Some pot pros see it as a threat, others a potential $14 billion opportunity for a product that investors have been mostly avoiding
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The legal cannabis industry is witnessing a strategic shift as some companies turn to hemp-derived THC products to tap into less-regulated markets and drive new revenue streams amid federal legalization delays in the U.S.
What is Hemp-Derived THC?
Hemp-derived THC exploits a loophole in the 2018 Farm Bill, which legalized hemp products containing less than 0.3% THC. Manufacturers extract and concentrate this THC, creating products that are psychoactive but federally legal. These products often avoid the strict regulations applied to cannabis, including mandatory safety testing and packaging rules, and are sold in a broader range of venues, such as liquor stores and online.
Moves by Major Cannabis Companies
Green Thumb Industries: Collaborated with Magnolia Bakery for THC-infused desserts and invested $20 million in hemp-focused Agrify Corp.
Tilray Brands: Launched hemp-derived THC beverages, including seltzers and mocktails.
Canopy Growth: Expanded its Wana edibles brand with hemp-derived THC offerings.
Curaleaf: Entered the market through its Select brand of hemp-based products.
Organigram: Invested in Open Book Extracts to develop cannabinoid products.
Market Potential
According to Alliance Global Partners analyst Aaron Grey, the hemp-derived THC market in the U.S. could grow to $13.5 billion, driven by demand for products like beverages that appeal to social drinkers seeking mild effects. For instance, Cann Social Tonic offers low-dose beverages (2-5 mg THC) targeting younger consumers looking for alcohol alternatives. The company's hemp-derived products are distributed in liquor stores across 20 states and sold online in 40 states.
Challenges and Controversies
While the market offers opportunities, hemp-derived THC faces regulatory uncertainty and safety concerns:
Lack of Safety Testing: Unlike cannabis, hemp-derived THC products are often untested for contaminants like mold or pesticides.
State Bans: States such as California and New Jersey have prohibited hemp-derived THC products, citing risks to children and insufficient safety protocols.
Lawsuits: Colorado is currently litigating the legality of chemical conversion processes used in creating hemp-derived THC.
Industry Friction: Cannabis operators argue that the unregulated hemp market undercuts their heavily regulated businesses.
Regulatory Push and Advocacy
Efforts to regulate the hemp-derived THC market include:
Coalition for Adult Beverage Alternatives (CABA): Advocating for federal regulations, including FDA oversight, to promote consumer safety.
Proposed Legislation: A bill by Senator Ron Wyden (D-OR) would task the FDA with establishing rules for hemp-derived products.
Future Outlook
Hemp-derived THC products offer a significant growth opportunity for cannabis companies struggling with federal legalization delays. However, long-term success will likely depend on resolving regulatory challenges and ensuring product safety to gain public trust and industry sustainability
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