Minnesota THC makers hold out hope for federal lifeline
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Minnesota makers of hemp-derived THC seltzers and gummies are holding onto hope that Congress will reverse a looming federal ban on their products — even as the legal limbo prompts some to scale back operations.
Why it matters: The new federal policy, set to take effect in mid-November, would deal a serious blow to the state's booming low-dose edibles market.
- The change could mean more financial strain for craft brewers, who've relied on the drinks to offset slumping booze sales, and fewer options for consumers.
Driving the news: Producers of the buzzy products found fresh reason for optimism in early August, when the U.S. Senate folded a one-month delay of the ban into a broader spending bill.
- The bipartisan provision, which had the backing of Minnesota's two senators, got over the finish line thanks to support from the White House.
Between the lines: Moving the deadline from November to December may not seem like much of a difference.
- But Minnesota industry leaders see the delay as a sign of goodwill that buys time to build support for passing a full regulatory fix as part of an end-of-year budget bill.
What they're saying: "This signals to me that there is at least some conversation at the highest levels about caring about this and really trying to find a solution," Indeed Brewing's Ryan Bandy tells Axios.
Threat level: While products made in Minnesota could still be sold here once the federal ban took effect, local producers say eliminating sales across state lines would devastate revenue, inventory and local jobs.
Case in point: Bandy, Indeed's chief business officer, estimates that about 20%-30% of the brewery's THC beverages are sold to out-of-state buyers.
- The company also makes money packaging products for other brands, and upwards of 70% of those items are shipped across state lines.
Plus: If the federal government deems hemp-derived THC products illegal, local producers will have to navigate thorny questions around compliance on matters like tax deductions and federal liquor licenses.
Friction point: "All the headaches that we have already solved in the state of Minnesota for hemp [would] now become headaches again," Bob Galligan, governmental affairs director for the Minnesota Craft Brewers, tells Axios of the robust regulatory framework passed by state lawmakers.
- "All the payment processing that we've done, all the credit card work that we've done, banking — all that goes out the window."
Reality check: While the Trump administration has pushed for both the delay and a broader hemp THC framework, the uncertainty has already prompted Minnesota producers and distributors to scale back on production and orders.
- "It does more for vibes than it does practically for business," Bandy acknowledged.
Indeed has already paused hiring for one job it planned to fill, he said, adding that "contingency plan" shifts could lead to less inventory and fewer brands on the shelves as the deadline nears.
Zoom in: Nick Kosevich, co-owner of Earl Giles Drink Emporium, told MinnPost that demand for the THC concentrate he sells to businesses in other states has dried up amid the uncertainty — he estimates he's lost $1 million in sales so far.
- Some Minnesota farmers have also scaled back their hemp planting, MPR News reports, which could ripple through the supply chain.
The other side: Supporters of the ban, which passed as part of a deal to end last year's government shutdown, say they're concerned about a lack of regulation in many states and the easy access to the intoxicating substances, which can be sold in a wide range of retailers.
What we're watching: Whether the delay remains in the spending measure once the U.S. House of Representatives returns from recess next week.
- Congress has until the end of September to pass the budget bill.