal legalization of hemp and its unintended opening of THC floodgates has also pitted marijuana and hemp business interests against each other, due to the definition of hemp being cannabis plants with 0.3% delta-9 THC by dry weight, an “arbitrary” definition that dates back to 1976.
In an ideal scenario, the report asserts, Congress would choose to remove cannabis altogether from the Controlled Substances Act – instead of the current rescheduling move that’s underway – and then have various federal agencies issue business rules and regulations for both psychoactive and non-psychoactive products, the same as the government does for alcohol and tobacco goods.
That could open the door to states doing away with their restrictive regulatory regimes for marijuana, which the report notes were developed largely to avoid interference from federal officials.
“States authorizing a commercial marijuana market should work to increase market dynamism by reducing barriers to entry, along with regulatory and tax costs, to more closely align the cost structure within these markets with that of emergent hemp-derived competition,” the report argues.
The report suggests that most of the restrictive marijuana industry parameters – including license caps for retailers – could be done away with in favor of traditional age-gating at retailers such as liquor stores, which are accustomed to checking identification of consumers before allowing any sales.
“Broadly, we recommend a package of reforms to state marijuana laws that would establish identical packaging, labeling, and testing requirements for intoxicating hemp and marijuana products and subject both sets of products to the same advertising requirements,” the report states. “Both sets of goods should face a single, simplified tax structure and both should operate in an open, dynamic market wherein the entry and exit of firms is unimpeded.”
“Any retailer who can demonstrate competency for appropriate age-gating should be free to apply for a retail cannabis license that allows them to purchase and resell both state-licensed marijuana products and intoxicating hemp products,” the report suggests.
By leveling the national playing field, marijuana brands would gain interstate commerce and access to the entire national market, while hemp companies would gain more certainty on what the legal and regulatory landscape is, instead of having to operate in a continually-shifting environment, the report proposes.
The report asserts that the current business models are based on an “arbitrary” definition that dates back to the 1970s. Read More