Supporters have generally argued the change is needed to protect public health and clamp down on unregulated “intoxicating hemp” products that resemble candy and are sold in convenience stores and online. Opponents — including the hemp industry, many farmers, and state regulators — generally contend the language is less about regulation and more about prohibition, saying it threatens an agricultural economy built around fiber, seed, CBD and wellness products. Notably, Whitney Economics (WE) provides several notable estimates for the U.S. hemp and hemp‑derived cannabinoid industry in its U.S. National Cannabinoid Report and submits that total hemp‑derived cannabinoid sales are in excess of $28 billion, supporting over 325,000 workers, and earning more than $13.2 billion in wages. All of this infrastructure, investment, and the jobs will indeed suffer from the actions of Senator McConnell and his D.C. collaborators. To put it simply, things went down we don’t understand, but I think in time we will.

This very plant – hemp — that, just a few years ago, seemed poised to anchor rural economies, fuel new product innovation, and signal a pragmatic approach to cannabis reform is now effectively banned — or at least its derivatives are. The ramifications of this move extend far beyond the Beltway. As stated, they reach into farms, manufacturing floors, and the very supply chains the industry has painstakingly built. And, if you listen closely, and if indeed it has been the large MSO interests of the marijuana sector of the cannabis industry that are pushing for this ban, you can hear a cautionary note echoing: be careful what you wish for. And so, think this through with me, let me know your mind.

I want to break this down in two sections. First, why this hemp ban is a tragedy. And second, why the prevailing MSO strategy — the assumption that Schedule III is the only cogent pathway— is dangerously shortsighted.

Section 1: Why the Hemp Ban Is a Tragedy

Harry Anslinger, the first commissioner of the Federal Bureau of Narcotics, was the architect of federal cannabis prohibition in the 1930s. Today, many see Senator Mitch McConnell as taking up that mantle, shaping federal cannabis policy with similarly sweeping prohibitionist consequences for the industry.

To be sure, it is impossible to understand this legislation without acknowledging its architects. Senator Mitch McConnell, long associated with hemp policy, orchestrated this change despite significant opposition from his Kentucky Senate colleague, Senator Rand Paul. Paul has been an unyielding advocate for hemp, emphasizing both the economic and regulatory sense in maintaining a reasonable threshold for hemp-derived cannabinoids. According to Marijuana Moment, Paul warned that the amendment “would devastate the hemp industry and send farmers, manufacturers, and retailers scrambling under new federal prohibitions” — yet McConnell’s push prevailed.

The legislative maneuvering here is emblematic of a larger more troubling macro-pattern: major policy shifts hidden in must-pass spending bills. Hiding major legislation inside a must-pass spending bill without proper public debate and process undermines the transparency and accountability that is the basis of our democracy. This tactic bypasses the normal legislative process, leaving citizens and lawmakers with little opportunity to fully understand, discuss, or challenge the changes being imposed. The recent inclusion of a hemp ban in this way is just the latest example, but it reflects a much larger problem that erodes trust in government and the rule of law. This issue is a topic in itself, deserving a prominent position in public debate about how our government operates and how the laws that affect us are created. We need to stay vigilant and demand that significant policy decisions go through proper debate and scrutiny, rather than being slipped in quietly. Without the proper public process, the new federal language redefines hemp, restricting not only THC content but also derivatives — effectively making products like Delta-8 THC illegal and calling into question a wide array of edibles, beverages, and consumer products that have been flourishing under the nearly two dozen state-hemp-product regulatory frameworks.

The implications are profound. Hemp, as cultivated and processed in states like Kentucky, North Carolina, and Colorado, has generated jobs, developed infrastructure, and introduced new streams of revenue for small and medium-sized businesses. Farmers invested heavily in 2021–2024 planting cycles based on the legal clarity provided by the 2018 Farm Bill. Leading cannabis industry economist, Beau Whitney told me that “the recent change in federal laws regarding hemp has ratcheted up the level of uncertainty in the market. This will impact hemp investments and funding for critical infrastructural development at a time when hemp operators need expanded capacity and infrastructure to expand the opportunities in the fiber, grain and cannabinoid sectors.”

Manufacturers created lines of products that complied with federal guidance, labeling rules, and state licensing requirements. Retailers offered these products to a burgeoning consumer base. Overnight, federal law signals that these operations may soon be unlawful. And yet, as I have often told clients and colleagues, a plant, a product, or a market does not vanish at the stroke of a pen. Consumers continue to demand these goods, and the underlying economic infrastructure remains intact. So much has been lost, and Whitney reminds us that “The U.S. has capitulated the hemp market to the rest of the word. We are no longer positioned to be a global leader as we may see fewer acres planted in 2026 that we did in 2014. The may be more acres of hemp in France or Morocco than the U.S.” Opportunity lost.

Also troubling is the fact that intermediary raw material products such as crude or distillate are also illegal. This makes even non-intoxicating products non-compliant under this new law. CBD products often are derived from full spectrum oils, that contain THC in small quantities. Given these prohibitions, the entire hemp cannabinoid market is at risk. Additionally, even isolated products containing zero THC will be impacted as if the intermediary raw materials are illegal, there will be no base in which to isolate from.

It is also critical to consider the THC beverage sector, one of the most highly regarded and fastest-growing segments of the national cannabis consumer market. Across the United States, thousands of outlets now sell THC beverages — from convenience stores to liquor retailers, and even major chains like Target have entered the space. These products rely almost entirely on hemp-derived THC. The marijuana sector cannot provide the ingredients for this category because it remains intrastate, limited by state law. Low-dose THC beverages have consistently failed to sell in dispensaries, but they thrive in retail liquor and convenience channels. The supply chain logic is unavoidable: hemp is the only scalable source of THC emulsions and ingredients for this sector. Without hemp, the industry risks constraining innovation and growth, and potentially throttling a category that has achieved nationwide visibility and consumer adoption. Even if rescheduling occurs, that does not suddenly create a federal avenue for interstate distribution of recreational THC beverages — unless the product is defined as a medical product, which these beverages are not.

Even if federal law changes tomorrow — or even if the current hemp ban is later reversed — these products are not going anywhere. Consumer demand is high, thousands of jobs are entrenched, and the infrastructure for production, distribution, and retail exists state-by-state. Federal prohibition may complicate operations, but it cannot erase a market that the states have already sanctioned and the public has clearly embraced. The industry may adjust, adapt, and innovate, but it will not likely disappear. In other words, numerous state laws continue to permit the hemp products that have been federally banned – so the question becomes federal enforcement, if any. And we have not seen any concerted effort to federally enforce against the federally-illegal state-regulated marijuana sector, which has blossomed into a massive industry. I suspect the same case will exist with hemp derivatives.

As such, it is essential that any affected hemp operators continue executing business as usual; especially since because the new hemp definition does not become effective for a year. This, however, is the time to begin evaluating and understanding options for continuing business in an industry that is extremely diverse. It is also a time to closely examine financing and banking alternatives and backups; state law compliance items, and each and every relevant business contract.

It’s also worth noting the irony — the marijuana sector of the cannabis industry, which believes that it stands to gain from stricter control over hemp products, has been a significant driver behind this legislative effort. That a portion of the industry (which is unequivocally prohibited at the federal level) would push for the prohibition of other cannabis derivatives is a striking reminder: everything we have with cannabis, no matter how carefully regulated at the state level, can be revoked federally without proper public debate. The chance for the marijuana sector and the hemp sector to work together toward a unified, national framework — one that could have harmonized supply chains, fostered interstate commerce, and built a truly national cannabis industry — has been lost, at least temporarily. The ball has been fumbled.

And make no mistake: this is not the end. The legislation allows roughly a year for phase-in. That window provides the industry a chance to organize, to advocate, and to adapt. Farmers will continue planting, manufacturers will continue innovating, and consumers will continue purchasing. The federal government may have changed the rules, but the market’s momentum is undeniable; especially in states that have chosen to maintain state bans on the marijuana sector.

Another irony is that a large amount of sales of hemp-derived cannabinoids was generated by marijuana businesses that were selling in both sectors. According to Whitney Economics, the marijuana industry, especially the MSOs, will likely see a total revenue decline as a result of this legislation.

What this really illustrates, in my view, is a failure of strategic foresight. Policymakers inserted these restrictions without the benefit of comprehensive input from industry stakeholders. MSOs and other well-resourced marijuana operators, in their rush to optimize their own regulatory positions, failed to build a coalition that might have created a robust, unified front to protect hemp. In effect, the industry has allowed internal competition and short-term tactical thinking to undermine what could have been a cohesive, strategic path forward.

Section 2: Why the MSO Schedule III Strategy Is Short-Sighted

While hemp struggles to survive sudden federal limitations, the multi-state operators (MSOs) appear to have staked their futures on a different bet: the rescheduling of marijuana from Schedule I to Schedule III. In theory, Schedule III status would alleviate the 280E tax burden, open banking pathways, and provide a degree of regulatory certainty. But as I have spent nearly twenty years advising clients on the nuances of 280E and DEA registration and federal scheduling, the reality is far more complex.

First, let’s address compliance. Schedule III registration under the Controlled Substances Act requires specific DEA licensing. All state-licensed dispensaries, while aiming to operate fully legally under state law, are not registered with the DEA to handle Schedule III substances. And upon close review of the prevailing Schedule III registration requirements, there is not a pathway for marijuana dispensaries to become federally compliant. That’s critical. Without proper federal registration, a Schedule III designation does not automatically confer legality for the products it sells. In other words, operators may be relying on a legal argument for relief that they cannot practically claim. Selling “Schedule III marijuana” without DEA registration is functionally the same as selling an illicit product under federal law — and it jeopardizes any claim to 280E relief. 280E is a significant tax issue affecting the cannabis issue and is better described here: https://www.congress.gov/crs-product/R46709.. At best, under Schedule II, a state-compliant, federally unregistered marijuana company would have an argument that 280E should not apply, but it is not a “given.”

Second, the supposed tax benefits would not appear to actually create any actual financial breathing room for marijuana sector companies. This is because many MSOs and numerous other marijuana sector interests have structured their accounting to take deductions, treat liabilities as contingent, or defer payments. In other words, marijuana sector operators are rarely paying those taxes in the first instance anyway. Reports have shown that the marijuana sector has hundreds of millions in back taxes, and relieving 280E will not instantly produce cash flow sufficient to drive expansion or reduce risk meaningfully. The perception that Schedule III is a “silver bullet” is therefore misleading.

Third, DEA and FDA regulatory rules for Schedule III substances are neither simple nor immediate. While rescheduling may theoretically permit research, interstate commerce, and pharmaceutical-grade oversight, the existing regulations remain in place, and new rules would take years to develop, if they are ever developed. We know the existing Schedule II framework…because it already exists; nothing new will save the marijuana sector in the event of rescheduling; and the existing Schedule III standards and regulations are not friendly to the manner in which the marijuana sector is currently structured; maybe even prohibitive. Manufacturers, cultivators, and researchers may eventually benefit, but dispensaries — the front-line retail operators — likely will not. I have examined the legal issues thoroughly and a cultivator and/or manufacturers could arguably qualify for Schedule III registration and compliance, but a dispensary model does not fit there…at all. In effect, Schedule III is a partial solution that privileges certain segments of the supply chain, leaving others in regulatory limbo. In short, it does not benefit marijuana sector interests that are heavily reliant on brands, retail distribution, and sales – it only benefits the top of the supply chain, if at all.

Fourth, interstate commerce remains constrained. Without DEA registration or revised federal guidance for distribution, selling Schedule III cannabis compounds across state lines remains largely impractical, and likely still illegal. The states are still the primary regulators, and the assumption that a federal rescheduling automatically creates a nationwide market is flawed. MSOs pursuing this strategy may find that their optimistic projections for scale and market access are grounded more in wishful thinking than legal reality. And so, if a marijuana sector company cannot comply with Schedule III requirements, as they currently exist, does that mean that they are any better off than they are today – because such a marijuana sector operator could only operate in the state in which they are licensed, under those esoteric rules. Doesn’t seem like progress.

Finally, Schedule III will likely favor large, vertically integrated players with the resources to navigate DEA registration and compliance. And when I talk about large interests here, I am not referring to MSOs, which remain small in comparison. I am talking about bigger scale entrenched national and multi-national interests. This leaves smaller operators and state-level entrepreneurs at a disadvantage; and MSOs fall into this category. This is a strategic concern for the industry as a whole. If MSOs are not considering the broader ecosystem, the attempt to “solve” regulatory problems could exacerbate inequities and stifle innovation.

Put plainly: the Schedule III strategy is an echo chamber. Whitney even submits that it may be a death knell to the marijuana sector, when he says that “rescheduling cannabis to Schedule III will more than likely force a consolidation in the market. The personal wealth destruction alone with cost billions, but through this process, it could open up future opportunities for those that survive. What was once a race to the starting line is appearing to be simply the beginning of the race.” Yet, MSOs repeat the mantra of “reschedule, reduce taxes, enable growth,” but they are not fully accounting for the operational and legal complexities that rescheduling entails. Without careful planning, they risk focusing on a regulatory milestone that may offer limited practical advantage, leaving their businesses exposed to uncertainty and regulatory friction.

Conclusion: Get on the Furthur Bus – A Roadmap for the Industry

The trajectory of cannabis regulation in the U.S. is rarely linear. We have learned — through years of federal prohibition, state-by-state legalization, and a series of legislative half-measures — that every advance carries hidden challenges. The recent hemp ban is a stark reminder of how fragile the gains in the hemp and broader cannabis markets can be. Meanwhile, the MSOs’ fixation on Schedule III demonstrates that even sophisticated operators can misread regulatory landscapes if they rely on narrow, internally reinforced assumptions. And it does not seem to help the economics or distribution problems that the marijuana sector currently faces.

The one-year phase-in for the hemp ban provides a window for advocacy and adaptation. Farmers, manufacturers, and consumers are resilient; markets evolve, and regulatory frameworks eventually align with economic reality. Similarly, the potential for rescheduling marijuana should not be dismissed — but it must be approached with full awareness of DEA compliance, tax realities, and market limitations. The lesson is clear: strategic foresight and unified action are far more powerful than chasing partial legal victories.

As someone who has advised governments and industry players around the world, I have seen how cannabis policy evolves — slowly, unevenly, but inevitably. We are in a moment of recalibration. The challenge for operators is to align short-term tactics with long-term vision: protect the existing market, advocate for sensible regulation, and pursue federal reform that fosters coherence, opportunity, and equity.

There is a rhythm to this work, a cadence that recalls the long strange trip of both the industry and our culture. The hemp ban may feel like a detour, and the Schedule III strategy may appear like the main highway, but the ultimate path will be one of adaptation, coalition, and pragmatism. Policies may shift; markets may falter; regulators may surprise. But the trajectory of cannabis — hemp, marijuana, and all their derivatives — is forward.

We will continue to see innovation in farming, processing, and product development. States will maintain regulatory systems, and entrepreneurs will find ways to serve their communities. And, as always, the federal government will have to catch up — because an industry of this size and complexity cannot be legislated out of existence. It may take time, compromise, and strategy, but it will endure.

The key is simple: learn from missteps, understand the terrain, and think holistically. One sector cannot succeed at the expense of another. One strategy cannot replace a comprehensive approach. The journey of cannabis reform in America is still unfolding, and those who navigate it with insight, flexibility, and foresight will shape not only the industry, but the culture and economy that grow with it.