THE END OF THE U.S. GOVERNMENT SHUTDOWN PLACES THE FAST GROWING INTOXICATING HEMP BEVERAGE INDUSTRY IN DIRE PERIL

In this blog, CHNANY past board member James Rieger — a partner in Tannenbaum Helpern, LLP’s Corporate, Distribution and Cannabis law practices — breaks down how the end of the U.S. government shutdown has placed the fast-growing intoxicating hemp beverage industry in immediate jeopardy.

Barring a lobbying and political “Hail Mary”, one of the brightest lights of the adult beverage industry, the marketing and sale of intoxicating hemp beverages, will likely come to a screeching halt in twelve months.

Hemp beverages, an accidental creation of the Farm Bill of 2018 (the “Farm Bill”), are non-alcoholic beverages with psychoactive properties derived from hemp with 0.3% or less dry weight THC at the time the hemp is tested.  Hemp beverages sold at retail in liquor stores, grocery stores, convenience stores and gas stations in many states may contain 2mg, 5 mg, 10 mg or even 100mg of total THC in a twelve to sixteen ounce can and come as seltzers, sodas, mocktails, teas and larger formats such as sangrias.  As beer volumes stagnate or decline, beer distributors have been adding intoxicating hemp beverages to their trucks at a furious pace.

Outside capital to build out the hemp beverage brands has been scarce and expensive as capital providers have been warily eying the political winds and the outside chance that Washington could legislate away the entire category.  With a large push from U.S. Senator from Kentucky, Mitch McConnell, the Agriculture, Rural Development, Food and Drug Administration, and Related Agency Appropriations Act, 2026, did just that as part of the package of legislation that reopened the U.S. Government on November 12, 2025 (the “Act”).  

Specifically, the Act redefines hemp as now measuring not only delta-9 THC but total tetrahydrocannabinol, which includes THCA (an acidic precursor that converts into intoxicating THC when heated).  More devastating to the intoxicating hemp beverage industry, the Act precludes the sale of final products containing more than 0.4 mg of total THC per container.  This past summer Congress was considering legislation that would prohibit more than a quantifiable amount of THC, so that vagueness has been resolved, albeit in an unsatisfactory way.  The Act also makes clear that cannabinoids that are not naturally occurring or are synthesized in a lab do not qualify as hemp, and thus are not federally legalized under the Farm Bill (delta-8 and delta-10 THC are two examples).  These provisions of the Act take effect 365 days from enactment, thus providing the industry and its lobbyists and supporters one year to convince lawmakers that the intoxicating hemp beverage industry should be regulated and not banned.

The industry could shift its marketing and sale to the federally illegal, state compliant, adult-use cannabis market but that shrinks the retail outlets selling the product by a factor of at least ten, subject the production, marketing and sale to the harsh impact of Section 280E of the Internal Revenue Code which disallows ordinary business deductions and prohibits interstate commerce.