An Expected End-of-Year Federal Ban Puts Hemp Businesses in Jeopardy

A looming federal deadline threatens to dismantle a $28 billion industry that emerged from a legislative gray area, placing thousands of American businesses and jobs in jeopardy. A provision tucked into a budget bill passed last year is set to outlaw the vast majority of hemp-derived THC products by the end of 2026, creating profound uncertainty for a market that has flourished since the 2018 Farm Bill legalized hemp cultivation.

The move targets what critics call the "hemp loophole"—an unintended consequence of the 2018 legislation that spawned a booming market for intoxicating products like THC-infused gummies, beverages, and oils, sold legally even in states where marijuana remains prohibited.

The Accidental Market

The 2018 Farm Bill was a landmark piece of legislation for American agriculture, federally legalizing the cultivation of hemp. Lawmakers defined legal hemp as cannabis containing no more than 0.3% delta-9-THC—the primary psychoactive compound in marijuana—by dry weight. The intent was to foster a market for industrial hemp used in textiles, construction materials, and non-intoxicating wellness products like CBD oil.

However, the bill’s specific wording created an opportunity that entrepreneurs quickly seized.

• The Loophole Explained: The 0.3% THC limit is based on the product's weight. This allows manufacturers to create heavier products, such as gummies or drinks, that contain psychoactive amounts of delta-9-THC while still remaining below the legal percentage threshold.
• Unforeseen Consequences: "Many people in Congress probably assumed that as long as they stuck to that limit... they would not be legalizing an intoxicating substance," explains Katharine Harris, a drug policy fellow at the Baker Institute for Public Policy. "What we have now seen is that that is wrong."

This has led to a quasi-legal cannabis market where hemp-derived THC products are sold as alcohol alternatives in bars and in makeshift dispensaries across states like Texas and Nebraska, where recreational marijuana is otherwise illegal.

A Thriving Industry on the Brink

For businesses like Sweetwater Hemp Company in rural Nebraska, the 2018 bill was a lifeline. The company processes raw hemp from local farms, using an ice water extraction process to create concentrates for edibles, oils, and other consumer goods.

Brett Mayo, Sweetwater's chief extraction officer, notes that the impending ban would effectively shutter his core business. The new rule targets "full-spectrum" products, which contain all the natural compounds found in the hemp plant, including trace but crucial amounts of THC.

"The federal hemp bill would basically eliminate full-spectrum products," Mayo stated. His process is incompatible with producing "broad-spectrum" products, which have all THC removed.

The new provision, set to take effect near the end of the year unless Congress intervenes, is surgically precise and devastatingly broad in its potential impact.

• The New Limit: The law would cap the amount of total THC at just 0.4 milligrams per container.
• Industry Impact: According to Jonathan Miller, an attorney for the advocacy group U.S. Hemp Roundtable, this would render an estimated 95% of all hemp extract products on the market illegal.
• Beyond Intoxicating Products: Miller emphasizes the collateral damage, noting, "Even the vast majority of nonintoxicating CBD products have more than 0.4 milligrams of THC per container."

The economic fallout could be immense. Miller estimates the U.S. hemp-derived THC industry is worth over $28 billion, and its collapse would wipe out thousands of jobs, from farmers to extraction technicians to retail workers.

The Path Forward: A Race Against Time

The impending ban represents a major course correction aimed at closing the loophole that lawmakers say they never intended to create. The provision was included in a bill passed last year to end a lengthy government budget shutdown, suggesting it was passed with little public debate as part of a larger, must-pass package.

Now, the industry and its advocates are in a full-court press to convince Congress to amend the law before it takes effect. Their argument is primarily economic: a ban is no longer feasible.

"I don't think it's going to be eliminated," said an optimistic Mayo. "It's just not feasible that you're going to get rid of, you know, a multibillion-dollar business and the taxes and everything that it brings in."

There are signs that policymakers are listening.

• Legislative Action: Lawmakers have already proposed changes to moderate the ban, though their path to passage remains uncertain in a divided Congress.
• Executive Intervention: In a move seen as promising by hemp advocates, President Donald Trump issued an executive order in December. The order directs federal agencies to develop regulations for hemp-derived THC products and to expand research into them, signaling a potential preference for regulation over outright prohibition.

The coming months will be critical. The fate of the $28 billion hemp-derived THC market now rests on whether Congress will act to provide regulatory clarity or allow the end-of-year deadline to pass, effectively turning a thriving, tax-paying industry into an illicit one overnight. For thousands of businesses like Sweetwater Hemp, the clock is ticking.