The sweeping redefinition of ‘hemp’ in the US following the passage of the funding bill threatens non-intoxicating CBD processors while pushing consumers toward unregulated markets
President Donald Trump signed legislation on November 12 that brought the longest government shutdown in history to an end. Yet, as the government reopens, a controversial US industry worth tens of billions is set to close.
As Business of Cannabis reported last week, hidden within this sweeping bill is a critical passage set to redefine the federal classification of hemp, and in turn, end a half-decade grey-market boom fueled by delta-8 THC, HHC, and other semi-synthetic cannabinoids.
But as many had feared, the ban’s scope extends far beyond its intended targets, threatening legitimate non-intoxicating CBD businesses and drawing immediate legislative pushback.
Collateral Damage: The Intermediate Product Problem
The provision, buried in the government funding bill that ended a 41-day shutdown, redefines hemp under federal law to close loopholes created by the 2018 Farm Bill.
While proponents argue it restores hemp to its original agricultural purpose, industry stakeholders warn the measure will devastate the wider hemp industry.
The ban’s most significant unintended consequence may be its impact on non-intoxicating CBD businesses, according to cannabis industry analyst and regular contributor Deb Tharp.
“Hemp does not include any intermediate hemp-derived cannabinoid products containing more than 0.3% combined total of total tetrahydrocannabinols and any other cannabinoids that have similar effects,” Tharp explained, citing the new statutory language.
The critical issue is that during extraction and refinement, almost all CBD crude and distillate routinely exceed 0.3% total THC on a weight basis, even when the final bottled CBD product falls well below the limit.
“Those intermediate materials are now, on paper, not hemp. Which means they are treated as controlled substances once the effective date hits,” Tharp noted. “Even if your end product is non-intoxicating CBD, the stuff in your big stainless steel tank on the way there is suddenly on the wrong side of federal law.”
Legislative Pushback Begins
On November 17, South Carolina Representative Nancy Mace introduced the ‘American Hemp Protection Act of 2025,’ draft legislation that would strike Section 781 from the continuing resolution before its November 13, 2026 effective date.
👀👀Look what we have here… pic.twitter.com/RN6Djyqoga
— Midwest Hemp Council (@Midwest_Hemp) November 18, 2025
The timing reflects growing concern about the provision’s economic impact. A 2023 Whitney Economics analysis found the US hemp industry supports $28.4bn in economic activity and generates approximately $1.5bn in state tax revenues, figures Mace cited when explaining her opposition.
Despite voting for the government funding package, Mace criticised how the hemp language was inserted. She told the congressional record that “prohibitionists slipped this provision into a must-pass government funding bill” rather than allowing “a substantive, open debate on the future of hemp policy.”
Her repeal legislation, however, offers no alternative regulatory framework—leaving unresolved the question of how to address legitimate concerns about unregulated intoxicating products while protecting the broader hemp industry.
Industry Voices Seek Strategy from the Embers
Jasmine Johnson, CEO of GŪD Essence, described the ban as ‘a deeply misguided decision that threatens small businesses, farmers, and consumers across the country.’
“Instead of creating clarity and responsible regulation for hemp-derived products, this ban destabilises an entire sector that has generated jobs, tax revenue, and safe access for millions of Americans,” Johnson said.
“Punishing responsible operators while failing to address real issues like product testing, age-gating, and quality standards does nothing to protect the public. It only pushes consumers toward unregulated markets.”
Paula Savchenko, founding partner of Cannacore Group and PS Law Group, emphasised that the one-year transition period provides time for strategic adjustment.
“It remains unclear how states will respond during the 365-day grace period. However, the hemp sector may begin to resemble the cannabis market, with a fragmented supply chain cut off from the benefits of interstate commerce.”
Savchenko advised businesses to conduct internal reviews of product formulations, cannabinoid synthesis pathways, and supply-chain documentation while monitoring state-level regulatory developments.
What Happens Next
The law establishes a two-stage implementation timeline. Within 90 days of enactment, the FDA must publish lists identifying which cannabinoids occur naturally in cannabis, which belong to the THC family, and which have THC-like effects. This initial guidance will help clarify the precise boundaries of what will become illegal.
The ban itself takes effect one year after enactment, on November 13, 2026, giving businesses a twelve-month window to reformulate products, liquidate inventory, or exit the market.
However, this transition period also creates regulatory uncertainty as states decide whether to begin enforcement early, wait for federal guidance, or maintain their own regulatory frameworks.
The fragmented approach threatens to create a patchwork of conflicting state regulations reminiscent of the legal cannabis industry’s challenges.
For the 300,000 workers and thousands of businesses in the hemp sector, the next twelve months will determine whether the industry can salvage operations through reformulation and compliance, or whether Congress will heed calls for repeal and replacement with actual regulation.
