Nonalcoholic beverages infused with Delta-9 tetrahydrocannabinol (“THC”) or CBD derived from hemp are emerging as a new category of drinks. This comes as younger Americans rethink their drinking habits. This trend is not only capturing consumer interest, but also attracting major retailers like Total Wine and grocery stores like Cub to provide consumers with hemp beverages. Additionally, alcoholic beverage manufacturers like Pabst Brewing Company are entering the THC space with certain hemp-derived beverages.

Federal Legal Framework

The 2018 Farm Bill legalized hemp containing less than 0.3 percent Delta-9 THC on a dry weight basis. This opened the door for an explosion of these products. However, the industry remains nascent and complex due to varying federal and state regulations. Moreover, very few federal courts have addressed this topic—but the two that have, said the 2018 Farm Bill broadly legalizes hemp including Delta-8 THC and CBD.

Additionally, the 2018 Farm Bill removed hemp from Schedule I of the Controlled Substances Act, rendering it federally legal. The federal government defines hemp as any part of the Cannabis sativa L. plant with a THC concentration not exceeding 0.3 percent on a dry weight basis. Under this definition, hemp-derived products are permitted for sale in the U.S. under federal law and are often shipped in interstate commerce.

Please note that Congress is in the process of considering revisions to the 2018 Farm Bill, and a new Farm Bill is expected in 2024.

Challenges in Federal and State Regulation

Despite federal permissibility, the hemp beverage sector faces significant regulatory challenges:

• FDA Regulation: The U.S. Food & Drug Administration (“FDA”), which has the authority to oversee hemp-derived foods and beverages, has yet to approve THC as a food additive. This rules out an alcohol and hemp beverage (with limited exceptions), due to the Alcohol and Tobacco Tax and Trade Bureau’s deference to the FDA. The FDA also targets the marketing of such products, especially hemp products making health-related claims or marketed towards children. In particular, the FDA has issued warning letters ordering hemp manufacturers marketing products with dubious health claims or misleading packaging to cease selling their products. This means that businesspeople in this space must prioritize honest, not misleading, marketing strategies for their products.
• State-Level Variability: The legal status of THC-infused beverages varies drastically from state to state. Some states, like Minnesota and Tennessee, have created detailed regulations covering testing, labeling, age restrictions and advertising of hemp beverage products. Others maintain a laissez-faire approach (New Jersey) or have yet to develop comprehensive guidelines (Pennsylvania), creating a patchwork of regulations that complicate national distribution strategies. Notably, North Carolina’s their Pilot Program ended in 2022, which means the state no longer regulates production and processors do not have many rules to follow.
• Pennsylvania: In Pennsylvania, hemp includes any part of the plant. Pennsylvania also allows for the marketing of such products without a permit. Nonetheless, the Department of Agriculture forbids consumable CBD products, making it difficult to manufacture a CBD-infused beverage with a Pennsylvania hemp permit.
• New Jersey: New Jersey law follows federal law, permitting hemp to the maximum extent under federal law. However, New Jersey requires a license for the cultivation of hemp plants or their conversion into finished products. This means that anyone seeking to manufacture a hemp beverage in New Jersey must have the appropriate licensure.

Outlook and Strategic Recommendations

The future of the hemp beverage market hinges on potential legislative changes at both federal and state levels. Companies interested in this sector should watch for regulatory updates and consider engaging in advocacy to shape policies that support the industry's growth.

Businesses looking to enter the market should also:

• Conduct thorough legal review to navigate the complex landscape under both federal and state law,
• Engage with industry groups to stay updated on regulatory changes, and
• Develop flexible business strategies that can quickly adapt to new laws.

Conclusion

As the popularity of hemp beverages continues to rise, understanding the legal and regulatory nuances is crucial for anyone looking to enter this space. While the market offers substantial opportunities, it also requires careful strategic planning and legal navigation to capitalize effectively on these emerging trends.