Hilary Bricken – Husch Blackwell
Source – LexBlog
In the past couple of weeks, I have been contacted by a few major news outlets about the legality of “THC beverages”. While it sounds like you can only find these products in a state-licensed cannabis dispensary, reporters are calling me about hemp-derived THC beverages that are cropping up for sale online and in major liquor stores across the country. Hemp-derived THC beverages are alcohol-free/non-alcoholic (“AF/NA”) drinks that are infused with delta-9 THC derived from hemp, usually along with other intoxicating cannabinoids, so that these beverages produce psychoactive effects without legally being dubbed “marijuana.”
How?
Due to the passage of the 2018 Agricultural Improvement Act (the “Farm Bill”), hemp and all of its derivatives (containing no more than .3% delta-9 THC on a dry weight basis) are no longer illegal schedule I controlled substances pursuant to the Controlled Substances Act (CSA) (even arguably if they contain other intoxicating cannabinoids). Note, though, that synthetically derived intoxicating cannabinoids remain illegal controlled substances on the CSA. Right or wrong, the Farm Bill technically allows for hemp-derived intoxicating cannabinoids so long as the pre-harvest hemp contains less than .3% delta-9 THC. As a result, enterprising hemp product makers and businesses quickly took advantage of this seeming oversight, which is why we’ve seen an almost overnight explosion of these THC beverages in the U.S.
The THC Beverage Craze
My initial two cents are that the first hemp-derived cannabinoid craze was cannibidiol (“CBD”). There was a time where it was hailed as a medical panacea by some, and I even remember when you could buy CBD-infused activewear that would allegedly help with workouts. The U.S. Food and Drug Administration (“FDA”) was not on board with the medical and health claims being made by the majority of hemp-CBD makers and sellers, and the agency continues to send out warning letters accordingly. Hemp-CBD is pretty much in the rearview mirror now, though, and the newest hemp-derived cannabinoid craze is these THC beverages. And my second two cents is that this particular hemp trend is getting stronger and stronger because of certain consumer demand (mainly the sober curious crowd) and because of the power of the ancillary players that are willing to distribute and sell it to consumers (like giant liquor distributors and retailers as well as gas stations, bars, and restaurants).
In turn, this post covers what, in my opinion, are (or should be) the top five concerns for hemp-derived THC beverage producers and distributors in 2025:
1. You’ve Got a Year, But Keep an Eye on Congress
The 2018 Farm Bill has once again been extended. This time for a year. That means that THC beverage makers and distributors have another year under their belts to gain market share and do business before Congress potentially addresses these products in a negative way. When I went to several cannabis events and trade shows last year, I got a mixed bag of opinions about how Congress will handle the alleged “loophole” in the Farm Bill that’s allowed for the proliferation of hemp-derived intoxicating cannabinoids–some say Congress is aching to close the loophole because it never intended to de facto legalize these products; others say THC beverages have gotten too big, powerful, and in demand to be sacked in the next Farm Bill. I don’t really think anyone can make the call here (especially given that a new presidential administration is coming in), but we should see whether THC beverages remain alive hopefully by the end of this year. As a result, THC beverage makers and distributors need to have a back-up plan in case Congress kills their dreams with the stroke of a pen. Alternatively, they need to engage in government relations accordingly in an effort to not only remain in the AF/NA marketplace but also to be regulated (which many THC beverage groups focused are asking to be regulated accordingly already).
2. States Are Friend, Foe, or Indifferent
Similar to their state-licensed cannabis cousins, because the federal government hasn’t done anything to regulate or really oversee these types of THC beverages, the states are picking up the slack. And very similar to state-licensed cannabis, each state is treating THC beverages differently. States now fall into four categories: permit and regulate intoxicating hemp products (see Minnesota); ban intoxicating hemp products altogether (see California); litigate over trying to ban or restrict intoxicating hemp products (see most recently Virginia); and do not take any affirmative action to specifically address intoxicating hemp but treat intoxicating hemp products like any other consumer product under the law (see Wisconsin). Obviously, THC beverage producers and distributors need to be extremely mindful of the applicable laws within a given state’s borders when it comes to THC beverages. And if you’re entering a state that regulates THC beverages (or that treats them like any other consumer good), you need to know and stay on top of the applicable regulations for packaging, labeling, safety warnings, product content, and consumer age limits, if any.
3. Competition is Increasing, Innovating, and Diversifying
Despite the precarious legal setting here between Congress and the states (especially when it comes to enforcement), competition in the THC beverage realm seems to be ever increasing because of the consumer demand from the sober curious and because major beverage distributors and retailers continue to dive in. Even DoorDash will now offer “hemp-derived products” in certain states originating from “DashMart . . . Total Wine & More, ABC Fine Wine & Spirits, and more. . . ” Increasingly too, state-licensed cannabis companies (in particular, multi-state operators) are creating THC beverage lines because intoxicating hemp is the faster path to survival and customer visibility compared to propping up cost-intensive and heavily regulated brick and mortar dispensaries. This ultimately means that successful THC beverage companies are going to seek to do distribution deals with known distribution companies in those states that permit these products. And those distribution agreements should take into account the special considerations of changes to the Farm Bill, if and when states ban these products, specific product compliance obligations, and specific indemnities regarding the legality of the products to ensure that there is no trafficking of cannabis containing more than .3% delta-9 THC in violation of the Farm Bill and state law.
4. Consumer Education is Key but Pretty Scarce
Many states still don’t have specific regulations for THC beverages. They simply treat these products like any other type of AF/NA product or they don’t address it at all. This means that many THC beverage companies are relying on self-imposed best practices when it comes to consumer health, safety, and education. That’s not necessarily a bad thing, but what it means is that information about these THC beverages varies widely between companies or sometimes is completely absent. Toward that end, it seems that each THC beverage company has a similar but different set of disclaimers on their websites about their products. Some incorporate non-evaluation statements by the FDA. Some disclaim any ability for these products to diagnose, treat, or help with medical conditions (other websites are silent on that front while also dangerously flirting with unsubstantiated health claims). Some mention the Food, Drug, and Cosmetic Act. Others state that these products should be kept out of the reach of children. Some mention obtaining certificates of analysis from manufacturers while others say nothing about verifying THC content. Some have purchase age restrictions and some do not. Some have marketing that’s arguably friendly to minors. And with some, you cannot really deduce the basic contents of the beverage itself other than “less than .3% delta-9 THC”. There are also certain product naming conventions that could potentially be misleading to customers when it comes to intoxication. This is all to say that, without federal or state regulation, beverage companies and distributors need to be mindful about consumer protection in 2025; the bigger the industry gets, it will only be a matter of time before we start to see plaintiffs’ lawsuits in this arena around negligence, products liability, and false and misleading advertising and labeling.
5. Shifting Brand and Product Perspectives
For some time, the state-licensed cannabis crowd has been unhappy with the current state of the Farm Bill and what intoxicating hemp companies have been able to pull off over the past two years. There is though a somewhat prevailing “if you can’t beat them, join them” attitude now, which makes sense given that hemp companies do not have to face onerous state regulations and cannabis licensing regimes, can take business deductions with the Internal Revenue Service, can move interstate, and can secure institutional investment while accessing financial institutions. It is also obvious that THC beverage companies are differentiating themselves from state-licensed cannabis operators in that most of them promise a low-speed, relaxing experience with their products as an alcohol replacement for the more mindful consumer. This means that in 2025, THC beverage companies have a significant opportunity to create powerful and influential brands that redefine cannabis-oriented drinks away from the concepts of being stoned or high and into purposeful lifestyle choices reflective of moderate consumption. Undoubtedly, a battle (and bettering) of the brands should be top of mind for all THC beverage companies this year.
For more information about legal planning for your THC beverage business this year, contact Hilary Bricken or your Husch Blackwell cannabis attorney to help you navigate the changing legal landscape and its implications for cannabis and hemp businesses.
