A federal bill to normalize banking for the cannabis industry has been reintroduced in Congress. The Secure and Fair Enforcement (SAFE) Banking Act, which would provide a create a legal framework for banking and financial services to serve state-legal cannabis businesses, has passed the House of Representatives several times but has never been voted on by the full Senate. 

 In a statement, Sen. Catherine Cortez Masto (D-NV), who first co-sponsored the legislation in 2017, said lawmakers “must make sure that businesses in states where marijuana is legal…have access to bank accounts and other financial services.”   

“I’m proud to support this legislation that will help Nevada small businesses and make our communities safer in the long run. It’s time to finally get this bill done.” — Cortez Masto in a press release 

The SAFE Banking Act would protect banks and their officers who provide financial services to legitimate, state-sanctioned cannabis businesses from criminal prosecution and liability and asset forfeiture, while maintaining banks’ right to choose not to offer those services. It would also provide protections for hemp and hemp-derived CBD related businesses and require banks to comply with current Financial Crimes Enforcement Network (FinCEN) guidance.  

Additionally, this bill would prevent federal banking regulators from prohibiting, penalizing or discouraging a bank from providing financial services to state-sanctioned and regulated cannabis business, or associated businesses, such as lawyers or landlords that provide services to the sector; terminating or limiting a bank’s federal deposit insurance primarily because the bank is providing services to a state-sanctioned cannabis business or associated business; recommending or incentivizing a bank to halt or downgrade providing any kind of banking services to these businesses; and taking any action on a loan to an owner or operator of a cannabis-related business. 

The proposal is co-sponsored in the Senate by Senators Lisa Murkowski (R-AK), Steve Daines (R-MT), and Elizabeth Warren (D-MA), Dan Sullivan (R-AK), Kevin Cramer (R-ND) and Patty Murray (D-WA).   

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An Arizona cannabis dispensary chain will no longer accept products tested by two laboratories that have been cited by state regulators for inaccurate testing results, the Arizona Republic reports. In an email obtained by the Republic, Story Cannabis said it would no longer accept products from Kaycha Labs and Level One Labs “with a Certificate of Analysis test date on or after October 1, 2026” due to “multiple compliance violations and concerns related to the testing.” 

Kaycha was recently fined $88,500 for inaccurate testing results, the report says, while Level One was found to have inflated the potency of its samples. 

In the email, Nikole Samuelson, the state retail buyer for Story, which operates 11 dispensaries in Arizona and in three other states, said the company “takes the quality and control of the products sold in its stores very seriously.”    

In an email to the Republic, George Griffeth, Level One co-founder and CEO, said the labs problems were due to “inadvertent” software problems and “human error.” He said he believed that Story may reconsider its position.  

“Story has expressed general compliance concerns, but it has not explained to Level One the specific standards underlying its decision or how it evaluated comparable findings at laboratories. We look forward to a constructive conversation with Story about a clear path to reinstatement. We are confident that a fuller understanding of the facts and our response will give Story a sound basis to reverse its decision.” — Griffeth, in an email to the Republic 

Kaycha Labs did not comment on the email. 

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A Michigan cannabis grower proved its case. A jury found that the buyer breached its supply agreement and awarded the grower $31.8 million in damages. But the grower still walked away without an enforceable verdict.

In Hello Farms Licensing MI, LLC v. GR Vending MI, LLC, the U.S. Court of Appeals for the Sixth Circuit reversed the judgment because the contract required the parties to engage in conduct prohibited by the federal Controlled Substances Act (“CSA”). The court held that a federal court could not enforce the agreement, despite Michigan law authorized the underlying cannabis activity.

The September 10, 2026, decision is not binding on California state courts or federal courts in the Ninth Circuit. Nevertheless, it offers an important warning for cannabis operators nationwide: A contract that is valid under state law may still be unenforceable in federal court.

The contract and breach

Hello Farms is a licensed Michigan cannabis cultivator. In November 2020, it entered into an output contract with GR Vending MI, LLC and CURA MI, LLC, both subsidiaries of Curaleaf Holdings, Inc. GR Vending agreed to purchase all cannabis grown by Hello Farms during its 2020 and 2021 harvests, while CURA MI guaranteed GR Vending’s obligations.

When the parties signed the agreement, Hello Farms held licenses to grow medical cannabis. GR Vending held both medical and adult-use retailer licenses.

The parties expected Hello Farms’ 2020 harvest to yield between 12,000 and 15,000 pounds of cannabis. GR Vending also agreed to pay a $2.2 million deposit, subject to refund under specified circumstances.

The agreement contained detailed testing requirements. Hello Farms had to test each 50-pound batch for THC potency and contaminants such as pesticides and heavy metals. Importantly, the contract required the marijuana to satisfy state and local recreational cannabis testing requirements.

Hello Farms ultimately produced approximately 16,300 pounds in 2020. The cannabis passed the required testing, and GR Vending accepted an initial shipment of roughly 2,000 pounds.

Then market prices fell.

GR Vending refused to accept additional deliveries. Hello Farms sold the remaining 2020 harvest to another buyer at lower prices. It also expanded its cultivation operation for 2021, obtained adult-use cultivation licenses, and sold that year’s production to the same alternative buyer.

From state court to federal court

Hello Farms sued for breach of contract in Michigan state court in February 2021. The defendants were able to move the case to the U.S. District Court for the Eastern District of Michigan based on diversity jurisdiction.

That procedural move would become critical.

The defendants asserted that the agreement was illegal under federal law and therefore unenforceable. The district court rejected that defense at summary judgment, and the case proceeded to trial.

The jury found that the defendants breached the contract and awarded Hello Farms $31.8 million. The defendants renewed their request for judgment as a matter of law, but the district court again rejected the federal-illegality defense.

The district court reasoned that the agreement concerned medical cannabis and that the Rohrabacher-Farr appropriations rider reflected a federal policy of tolerating state-compliant medical cannabis activity. The defendants appealed.

Why the verdict became unenforceable

The Sixth Circuit reversed.

As the court explained, federal courts generally apply state substantive law when exercising diversity jurisdiction. But the effect of illegality under a federal statute is a question of federal law. A federal court must therefore determine whether enforcing an agreement would enforce the precise conduct that Congress made unlawful.

That principle proved fatal to Hello Farms.

In the Court’s view, the agreement required Hello Farms to possess cannabis with the intent to distribute that cannabis to GR Vending and enable GR Vending to possess it for further distribution or sale. Each step implicated conduct prohibited by the CSA unless federally authorized.

The court distinguished between a lawful economic transaction that contains an incidental illegal provision and a contract whose central performance is itself federally prohibited. Hello Farms’ agreement fell into the second category because the purchase and distribution of cannabis were the core of the bargain.

The court consequently refused to enforce the defendants’ promise to pay for that performance. It reversed the district court’s denial of judgment as a matter of law, eliminating the prior verdict and Hello Farms’ recovery.

Money damages were no solution

Hello Farms argued that it was not asking the court to order anyone to grow, deliver, or purchase cannabis. The company sought money damages for a transaction that should have occurred years earlier.

The Sixth Circuit found that distinction unpersuasive.

Hello Farms’ lost profits arose from, and were measured by, the defendants’ promise to purchase cannabis. Awarding damages would therefore give Hello Farms the economic benefit it expected from the federally prohibited transaction.

According to the court, federal illegality is not limited to cases seeking specific performance. A court also may refuse to award expectation damages when the plaintiff’s claimed recovery depends on enforcement of the unlawful bargain itself.

This is one of the decision’s most significant lessons. Simply drafting a monetary remedy does not necessarily insulate a cannabis agreement from federal illegality. If the damages represent the profits expected from cannabis cultivation or sales, a federal court may conclude that awarding those damages would indirectly enforce the prohibited performance.

The opinion does not, however, resolve every potential claim involving a cannabis business. It does not hold that federal courts must reject every dispute involving consulting services, intellectual property, real estate, equipment, loans, restitution, or other obligations connected to the industry. The closer the claim is to direct cultivation, possession, purchase, or distribution, the greater the apparent risk under the Sixth Circuit’s reasoning.

Marijuana rescheduling didn’t save the contract

The fact the federal government moved state-legal medical marijuana to Schedule III earlier this year also failed to rescue Hello Farms’ verdict.

The Sixth Circuit explained that the federal change occurred years after the parties entered the contract. Nothing in the rescheduling rule made the change retroactive or transformed the parties’ 2020 agreement into a federally lawful transaction.

The court also noted that Schedule III does not eliminate federal regulatory requirements. State-licensed medical-cannabis businesses may still need DEA registration and applicable FDA approval to cultivate, distribute, or introduce cannabis products into interstate commerce lawfully.

Rescheduling therefore does not mean that every state-licensed cannabis transaction is now federally legal. Whether a particular agreement is enforceable may still depend on when it was executed, the products and markets it covers, the parties’ registrations, and the federal rules applicable to performance.

What California operators should do

The Sixth Circuit’s opinion is not controlling precedent in California or the Ninth Circuit. California courts may analyze contract illegality and public policy differently, and the enforceability of any agreement will depend on its terms, claims, remedy, and forum.

Still, the decision relies heavily on U.S. Supreme Court authority governing the power of federal courts to enforce federally prohibited agreements. California operators should not assume the risk stops at the Sixth Circuit’s boundaries.

The takeaway

Hello Farms convinced a jury that the defendants breached their agreement. It proved substantial damages and obtained a $31.8 million verdict. None of that was enough once the federal appellate court concluded that enforcing the verdict would enforce a federally illegal bargain.

The case does not establish that every cannabis-related agreement is unenforceable. But it does reinforce a basic reality that cannabis contracts must be drafted not only for commercial performance and state regulatory compliance, but also for the court or tribunal that may eventually be asked to enforce them.

In cannabis contracting, a strong damages provision matters, but only if the chosen forum is willing and legally able to enforce the underlying bargain.

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For more updates on recent marijuana legislation, including rescheduling and the DEA rulemaking process, please check out these recent posts:

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The federal ban on intoxicating hemp products would shut down about 68.1% of U.S. hemp-related businesses, according to a Whitney Economics report outlined by The Denver Gazette. The ban, which was set to take effect in November was delayed one month in August, via an amendment to a federal funding bill. 

The Whitney Economics analysis found that, in addition to the closures, 15.5% of hemp businesses would need to lay off employees, 6.9% would remain in business but would see less revenue, and 3.2% would relocate, presumably outside of the U.S. 

The report also suggests that states would lose between $1.2 billion and $1.5 billion in tax revenue and between $46.6 billion and $59.6 billion in potential retail losses.  

“Given the high levels of potential business failures and relocations, the economic impact of the current hemp laws, if enacted is rather profound, a reduction of total industry wide revenues by $35.1-$41.3 billion, 29,523-36,744 fewer employers and 188,961-225,861 displaced workers, earning between $7.5-$8.9 billion in wages.” — Whitney Economics, “2026 U.S. Hemp Cannabinoid Report,” via the Gazette 

The U.S. Hemp Roundtable has suggested that between 90% and 95% of current hemp products sold in the U.S. would be eliminated from the market under the ban, according to the Gazette. 

Whitney Economics surveyed 496 hemp businesses across 35 states to compile the report.  

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The transition to the new cannabis tracking system in New Mexico is leaving some businesses unable to sell products, leading to steep financial losses, Source NM reports. The new system, New Mexico Seed to Sale (NMS2S), launched September 1 but retailers have experienced issues making the transition from the old system, BioTrack, to the new one. When BioTrack went offline on September 7, it crashed and did not properly add inventory to NMS2S. 

Matt Kennicott, executive director of the New Mexico Cannabis Association (NMCA), told Source NM that one retailer had about 50,000 items that failed to transfer over from the old system, leaving “hundreds of thousands of dollars of inventory” unsellable by the retailer. 

Another retailer had $150,000 worth of its top-selling product erroneously labelled as a different product, which prevented further sales; while one of the state’s larger retailers had $460,000 worth of product miscategorized, all of which it was unable to sell.   

One retailer told Kennicott that they had so many issues they will likely have to hire one full-time and one more half-time employee to fix the errors. 

Sabrina Aragon, chief operating officer of High Desert Relief, told Source NM that the new system requires testing results for products that were transferred from the old system to be manually entered, which means customers will have to trust that retailers aren’t accidentally, or purposely, entering numbers incorrectly. 

Aragon gave the new system “a 4-out-of-10 on functionality right now, just from an operational standpoint.” She noted that the new system also requires dispensary employees to manually calculate the three different levels of taxes – county, state, and excise – on each sale. Kennicott called that “a deep, deep flaw within the system” that regulators told him would take “at least six months” to fix. 

Kennicott indicated that businesses may revive a lawsuit that sought to allow businesses to continue using BioTrack until NMS2S is proven to work properly. He said the plaintiffs dropped the original lawsuit but that, given all of the problems, the plaintiffs could show a court “actual quantifiable harms, dollar amounts attached to them, things that actually happened because of how this rollout has occurred.”  

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Colorado regulates marijuana businesses through the state Marijuana Enforcement Division (MED), while local jurisdictions retain separate licensing and regulatory authority over marijuana businesses within their boundaries. The current Colorado Marijuana Rules are codified at 1 CCR 212-3 (version effective January 5, 2026). Because state rules, forms, fee schedules, and local ordinances can change, applicants should confirm relevant requirements before filing or closing a transaction.

Who regulates marijuana licensing in Colorado?

The MED administers Colorado’s state marijuana licensing framework under the Colorado Marijuana Code and the Colorado Marijuana Rules. A regulated marijuana business may not operate until it has the state and local approvals or licenses required for its business and location. Colorado’s rules expressly condition state business licensing on relevant local approval. The also allow local jurisdictions to impose separate requirements concerning the time, place, and manner of marijuana businesses.

What types of marijuana business licenses are available?

Colorado maintains medical and retail marijuana business license categories that include stores, cultivation facilities, products manufacturers, testing facilities, transporters, and retail business operators. Colorado also recognizes a medical marijuana research and development facility license, and retail hospitality license types–including marijuana hospitality businesses and retail marijuana hospitality and sales businesses. In addition, Colorado’s licensing framework includes accelerator licenses associated with the social equity program. A separate state application is required for each license type.

Is Colorado accepting applications for new marijuana licenses?

Colorado law permits applications for regulated marijuana business licenses, but the availability of a particular license at a particular site depends in part on the local jurisdiction. Colorado rules allow a local jurisdiction to prohibit a regulated marijuana business license type, or to impose separate local licensing requirements. Accordingly, an applicant should confirm that the proposed jurisdiction and premises can support the intended license before making substantial site or transaction commitments.

What is the Colorado marijuana license application process?

The MED’s Regulated Marijuana Business License Application is Form DR 8548. As of July 1, 2026, applicants can now file a unified application for identical controlling beneficial owners who are applying for multiple licenses in the state.

The marijuana application requires disclosure information, a main application, authorization forms, and an affirmation of reasonable care, with additional addenda required for specified applicant structures or license types. The application materials address ownership and investment categories that include controlling beneficial owners and, where applicable, passive beneficial owners, qualified institutional investors, qualified private funds, and other interests addressed by Colorado law and MED rules.

The MED may require additional information or documents to process and investigate an application. Applicants may not operate the regulated marijuana business before obtaining all necessary state and local approvals or licenses.

What ownership and financial-interest categories does Colorado require applicants to understand?

Colorado does not treat every investor, lender, fund, or economic participant in a marijuana business the same. The Colorado Marijuana Rules divide ownership and financial interests into categories that determine what must be disclosed and, in some cases, who must be licensed or found suitable.

What is a Controlling Beneficial Owner (CBO)? A Controlling Beneficial Owner generally includes a person or entity that, acting alone or in concert, owns or acquires at least 10% of the owner’s interest in a regulated marijuana business; an affiliate that controls the business, including a manager; or another person or entity that is otherwise in a position to control the business. A Qualified Institutional Investor is generally treated as a CBO only when it owns or acquires more than 30% of the owner’s interest. CBO status is important because controlling beneficial owners are subject to the owner-licensing and disclosure framework in the MED rules.

What is a Passive Beneficial Owner (PBO)? A Passive Beneficial Owner is a person or entity that holds an ownership interest below the controlling-beneficial-owner threshold and is not otherwise in a position to control the regulated marijuana business. The rules distinguish passive ownership from control, but PBOs remain within the regulatory ownership framework and may be subject to disclosure or additional MED review, including reasonable-cause disclosure.

What is a Qualified Institutional Investor (QII)? A Qualified Institutional Investor is a specifically defined institutional investor, including certain regulated banks, bank holding companies, insurance companies, registered investment companies, employee benefit or pension plans, government pension plans, and qualifying groups of such institutions. The QII category matters because Colorado applies a different controlling-ownership threshold and disclosure treatment to qualifying institutional investors.

What is a Qualified Private Fund (QPF)? A Qualified Private Fund is generally a private investment fund that would be an investment company under the federal Investment Company Act of 1940 but for the exclusions in sections 3(c)(1) or 3(c)(7), is advised or managed by a properly registered investment adviser, and satisfies the additional requirements stated in the Colorado Marijuana Rules. When a QPF is a controlling beneficial owner, the MED requires organizational disclosure concerning persons who control the fund’s investment in, or management or operations of, the marijuana business.

What is an Indirect Financial Interest Holder (IFIH)? An Indirect Financial Interest Holder is a person with a financial or economic relationship to the regulated marijuana business who is not an affiliate, CBO, or PBO. The category can encompass specified debt, commercially reasonable royalties associated with intellectual property, and other economic arrangements recognized by the rules. Certain IFIHs receive heightened disclosure treatment, including a person who holds two or more indirect financial interests, is also a PBO, or provides previously undisclosed debt financing exceeding 50% of the business’s operating capital.

Why do these categories matter in an application or acquisition? The classification affects the scope of the MED’s disclosure, licensing, and suitability review. Colorado requires specified disclosures for controlling beneficial owners and certain indirect financial interest holders and authorizes additional disclosure of specified owners, affiliates, and financial interests. Applicants should therefore analyze not only the cap table, but also management and control rights, financing, royalties, fund structures, and other economic arrangements before filing or closing a change-of-ownership transaction.

What is a finding of suitability, and who may need one?

Colorado’s rules use findings of suitability as part of the licensing and ownership-review process for persons and entities that fall within specified ownership or investment categories. Controlling beneficial owners are subject to the owner-licensing requirements in the Colorado Marijuana Rules, and passive beneficial owners may elect or be required in specified circumstances to be subject to disclosure or licensure. Suitability and owner-license requirements therefore depend on the person’s or entity’s status under the current ownership provisions rather than on a single ownership-percentage rule applied to every investor.

What is required at the local level for Colorado marijuana licensing?

Local governments may impose licensing requirements separate from the MED’s state process. Those local requirements may address the proposed premises, zoning or land use, local application materials, inspections, hearings, and other locally imposed licensing conditions. In Denver, for example, the municipal code requires specified inspections and permits before issuance of a local marijuana license and requires a corresponding state license.

Do owners and employees need individual MED licenses or badges?

Colorado distinguishes Owner Licenses and Employee Licenses, and the rules provide for identification badges associated with those licenses. A natural person who is required by the rules to obtain an Employee License must obtain that license before beginning activities that require an Employee License. Controlling beneficial owners are subject to the Owner License provisions of the rules, while the required credential for any particular individual depends on that person’s ownership and operational role. The MED uses Form DR 8517 for the Marijuana Employee License Application.

How much does a Colorado marijuana business license cost?

Colorado does not impose one uniform state application-and-license fee across all regulated marijuana business license types. The current Colorado Marijuana Rules contain separate fee schedules by license category, and cultivation fees vary by tier or class. Under the current rules, the first payment is submitted with the application and the second payment is generally due at least twelve months before the license expiration date. Local jurisdictions may charge additional application, license, transfer, change-of-location, or other fees under local law.

How long are Colorado marijuana business licenses valid?

Senate Bill 24-076, which became law in 2024, extended initial state regulated-marijuana business license and renewal periods from one year to two years. The legislation permits local licensing authorities to determine whether local licenses are issued for one-year or two-year terms.

How long does the licensing process take?

The cited state materials do not establish a universal processing period for every new regulated marijuana business license. The application process requires state review, local approval, ownership and suitability review, payment of applicable fees, and satisfaction of premises-specific local requirements. A transaction timetable should therefore be based on the particular license type, ownership structure, premises, and local jurisdiction rather than on a single statewide processing estimate.

What special rules apply to new marijuana licenses in Denver?

Denver’s municipal code reserves applications for specified new marijuana business licenses to social equity applicants, subject to stated exceptions. The current Denver code provides that this social-equity exclusivity provision is repealed effective July 1, 2027. Denver separately imposes a moratorium on applications for new marijuana store and new marijuana cultivation facility licenses. Denver’s code also contains proximity, location, hearing, inspection, permit, and other local requirements that can affect whether a proposed premises is licensable.

Can a non-social-equity buyer acquire an existing Denver marijuana license before July 1, 2027?

Denver permits transfers of marijuana business ownership subject to approval by the local licensing authority and the requirements of its municipal code.

Before July 1, 2027, a license held by a social equity applicant may be transferred to social-equity or non-social-equity applicants only if at least fifty-one percent of the license remains held by one or more social equity applicants. A non-social equity applicant, however, may transfer its license to a non-social equity applicant without any additional social equity restrictions.

After July 1, 2027, Denver’s code states that licenses held by social equity applicants may be transferred to social-equity or non-social-equity applicants upon approval by the manager. A purchaser should therefore determine whether the target license is subject to Denver’s social-equity transfer restriction before structuring the acquisition.

Who qualifies as a Colorado social equity marijuana licensee?

The current Colorado Marijuana Rules implement the statutory social-equity framework and require applicants to establish qualification under the criteria applicable to their application. The rules include evidentiary provisions addressing qualification based on residence during the relevant period, receipt of specified government assistance, and marijuana-related arrests or convictions involving the applicant or specified family members. The rules also contain ownership requirements applicable to regulated marijuana businesses held by social equity licensees. Because those criteria have been amended over time, applicants should ensure they are using the current version of the rules and the current statutes rather than relying on older summaries of the program.

What mistakes should an applicant avoid?

• Do not assume that a state-level license category is available at a particular location without confirming the local jurisdiction’s rules and the site’s eligibility.
• Do not use an outdated ownership chart or incomplete financial-interest disclosure where the current MED application and rules require additional ownership or investment information.
• Do not assume that every owner and worker requires the same individual credential. Owner License, Employee License, and identification-badge requirements depend on the role and status addressed by the rules.
• Do not budget only for state fees, because local jurisdictions may impose separate fees and licensing requirements.

Are the Colorado rules subject to change?

Yes. In fact, the MED just concluded a rulemaking session in preparation for a rule change. We will keep you posted on these changes when they are finalized and published.

What is the bottom line?

A Colorado marijuana business must satisfy the state licensing framework and the requirements of the relevant local jurisdiction before operating. The applicable license type, ownership structure, individual-license requirements, fees, and local-site restrictions should be analyzed under the current MED rules and the current local code for the proposed premises. For Denver transactions, the social-equity exclusivity and transfer provisions remain applicable through a sunset date of July 1, 2027.

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Cannabis arrests in Northwest Indiana counties that border Michigan and Illinois – both of which have legalized cannabis for adult use – fell between 2021 and 2025, NWI Times reports. In Lake, Porter, and La Porte counties, arrests for misdemeanor and felony cannabis charges totaled 1,272 in the first quarter of 2021 but were 734 by the fourth quarter of 2025. 

Cannabis arrests in the counties spiked to 1,742 during the second quarter of 2022 – the highest recorded during the time period – but dropped below 1,000 the following quarter, the analysis found. Arrests increased the following two quarters again, before falling below 1,000 again in the subsequent two quarters. In the fourth quarter of 2023, arrests fell to 666, but rose to 742 in the first quarter of 2024, before falling to 670 in the following quarter. 

The third quarter of 2024 saw the lowest levels of cannabis arrests across the three counties during the analysis period, at 468. The following three quarters saw three straight increases – to 734, 826, and 1,192, before decreasing again to 842 and then again to 734.   

Illinois permitted the sale of adult-use cannabis starting January 1, 2020, while Michigan launched its program in 2018. 

Local police departments accounted for the majority of the arrests, with 12,162. County Sheriff’s Departments arrested 7,736 people during the analysis period, while State Police recorded 1,466 arrests.   

Most of those arrested (11,872) were Indiana residents, while 3,690 of those arrested were from Illinois, and 4,582 were from other states. 

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Michigan cannabis regulators have, for the first time, issued a suspension of a hemp business license over excessive THC levels. The Cannabis Regulatory Agency (CRA) last week said it had suspended the license of Loud Labs of Michigan LLC after an investigation found the company possessed products containing delta-9 THC beyond the state’s legal hemp threshold of 0.3%. 

CRA staff conducted a compliance inspection at the business on March 25, during which the inspectors observed multiple cannabis products and reviewed certificates of analysis indicating that certain products contained delta-9 THC that exceeded hemp threshold. The agency conducted an inventory audit on May 18 and identified multiple products for which corresponding laboratory certificates of analysis reported delta-9 THC concentrations above 0.3%.  

The agency’s report points out five products in particular, including a concentrate with a reported delta-9 THC level of 92.84%; another with a concentration of 21.38%; and a third with a concentration of 20.35%. Two topical patches were also found to have THC levels in violation of state hemp laws – one tested at 0.59%, and another tested at 0.45%, according to the notice of suspension. 

The CRA alleges that Loud Labs violated parts of the state’s Industrial Hemp Research and Development Act (IHRDA), which provides for suspension of a processor-handler license when the licensee intentionally possesses cannabis containing more than 0.3% delta-9 THC on a dry-weight basis. Based on those allegations, the agency suspended Loud Labs’ hemp processor-handler license effective immediately and has also provided notice of its intent to revoke the license.  

Under the applicable provisions of the IHRDA, a license must be revoked if, following notice and an opportunity for a hearing, the CRA determines by a preponderance of the evidence that the licensee violated the relevant provision.   

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Earlier this week, the House passed a short-term funding bill that postpones the federal ban on hemp-derived THC products. President Trump signed the ban into law last year; it was scheduled to take effect November 12^th. This Wednesday, however, Trump signed off on the Congressional extension, pushed by his Administration, which means the ban is now scheduled for December 11^th.

The extension begs three primary questions for me. The first is whether Congress will pass legislation relevant to intoxicating hemp products (i.e. regulating them), prior to December 11^th. The second is whether Congress will extend the deadline again, if legislation fails to coalesce. The third is whether enforcement will follow, if a ban takes effect. I’ll answer these and a few more in FAQ format.

Will we see legislation around intoxicating hemp products prior to December 11^th?

We hear a lot of scuttlebutt from Capitol Hill and industry players on this topic. The general sentiment is that comprehensive legislation to regulate intoxicating hemp products is unlikely to coalesce prior to December 11^th. There are just too many disparate interests, too many ideas, and not enough time.

That conclusion was buttressed for me yesterday morning, when Speaker Johnson announced cancellation of all votes for the last two weeks of September. This leaves a very small window before midterms. After midterms, things become even less certain.

Note: the current composition of Congress fully supported the ban, and hardline conservatives have vocally supported it. If Democrats take majorities, we may see a more “regulated market” approach.

Will we see another extension to the December 11th ban on intoxicating hemp products?

This is possible. The Trump Administration has signaled that it will not seek another extension beyond December 11. The Administration had also talked of implementing regulations over the extension period, for whatever it’s worth. More recently, we’ve heard talk of a second extension to the ban, through March. Again, much depends on the midterms.

Who benefits from an extension? Who suffers?

The primary beneficiaries are going to be sellers of unregulated, intoxicating hemp products, from Trump aides on down. Our impression is that many operators in the space aren’t planning carefully, or planning much at all. It’s also fair to say that a lot of hemp products sellers will keep doing whatever they’re doing, or attempt to, regardless of any federal law.

State-legal cannabis sellers are on the other side of this equation, which is a complicating policy factor—including for proponents of an “agnostic” or “one source” bill. The sale of intoxicating hemp products in adult-use cannabis states, including at gas stations etc., competes with these regulated businesses’ sales.

The alcohol lobby is another complicating factor. Major drink producers are pushing to restrict or ban hemp-derived beverages, while wholesalers and retailers would like to see regulation. All of these competing interests, plus the confusion around cannabis regulation more generally, create a true morass.

Will there be enforcement against sellers of intoxicating hemp products, if the ban takes hold?

I wrote a piece about this last December, after the first ban was scheduled. In relevant part, I opined:

At the federal level, I wouldn’t expect a coordinated crackdown by DEA and U.S. attorneys. That would be too expensive, too unwieldy. Instead, I think targeted enforcement of select larger players—perhaps including warning letters next summer—is the most likely path. In that scenario, the chilling effect I mentioned for service providers would be magnified, and it’s likely that many operators would also stand down.

I also think states will continue to get on the prohibition bandwagon, as I explained to MJ BizDaily last month. Some already are, but you’d see more of this in an environment where the feds throw their backs into it, enforcement-wise, and where de jure prohibition is not the whole picture.

I don’t have much to add at this point, other than any business operating under perpetually looming bans, deadlines, enforcement threats, etc., is operating in a dicey milieu. The money must be good!

Big picture

For a long time, I’ve been on record opposing intoxicating hemp products. This is not simply a public health objection to unregulated, chemically synthesized, frequently contaminated products (which are often for sale to minors). As a legal matter, our law firm concluded: 1) the “Farm Bill loophole” does not exist, 2) that most intoxicating hemp products are marijuana or other controlled substances, 3) that most of these products clearly violate the FD&C Act in addition to the Controlled Substances Act, and 4) that most states lack a regulatory framework for these sales (while others outright prohibit them.) I reiterate all of this here, as context for the opinions above.

I do continue to believe that we need a wholistic U.S. policy for the cannabis plant. As far as the pending ban on intoxicating hemp products and seed sales, let’s see what happens leading up to the midterms, and before December 11^th.

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