Congress Moves to Redefine Hemp: One Year to Reshape a Multi-Billion Dollar Industry

Author’s Note: The scientific name of the plant, and its various byproducts, which are the subject of this memorandum, is Cannabis sativa L. Other terms have been used throughout history to describe cannabis plants with certain characteristics. Relevant here, the term “marijuana” has been used to describe cannabis plants (and derivatives) which could cause an intoxicating effect if consumed, and “hemp” was used to refer to cannabis plants (and derivatives) which were not marijuana. The 2018 Farm Bill called that distinction into question (i.e., “intoxicating hemp”), and the recent definitional change discussed herein appears intended to re-clarify that distinction. In the interest of specificity and without regard to any other terminology or distinctions employed by the laws of any given state, this memorandum uses the above terms consistent with the explanation provided herein.

While most of the country rolled its eyes at yet another government shutdown, few realized that one of the final sticking points in the funding negotiations was the future of intoxicating hemp. By the morning of November 13th, the cannabis and alcohol industries were already celebrating what they believed Congress had finally accomplished: the long-anticipated closure of the hemp-derived cannabinoid loophole created by the 2018 Farm Bill.

Meanwhile, the clock began ticking for the nation’s $28.4 billion hemp industry, which employs an estimated 300,000 people nationwide. Stakeholders now have one year to overturn or modify the law. Otherwise, by late 2026, all intoxicating hemp-derived products will again fall under the federal definition of a controlled substance, and an intoxicating hemp industry will cease to exist.

Overview: New Federal Definition of Hemp

Under the updated definition in the Agricultural Marketing Act of 1946: Sec. 781, “hemp” is no longer defined just by what's in it, but by how it was made and what it's meant to do.

“(iv) any final hemp-derived cannabinoid products containing—

“(I) cannabinoids that are not capable of being naturally produced by a Cannabis sativa L. plant;

“(II) cannabinoids that—

“(aa) are capable of being naturally produced by a Cannabis sativa L. plant; and

“(bb) were synthesized or manufactured outside the plant; or

“(III) greater than 0.4 milligrams combined total per container of—

“(aa) total tetrahydrocannabinols (including tetrahydrocannabinolic acid); and

“(bb) any other cannabinoids that have similar effects (or are marketed to have similar effects) on humans or animals as a tetrahydrocannabinol (as determined by the Secretary of Health and Human Services).

In plain English, this means that products with synthesized cannabinoids, those marketed or intended to produce intoxicating effects, or which contain more than 0.4 milligrams per container of total tetrahydrocannabinols (including THCa) will fall outside the scope of lawful hemp, even if they meet the 0.3 percent THC threshold.

The first regulatory deadline and its corresponding deliverable, due in 90 days, will shape how the statute is interpreted in practice. The Food and Drug Administration, in coordination with other federal agencies, is required to publish a series of foundational lists determining:

• Cannabinoids known to be naturally produced by Cannabis sativa L.,
• All tetrahydrocannabinol-class cannabinoids occurring in the plant,
• Any cannabinoids that either mimic or are marketed to mimic the effects of THC, and
• What qualifies as a “container” for hemp-derived products under the new definition.

Silence is Over as the Federal Government Finally Weighs In

For the last seven years, the federal government allowed the intoxicating hemp market to evolve in a legal vacuum. Following the 2018 Farm Bill, products like delta-8 THC, HHC, and other lab-altered cannabinoids rapidly emerged on the market. These were technically compliant under federal law if they were derived from hemp and contained less than 0.3 percent delta-9 THC by dry weight.

Federal agencies, including the USDA and DEA, remained largely silent as the category exploded in retail and online markets. A lack of federal guidance or enforcement forced states to respond individually. Some imposed outright bans on specific cannabinoids or products with any traceable THC, while others created complex regulatory frameworks. Several did nothing at all. The result was a fractured and inconsistent patchwork of state-level rules that left both consumers and operators navigating uncertain legal ground.

For instance, in May 2025, Tennessee enacted legislation to regulate intoxicating cannabinoids through licensing, age restrictions, product limits, and testing requirements. This legislation also transferred regulatory oversight of hemp-derived cannabinoid products, a category distinct from non-intoxicating hemp products to the Tennessee Alcoholic Beverage Commission effective January 1, 2026. That transfer takes place just days before Tennessee’s next legislative session opens on January 13. With limited time and competing policy priorities, will Tennessee choose to revisit its newly adopted framework, reinforce the one it just passed, or wait to see how the FDA’s forthcoming guidance reshapes the federal landscape?

How will this new definition affect the unresolved debates in states like Texas and Florida, where lawmakers continue to argue over whether to ban, regulate or leave intoxicating hemp products largely unregulated? It will undoubtably become more difficult to argue for a regulated market when the business activities in question now fall back under the federal definition of a criminal offense.

The answers to these questions are impossible to answer now, but they will dictate the future landscape of the cannabis plant in the United States.

From Interstate Sales to Federally Controlled Substance

By narrowing the federal definition of hemp, Congress has placed many intoxicating products in direct conflict with the Controlled Substances Act. Once the one-year period ends, products containing synthesized cannabinoids, THCa, and other intoxicating compounds may be treated as Schedule I controlled substances at the federal level. This creates immediate risk for certain manufacturers, distributors, and retailers who continue to operate based on state-level frameworks—or does it?

Marijuana itself remains a Schedule I substance under federal law, yet adult use licensees operate openly in dozens of states under robust regulatory systems. This has been permitted, in part, because marijuana benefits from explicit federal spending restrictions that limit DOJ enforcement in states with medical marijuana laws. These protections do not exist yet for hemp, leaving operators exposed. It would be puzzling to see the federal government ban intoxicating hemp only to then restrict the enforcement of the same through similar spending restrictions, but at this point, anything is possible. Accordingly, current and aspiring hemp businesses may end up facing a pivotal question: should they comply, or ignore federal law as many state-licensed marijuana businesses have?

Stated otherwise, the question that looms large for operators navigating conflicting signals from Congress, FDA, and DOJ is whether the federal government will spend DEA resources cracking down on hemp-derived products when it hasn’t similarly followed through with marijuana enforcement, much less on its promise to reschedule.

Wait… Did Hemp Products Just Become Marijuana Products?

For years, hemp-derived products have enjoyed three key benefits:

1. Exemption from Section 280E of the Internal Revenue Code, which bars businesses trafficking in Schedule I substances from claiming standard tax deductions,
2. The legal right to move across state lines, and
3. A regulatory burden free from the high licensing fees, application hurdles, and compliance costs that define most state cannabis programs.

These advantages fueled rapid market growth for less-expensive, more accessible hemp smokables, edibles, and vape products that gave users almost the same psychoactive effects as marijuana. In many jurisdictions, these products directly competed with regulated marijuana yet were able to underprice licensed dispensaries.

Given the new definition of “hemp” set out above, most – if not all – of those benefits vanish. To the extent that intoxicating hemp product manufacturers and retailers are able to continue business at all, they will now be required to comply with state-specific regulatory regimes. They would no longer be able to “legally” ship their products across state lines, and would likely face the same 280E tax consequences as medical and adult-use operators. This raises a larger existential question: for products containing an intoxicating level of THC or synthetic cannabinoids, is there still a meaningful legal distinction between intoxicating hemp and marijuana?

Enforcement, State Reactions, and Legal Risk

With a one-year clock now running, states must decide whether to align with the new federal definition or risk operating outside of it: a choice that carries legal, political, and economic consequences for both regulators and operators.

Dual-track systems that treat intoxicating hemp separately from marijuana could remain in place, at least temporarily, while others may attempt to draw finer distinctions or reframe enforcement priorities. In states where enforcement action puts state-compliant businesses in direct conflict with federal controlled substances law, we are likely to see lawsuits and legal challenges. Will courts be forced to resolve what qualifies as “intoxicating” or “synthetic” when federal and state definitions don’t align?

In states like Tennessee, beverage manufacturers have begun exploring intoxicating hemp formulations as a new category. But without uniform federal guidance, these businesses risk violating federal trafficking laws by shipping products across state lines or by misunderstanding what is permitted under their own state’s evolving rules.

In an exclusive statement, Russell Thomas, Executive Director of the Tennessee Alcoholic Beverage Commission, acknowledged the challenge ahead:

“Recently, the federal government enacted legislation that will amend the federal definition of hemp effective January 1, 2027. We are carefully reviewing the legislation and will be discussing it with our partners in other parts of state government, as well as with regulators in other states.

At this time, it is too early to determine how this change may affect Tennessee over the next two years. Our focus remains on enforcing Tennessee’s current hemp statutes and ensuring compliance with existing state law.”

What remains unclear is how (or if) the federal government intends to enforce this change. Will DEA and DOJ act swiftly against non-compliant hemp businesses post-deadline while continuing to look past similarly positioned marijuana businesses? Will the FDA or the USDA issue preemptive guidance to the states? Or will Congress once again undercut its own statute by declining to fund enforcement, as it has with state-legal cannabis?

Final Thoughts

Whether you operate in marijuana, hemp, alcohol, or retail – it’s time to assess your exposure. This next year may determine whether your products, operations, and business model remain viable under federal law.

Dickinson Wright’s cannabis, hemp, and alcohol regulatory team is actively monitoring agency implementation, FDA timelines, and federal enforcement signals across multiple jurisdictions. We can help you:

• Evaluate whether your current product lines fall within the new legal definition of hemp;
• Identify federal and state conflicts that could trigger enforcement or require licensure;
• Prepare advocacy strategies or comment responses during the rulemaking period; and
• Build compliance frameworks, action plans, and timetables ahead of federal agency guidance.

Reach out to our team to schedule a strategic review and discuss next steps tailored to your risk profile and market position.

Special thanks to  Regulatory Compliance Strategist Jessica Kaiser for contributing to this article.