Even Legal-Cannabis States Can't Escape: A Federal Ban Is About to Empty the THC Shelves
A loophole in the 2018 farm bill let hemp-derived THC grow into a $28 billion industry, and now Congress wants to close it — even legal-cannabis states will feel the pinch when they lose the cheap alternative.
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The argument · tap a timestamp to hear it
Legal-cannabis states can't escape a federal ban either
Half of US states have legal recreational cannabis, but the reason THC drinks, vapes and gummies can be sold openly in states that ban cannabis is a loophole left by the 2018 farm bill: it allows low-concentration THC from hemp. After lab processing, that low concentration is enough to mimic a cannabis high, which is how you get Delta 8, Delta 9 — and, as the show jokes, by now Delta 11. Congress now wants to close the loophole, and it's using a stricter ban to do it. The key is that this is a federal ban, so even if your state has legal cannabis, you get hit.
— Adrian MaWhat's being banned is a $28 billion industry
The show puts the size at $28 billion and says the industry could disappear before the end of this year. Tennessee has already gone first: since July it has banned most THC hemp products, and a local reporter described herself as already living in a ‘post-hemp world’. State lawmakers even beat Congress to it, banning full-spectrum CBD and smokable flower first. For retailers, farmers and processors, this isn't a policy debate — it's a choice that has to be made before year-end.
— Mariana BacayauFarmers are going back from hemp to blackberries and corn
Tennessee farmer Lee Crabtree's farm used to grow mostly CBD-variety hemp, and the new state law makes selling those products illegal, so he's gone back to traditional seasonal crops like blackberries and corn. The family still has the industrial kitchen from its CBD food days, and now his wife Stacy uses that big stainless-steel counter to cut grapes for chicken salad to sell at the roadside farmers market. Lee says income is down, and if the traditional crops don't sell, he'll have to go find a job. This is what the ban looks like landing on one household.
— Mariana BacayauThe regulator's case: consumers don't know what they're drinking
Tennessee Republican state representative William Lamberth uses a drinks analogy: someone buying a Sprite expects a Sprite, not a beer; someone buying a beer expects a beer, not a tequila; someone buying a tequila expects not to get a Sprite. He says the goal is for consumers to know exactly what they're buying. But even farmers who agree with the logic worry the law overcorrects. The show gives the other side too: big companies are laying people off, and some are simply moving states — Emily Schaeferich's company Burning Acre moved from Columbia, Tennessee, to North Carolina to keep growing, and she admits ripping up an entire retail, manufacturing and wholesale supply chain ‘definitely costs a lot of money’.
— William LamberthMoving to another state may be wasted effort
Hemp economist Beau Whitney calls the nationwide ban taking effect in December an ‘extinction-level event’. His mechanism: cannabis can only be grown in certain states, while hemp can be grown and shipped anywhere, so hemp businesses can build supersized capacity, push costs down and ship nationwide; cannabis, by contrast, needs a separate supply chain per state and can't get hemp's economies of scale. The result is that hemp-derived food is far cheaper than the cannabis equivalent. So even in states with legal recreational cannabis, consumers will feel squeezed when they lose the cheap alternative.
— Beau WhitneyThe ban takes out state tax revenue
The show pulls out economies of scale on its own to explain it: the more of the same good you produce, the lower the unit cost, and the savings can be passed on to consumers. That also explains why hemp-derived food is cheaper than cannabis products. But consumers aren't the only ones affected. For a lot of state budgets, losing the hemp industry means losing a sizable source of tax revenue — in Tennessee alone, a $54 million budget hole. Beau Whitney also says it could put hundreds of thousands of jobs at risk.
— Adrian MaThe delay just moves it from November to December
The White House has urged Congress to delay or amend the ban, the Senate currently supports it, and the House voted earlier this month to delay it too. But those moves only push the effective date from November to December — a one-month delay. For companies that have already moved states and rebuilt supply chains, a month changes nothing — they may have just moved the whole business only to find the industry destroyed in December.
— Adrian MaThose staying behind switch to fiber hemp
Tennessee farmer Bill Corbin, in Springfield, is preparing the first fiber hemp crop for the French company Hemp-It; this hemp is used for rope, packaging and auto parts. He says there isn't a person in the industry who didn't know this day was coming, that he thinks the industry was unsustainable to begin with, and he agrees with lawmakers' effort to suppress recreational use of hemp derivatives. But he worries about medical consumers: he himself is older and has arthritis, relies heavily on full-spectrum CBD, and the products left after the ban may not be strong enough for older people or those trying to avoid opioid painkillers.
— Bill CorbinIn their own words · checked verbatim
But even in places where it's not, you'll still see smoke shops and liquor stores selling things with that signature star-shaped leaf.
Adrian Ma0:00
That's a $28 billion industry that could be gone by the end of the year.
Mariana Bacayau1:00
If someone buys a Sprite, they expect to get a Sprite, not a beer. If they buy a beer, they expect to get a beer, not a bottle of tequila.
William Lamberth5:08
I've described it as an extinction-level event.
Beau Whitney6:10
Because marijuana can only be grown in certain states, while hemp can be grown and shipped anywhere.
Beau Whitney6:10
Just here in Tennessee, it's meant a $54 million hole in the state budget.
Adrian Ma7:13
There's not a person in this industry that didn't know this day was coming.
Bill Corbin8:14
And this is a federal ban, so that will affect people in states where weed is legal.
Adrian Ma9:15
Figures
| Size of the hemp-derived THC industry | $28 billion | 1:00 |
| Tennessee budget hole | $54 million | 7:13 |
| Size of the ban delay | From November to December, one month | 7:13 |
| Emily Schaeferich's cross-state commute distance | Nearly 300 miles | 5:08 |
Glossary
- full-spectrum CBD
- An extract that preserves multiple cannabinoids from hemp, unlike pure CBD.
- Delta-8
- A hemp-derived THC variant that, after lab processing, can produce cannabis-like psychoactive effects.
- economies of scale
- The more you produce, the lower the unit cost, and the savings can be passed on to consumers.
- California sober
- A lifestyle of giving up alcohol but continuing to use cannabis or THC drinks.
How to listen
Founders, investors and operators in regulatory arbitrage, consumer brands and agricultural supply chains, plus anyone making compliance and policy-risk calls.
The show promo and ads at 0:00-1:00 can be skipped; the episode proper starts with the Tennessee case.