Mail-order, chemically made THC undermines Michigan's Marijuana industry
Michigan’s marijuana industry is hoping Congress will stamp out a growing competitor.
The 2018 Farm Bill created what’s known as the “Farm Bill loophole” that made hemp-derived THC federally legal. This has allowed operators in other states where marijuana is illegal to take hemp-derived THC and combine it with enough additives to mimic full-THC marijuana products — circumventing regulated states like Michigan — and ship them nationwide.
Now Congress is in a battle over a new Farm Bill, a $1.5 trillion package that sets agricultural and food policy for the next five to six years, and will decide whether to close the loophole or let it stand. The hemp-derived market, which also includes non-intoxicating CBD products that include gummies and creams for sleep and pain, is worth an estimated $28 billion and supports 328,000 workers in the U.S., according to Oregon cannabis industry analysis firm Whitney Economics.
On one side are hemp farmers from states like Indiana that have now become reliant on the growing hemp industry and on the other is state-regulated marijuana industries like the one in Michigan.
Many in Michigan’s cannabis industry, which first began legal recreational sales in late 2019, are paradoxically for the prohibition of this type of cannabis while others want hemp-derived to at least be state-regulated.
“Exploitation of a Farm Bill loophole created a market and means for intoxicating hemp-derived cannabinoids to be sold, untested, at convenience stores and over the internet, often to minors,” Lance Boldrey, a partner at Detroit-based law firm Dykema Gossett PLLC and part of the legal team that designed the state’s marijuana legalization framework. “These products are marketed with marijuana strain names and as having the same effects. They can be produced far more cheaply than marijuana and with minimal, if any, regulatory requirements and costs production and definitely have an impact on the Michigan market for regulated marijuana.”
Hemp sits on a table in a lab.
Competing cannabis characteristics
The 2018 Farm Bill effectively de-scheduled hemp as a controlled substance, stating that any cannabinoid derived from hemp — defined as cannabis containing less than 0.3% THC — could be sold in the market, free of federal intervention.
In other words, with enough additive ingredients, gummies and drinks could be created to offer the same psychoactive effects as traditional marijuana that’s heavily regulated in states like Michigan. This has led to a recent boon for operators in other states — as Michigan regulates all hemp and cannabis products, regardless of the Farm Bill — who can not only federally produce THC products, but can ship them across state lines provided they don’t surpass 0.3% THC by weight.
For instance, Massachusetts-based Cantrip distributes hemp-derived THC drinks to 39 states thanks to the Farm Bill. In Michigan, however, hemp-derived THC is regulated like traditional cannabis-derived THC and therefore is barred from sales outside of a marijuana dispensary. This makes the market effectively a non-starter for these companies because they see success by being able to sell their products in grocery stores and other less-regulated retail outlets than dispensaries.
Cans of THC beverages sit in a drink cooler, seen April 16, 2024, at the Pleasantrees retail location in the former Gibraltar Trade Center in Mount Clemens.
But despite Michigan’s regulations, consumers can simply order many similar hemp-derived THC products online and shipped directly to their door. There’s no oversight on whether and how those products were tested, said Dave Morrow, chair of the state’s largest cannabis operator, Lume Cannabis Co.
“We’re not anti-hemp or anti-hemp-derived cannabis, but all THC products need to be regulated and tested,” Morrow said. “We worry that this unregulated sector of the market is going to come back and harm the regulated markets. We have to test for yeasts and molds and bacteria. They don’t. And if someone gets hurt by this stuff, we’re afraid that backlash will harm the entire THC market and ruin all this progress we’ve made or put it in reverse.”
Mike DiLaura, chief of corporate operations and general counsel for Madison Heights-based House of Dank, told Crain’s that the Farm Bill loophole undercuts the state’s legal market and puts unsafe products in the marketplace.
“We think safe, tested products, particularly the processed products, are the bedrock of our industry and regulating intoxicating hemp furthers that goal,” DiLaura said.
Morrow said these online companies also fail to do age verification and frequently sell to minors.
Oklahoma City-based online hemp-derived THC retailer Mood offers THC gummies for delivery to addresses in Michigan. While visitors to its website have to click whether they are 21, there appears to be no verification of the consumer's actual age at any point in the transaction process.
Mood offers gummies with 5-15 mg of hemp-derived THC, delivered straight to your door. And while the Michigan Cannabis Regulatory Agency has technically banned this practice, requiring the sale of any cannabis product in the state to be made by an in-state producer, it is effectively helpless in stopping these products from traveling through the federal mail system.
Mood, which did not respond to an inquiry on the matter, projected it would generate revenue of $100 million in 2023.
The CRA declined to comment on its enforcement or the concept of hemp-derived cannabis.
Morrow said Lume is producing a documentary to show legislators about hemp-derived THC versus traditional THC.
But the company doesn’t want the loophole closed. It wants regulations for hemp-derived THC because of potential business opportunities. Lume recently launched a THC beverage called Buzzn, which can only be sold in Michigan dispensaries. The company is exploring opening a canning operation in another state like Wisconsin, where it can can the beverage with hemp-derived THC and ship it across the U.S.
“It dramatically opens up the market,” Morrow said. “It’s way easier for us to scale up Buzzn with D-9 (hemp-derived THC) than having to get licensed in each individual state. I can open one canning facility and do 10 million units in one state and produce at scale.”
A worker inspects hemp plants as they dry.
Closing in sight?
Meanwhile, legislators continue to debate the Farm Bill. Competing interests are lobbying the U.S. House Committee on Agriculture to revise the 942-page package — most of which have nothing to do with the loophole.
Some revisions include language that protects the loophole, while others clarify it or outright ban hemp-derived THC and more.
U.S. Rep. Mary Miller, a Republican from Illinois, last week filed a proposed amendment to the bill that would “exclude” products with THC from protection.
This would spell a win for many cannabis operators in state-regulated markets. The U.S. Cannabis Council, which represents state-regulated operators, has been pushing the provision.
“Closing the perceived loophole in the Farm Bill would create parity and facilitate state-level regulation, followed by eventual federal legalization of all THC products,” the council said in a statement.
Others worry that text would ban the vast majority of hemp products, even those without psychoactive ingredients.
“By federally banning all ingestible hemp products with any quantifiable level of THC, the Mary Miller Amendment would result in federal prohibition of 90% to 95% of all hemp products on the market, even a large majority of popular, non-intoxicating CBD products that naturally contain trace, non-intoxicating amounts of THC in them,” U.S. Hemp Roundtable General Counsel Jonathan Miller, said in a statement.
The Farm Bill expired in October, but President Joe Biden appropriated an extension, meaning it will continue through September. So the conundrum must be solved in the next four months.
