Navigating New Hemp Laws: A Major Shift for the Cannabis Industry

A fast-growing market built on hemp-derived cannabinoid products is about to face a federal reset. Over the past several years, consumer demand for products such as hemp-derived THC gummies, beverages, vapes, and flowers helped create thriving new retail categories across mainstream outlets and e-commerce. But the Continuing Appropriations and Extensions Act, 2026 (2026 CAEA) fundamentally changes the federal definition of lawful hemp and, when it takes effect in November 2026, will significantly narrow which finished products can still be sold as “hemp” under federal law. For businesses operating in this space, 2026 is less a waiting period than a strategic runway--requiring early decisions about product portfolios, testing and labeling readiness, inventory and contracting, and the likelihood that state responses may accelerate compliance timelines in key markets.

The New Law: A Strict Reinterpretation of Hemp

The Continuing Appropriations and Extensions Act of 2026 (P.L. 119-37), signed by President Trump on November 12, 2025, significantly narrows the federal definition of “hemp.” The new definition will effectively ban most psychoactive hemp-derived cannabinoids when the law takes effect on November 12, 2026. This substantial change in federal policy will have major implications across the hemp and cannabis sector.

Under the CAEA’s revised hemp definition, legality is no longer determined solely by a product’s delta-9-THC level. Instead, compliance now depends on total THC, which includes both delta-9 THC and THCA (adjusted for decarboxylation), and must stay under a strict 0.4-milligram total THC cap per container for finished hemp-derived cannabinoid products. Because THCA and other THC forms now count towards this cap, many products that previously met a delta-9-only standard may no longer qualify as “hemp” under federal law.

In practice, “THC” under the CAEA covers a broader group of THC-active cannabinoids commonly sold today, including delta-8 THC, delta-10 THC, HHC, and THCA-based products that expanded under the Farm Bill loophole. The statute also excludes cannabinoids not naturally produced by the plant, as well as cannabinoids that can occur naturally but are synthesized outside the plant.

Finally, the law requires FDA within 90 days of enactment to publish lists of naturally occurring cannabinoids, THC-class cannabinoids, and cannabinoids with similar effects, along with a definition of “container.”  These lists will effectively establish the set of psychoactive cannabinoids that manufacturers and laboratories must assess for compliance.

Industry Reaction and the Need to Act Now

The new law faces strong opposition from hemp farmers, manufacturers, and retailers, who warn that the revised definition of hemp will eliminate up to 95% of current hemp-derived consumer products, jeopardizing hundreds of thousands of jobs, and collapsing what had grown into a $28 billion national market. Industry groups stress that products swept in by the 0.4 mg total THC cap include not only THC-active items but also many full-spectrum CBD products relied upon by seniors, veterans, and chronic-care consumers. They argue that Congress’ action threatens to shutter farms, force small businesses into insolvency, and push demand into unregulated or illicit channels rather than achieving safety goals.

By contrast, state-licensed marijuana dispensaries and cannabis regulators have generally welcomed the new framework, viewing it as a long-overdue correction to what they describe as an uneven competitive landscape. Because the psychoactive hemp-derived products had been widely sold in gas stations, liquor stores, vape shops and online, and often at far lower tax and compliance burdens, state operators argued the hemp sector had gained an unfair advantage over tightly regulated marijuana businesses.

Despite these differing perspectives, both sides acknowledge that the status quo is unsustainable. As a result, there is growing consensus around the need for stable, predictable hemp rules with discussions frequently centering on mandatory age-gating, standardized labeling, clear potency limits, and coordinated federal-state enforcement models that modernize oversight without undermining legitimate hemp markets.

Critically, businesses cannot wait until the federal effective date of November 12, 2026 to adapt to the new law. The CAEA’s redefinition of hemp is already reverberating through supply chains, raising costs, delaying product innovation, and accelerating risk assessments around inventory, testing programs, and distribution agreements. Several states are not waiting for the federal deadline either. Some have begun aligning their laws with the CAEA’s narrower definition, moving to restrict hemp-derived THC products sooner. This evolving landscape underscores that the industry is already operating in a transitional regulatory environment.

Conclusion

The evolving federal hemp law demands immediate and strategic action. The legal landscape is highly dynamic, with further interpretations and potential challenges anticipated. To navigate this complex environment and mitigate significant risks, businesses must secure specialized guidance without delay.

Here are critical, actionable steps that require expert insights:

• Comprehensive Compliance Audit: Conduct a thorough audit of current product lines, manufacturing processes, and supply chain. Identify non-compliance areas with new "total THC" and psychoactive cannabinoid restrictions for a clear roadmap.
• Product Evaluation and Reformulation Strategy: Meticulously review all existing hemp products and develop a coordinated strategy for selling, reformulating or discontinuing inventory before the new federal definition of lawful hemp takes effect.  Because the law provides no guaranteed federal sell-through safe harbor, any non-compliant inventory remaining in commerce after the effective date may be treated as illegal marijuana under the CSA. Companies must therefore adopt a structured, well-documented approach to winding down non-compliant products. This strategy should include:
  • Forecasting how much inventory must be cleared before the compliance deadline to avoid post-deadline liability.
  • Maintaining consistent, responsible marketing practices to prevent regulators from viewing accelerated sales activity as “inventory dumping,” particularly given concerns that aggressive offloading of high-THC hemp products could fuel diversion or black-market activity.
  • Avoiding high-risk distribution channels and refraining from introducing non-compliant inventory into less-regulated markets in the final months, as such actions may draw scrutiny under the new total-THC framework.
  • Progressively reducing production runs to naturally decrease inventory nearing the effective date.
  • Engaging retail and distribution partners early to set last-order dates and minimize returns or stranded inventory once the law takes effect.
• Contract Review and Renegotiation: Professional review of existing contracts (farmers, manufacturers, distributors) is essential to identify potential breaches and lead renegotiations aligned with new federal requirements.
• Federal and State Advocacy Strategy: Engage early in targeted advocacy at both the federal and state levels before the law takes effect. Coordinate outreach across jurisdictions and ensure messaging remains aligned with evolving statutory language, agency authority, and the positions of key stakeholder coalitions. Given how quickly the regulatory landscape is shifting – and how differently states may respond – thoughtful, well-structured advocacy that fits within applicable statutory frameworks can help ensure company positions are strategically sound and appropriately calibrated as policymakers consider implementation and potential adjustments.
• State Law Monitoring and Strategy: Actively monitor legislative activities. Develop state-specific compliance strategies to avoid violations in every market you operate.
• Guidance on Diversification and New Product Development: If pivoting towards non-psychoactive hemp applications or innovating within industrial hemp, seek critical advice on product classification, marketing claims, and regulatory pathways for new offerings.

In this period of rapid evolution, continuous vigilance and the strategic refinement of business operations are indispensable for companies within the transforming cannabis sector. Affected businesses should urgently consider their strategies and product portfolios to mitigate significant business risks.