State Actions Grow to Close Market Loopholes, Unregulated Sales

’Chemically converted products are where the legality debate exists,’ Lawyer Says

When Philadelphia-based attorney Seth Goldberg started representing businesses and individuals looking to expand into cannabis 10 years ago, a lot of his work focused on state-licensed cultivators, product manufacturers, and dispensaries in regulated state markets. In recent years, the market has evolved to an emphasis on cannabis as a functional ingredient in food and beverage products. Goldberg’s clients now include a food company looking to expand into THC edibles and a beverage company looking to add a line of THC drinks. THC is the psychoactive component in marijuana. His practice is constantly evolving with shifts in state and federal law and enforcement — or the lack thereof. Without clarity and consistency in the regulation of cannabis-infused food and beverages nationally, entrepreneurs with an appetite for risk have forged a patchwork market for unregulated THC drinks containing psychoactive ingredients such as delta-8 and delta-9. Often, these companies exploit loopholes in the 2018 Farm Bill, which removed cannabis with low concentrations of THC from the Controlled Substances Act and called it hemp. Delta-8 and delta-9 THC drinks are popping up outside of regulated dispensaries in states like Minnesota and Texas. You might even find such products at the local convenience store in your state. “There’s been a real evolution in terms of how cannabis consumer packaged goods are being marketed in 2025 relative to when I got into this is 2015,” Goldberg, a business litigation partner at law firm Pashman Stein Walder Hayden, said in an interview with Beverage Digest. He is co-chair of the firm’s Cannabis & Hemp Law practice. The flood of new THC beverages across the US is now catching the attention of state legislators and regulators. Just this month, Maryland Gov. Wes Moore signed legislation that limits the amount of THC in drinks that aren’t sold by state licensed cannabis distributors. A bill in Tennessee prohibits the sale of hemp-derived THC drinks at convenience stores and groceries. A number of other states including Florida and Georgia have attempted legislation governing this new crop of THC beverages. Hemp-based THC drinks haven’t captured the attention of the Trump administration, however. BD’s Duane Stanford spoke to Goldberg to better understand this exploding THC beverage market. Given the level of regulatory gray area in this sector, BD isn’t identifying brands in this story.

The following interview has been condensed and edited for clarity:

Duane: What is legal federally when it comes to THC beverages?

Seth: From a federal standpoint, the 2018 Farm Bill legalized hemp, defined as cannabis with less than 0.3% delta-9 THC. Delta-9 THC is the intoxicating cannabinoid in cannabis. Anything above that threshold is considered marijuana and remains a controlled substance federally. Anything below is considered hemp and arguably legal under the Farm Bill. However, not all THC being marketed today is the delta-9 THC found naturally in cannabis.

Duane: Not all THC is equal under the law?

Seth: Correct. Delta-9 THC must come from hemp to be federally legal. By definition, a plant will either be marijuana because the plant itself has THC that's higher than 0.3% or it will be categorized as hemp because it has THC below 0.3%.

’CHEMICALLY MANIPULATED’

Duane: Are hemp and marijuana different plants by nature?

Seth: Yes. Through breeding, we have low-THC strains considered hemp. Where lines get blurred is that hundreds of cannabinoids exist in cannabis plants, and some non-psychoactive cannabinoids can be chemically manipulated to become psychoactive.

Duane: What's an example?

Seth: Delta-8 THC. It's found in small quantities in hemp but can be created by chemically altering CBD molecules from hemp. Delta-8 is psychoactive, and many products on the market contain delta-8 THC created this way. There is also delta-10 THC and THC-O, which is intensely psychoactive. These are uniformly made through chemical processes.

‘LOOPHOLE’

Duane: Has that created a gray area in the law?

Seth: Yes, both federally and at the state level. Some call it a loophole. The Farm Bill says hemp and its derivatives are federally legal. Some argue that if you convert CBD from hemp into intoxicating delta-8 THC, it remains federally legal because it derived from hemp CBD. Many states disagree, saying the Farm Bill's intent wasn't to allow conversion of non-intoxicating CBD into intoxicating delta-8 THC.

Duane: Is this why we've seen a sudden rise in THC drinks everywhere?

Seth: Correct. Hemp beverages are exploding. And in some respects, that’s a good thing. Delta-9 THC occurring naturally in hemp is a Farm Bill compliant substance that can go into beverages, leaving aside what the FDA says. The chemically converted products are where the legality debate exists. A lot of people would say the 2018 Farm Bill was intended to create a market for non-psychoactive cannabis for farming. It wasn't intended for a consumer packaged goods market. The proliferation of hemp THC beverages started when this chemical conversion process became popular a few years ago.

‘VERY INTOXICATING’

Duane: Is 0.3% THC enough to be effective?

Seth: That's where dosing comes in. If your plant has 0.3% THC or less on a dry weight basis, it's legal hemp. But if you concentrate that Farm Bill-compliant THC and put it into a beverage, you can create something very intoxicating. A can of hemp beverage might say "less than 0.3%" but contain hundreds of milligrams of THC.

Duane: So, the 0.3% refers to the plant material, not the final product? That seems like another loophole.

Seth: Exactly. The Farm Bill controls what comes out of the ground on a dry weight basis. You take those compliant plants, create a distillate or powder, and then dose it in products. Most hemp processors are creating distillates. And those distillates are going to a company that's making the formula for the beverage, and it's arguably Farm Bill compliant because it came from hemp. But the product manufacturers are now using it to create the dosage of THC.

Duane: One THC beverage brand I came across recently says its delta-9 is “naturally-derived” from “federally legal hemp” and contains “no more than 0.3% of the product’s net weight, ensuring full compliance with the 2018 Farm Bill.” Is this misleading?

Seth: This is a great example of the second loophole. When the farmer takes the plant out of the ground it must test below 0.3% THC on a “dry weight basis” to qualify as hemp. If it tests higher, it is marijuana and should be destroyed under USDA regulations because it is what is referred to as “hot hemp.” Dry flower is very light so 0.3% THC on this basis is not a lot. Now, some manufacturers are reading “dry weight basis” to apply to a finished product, be it a can of beverage, a brownie, and so on. So, 10 mg of THC in a 16-oz (473ml) can of hemp beverage is far less than 0.3% of the product’s net weight. In fact, that can could be marketed as having as much as 1,400 mg of THC before it exceeds the 0.3% threshold for hemp. That’s a lot of THC!

WHILE FDA STANCE CLEAR, ENFORCEMENT ISN’T

Duane: What does the FDA say about these beverages?

Seth: The FDA has been clear since the 2018 Farm Bill that CBD and other hemp cannabinoids cannot be put into foods and beverages. However, they're not taking much enforcement action, leaving regulation largely to the states. In places like California, state-licensed cannabis manufacturers can make beverages with delta-9 THC for regulated dispensaries. In states like Minnesota without legalized cannabis, hemp-derived delta-9 THC beverages are booming. The hemp-based delta-9 THC beverages being sold comply with state law. They may or may not comply with the Farm Bill, depending on your view. But they would violate the Food, Drug, and Cosmetics Act because the FDA has said these kinds of substances can't be put into foods and beverages.

Duane: To clarify, is delta-9 fine under the Farm Bill but delta-8 debatable?

Seth: Delta-9 THC is flat out fine provided it's below the 0.3% threshold. But the FDA still maintains these substances shouldn't be in beverages, though they're largely not enforcing this. The FDA is leaving it up to the states.

GAS STATIONS AND CONVENIENCE STORES

Duane: Where are these THC products proliferating?

Seth: It depends on the state. In states without legal cannabis, these hemp cannabinoid products appear in convenience stores, gas stations, grocery stores, and mass alcohol retailers like Total Wine, which has been influential in their proliferation.

Duane: How are states responding with regulations?

Seth: Many states are issuing regulations addressing "total THC," requiring all THC compounds combined to be below 0.3%. Some states are prohibiting chemically converted cannabinoids like delta-8 entirely. Texas, Virginia, South Dakota, Arkansas, Pennsylvania, and Georgia are all working on legislation. Any manufacturer looking to enter this market must focus on two critical areas. First, understand state regulations for hemp cannabinoids, as these vary significantly across states, creating a patchwork of rules that prevent simple product transfers between markets. Second, maintain clarity on current federal legislation, recognizing that these federal regulations could change at any time.

Duane: Will the federal government get involved?

Seth: The hemp industry is trying to persuade lawmakers to leave the 2018 Farm Bill unchanged, while the regulated cannabis industry wants changes to restrict using hemp cannabinoids for intoxicating products. The longer this debate continues, the more established the market becomes, making legislative changes more difficult. Larger cannabis companies are also expanding into the hemp cannabinoid market.

BETTING ON INERTIA

Duane: Is the tide turning against these products, especially chemically derived delta-8?

Seth: There's a little bit of a disconnect between legislators and the market. On Capitol Hill, concerns focus on hemp intoxicants derived from chemical processes. Meanwhile, the market is proliferating with these brands. Many are betting that there won’t be a change to the 2018 Farm Bill. And you're starting to see bigger and bigger companies getting into the space, and brands are growing, and the space is growing. And there are a lot of people betting on the size of the market and the value of the market, to then say to legislators, "Look, you can't make a change to the Farm Bill. We now have a $40 billion industry or a $50 billion industry." And it may be, by dint of inertia alone, that legislators can't change the 2018 Farm Bill. The longer this debate goes on, the greater that inertia becomes. We're seeing major cannabis companies like Curaleaf and Tilray, which made their bones in regulated cannabis, now expanding into the hemp cannabinoid market.

Duane: Is that because those companies don’t see the regulated THC beverage market growing as fast as expected?

Seth: There's a ceiling on the sales of regulated cannabis because you must sell through state licensed dispensaries to consumers who want that product. Scaling for cost-efficient beverage distribution in a single state is challenging. In contrast, the hemp cannabinoid market is generally not regulated, and product is being sold across state lines. It's not that the regulated cannabis products aren't making money. It's that the lightly regulated opportunity with hemp cannabinoids is going to exist until the 2018 Farm Bill gets changed or doesn't.

ALCOHOL INDUSTRY REACTION

Duane: Is the alcohol industry concerned about competition?

Seth: It seems big alcohol largely sees this as an opportunity to expand into a new product area or to expand a product line. I expect many alcohol companies will acquire successful hemp cannabinoid beverage brands. It's becoming like the craft beer market, with everything from small local producers to nationally distributed brands.

ASSESSING RISK

Duane: How would you advise companies considering entering this market?

Seth: Hemp-derived delta-9 THC beverages have a better risk profile than chemically converted products like delta-8. Federal law is more likely to change regarding chemically converted substances. For naturally occurring THC products, there's an opportunity to build a brand while regulations aren't being enforced under either federal or state law. Larger companies might make small investments now to establish a foothold without fully committing. At the end of the day, they can just come in and buy a company when the law changes.

Duane: Why would companies bother with delta-8 if delta-9 seems safer legally?

Seth: In unregulated states, delta-8 can be cheaply produced from CBD. Among manufacturers, there are folks who are thinking about how this product could be regulated, should be regulated. They're worried about ingredients. They're doing testing. They're trying to create a safe product. And there are companies out there who are looking at this as the Wild West and they're just trying to get to market as quickly as possible and take advantage of this opportunity until the federal law is clarified. I really haven't seen the bigger brands in this space marketing delta-8. There's a decision being made that they’re not going to get into the chemically converted delta-8 type products because on a gut level they feel different than the delta-9 THC products.

Duane: So, it’s a matter of risk tolerance?

Seth: Ten years ago, when I got into cannabis, I was talking with Fortune 100 companies and startups about whether they wanted to get into state-licensed cannabis even though cannabis was federally illegal. The spectrum of risk was whether the Department of Justice would decide that companies selling marijuana in a licensed state had still violated the Controlled Substances Act. Today, it's the same conversation, but a different spectrum of risk. Are you willing to get into a market where there's a potential change to federal law coming and it's not clear whether the Farm Bill legalized these products or not? There has been some federal crackdown by the Drug Enforcement Agency, and the FDA has been sending more and more warning letters to delta-8 manufacturers. But the lack of enforcement is driving the spectrum of risk. The lack of enforcement creates the opportunity. How far do I want to go in? How big of an investment do I want to make? And what happens if there is enforcement? Some companies will say, "Look, I know there's a state regulation, but they are not enforcing it, so I'm going to push it until I see there's some enforcement.” Some companies will say, "If I get an FDA warning letter, that's when I'll stop."