Sweetwater Hemp Company in rural Buffalo County, Nebraska, was one of the first businesses in the state to enter the burgeoning hemp-derived THC industry.
Founded by fourth- and fifth-generation farmers from the tiny village of Pleasanton, the family business turned to hemp farming and production after it was federally legalized in 2018. Now, they operate one of the largest ice water extraction facilities in the country and produce hemp products like CBD tinctures and gummies with hemp-derived THC.
But Sweetwater’s future was in limbo earlier this year after Nebraska lawmakers introduced a bill that would have enacted strict regulations on THC products extracted from hemp in the state. Brett Mayo, the company’s chief marketing and extraction officer, said the proposal would have seriously limited their ability to do business.
“(The bill) would have eliminated topicals, tinctures, you know, every single thing in the market, and basically make it single serve, which doesn’t work for the customer,” Mayo said. “It would really hurt us as far as making money and being able to stay open.”
Nebraska’s bill failed – but it’s just one example of state attempts to crack down on intoxicating hemp products. The multi-billion-dollar hemp-derived THC industry, which emerged as an unintended result of the legalization of hemp under the 2018 Farm Bill, is threatened by a patchwork of state regulations.
The future for Texas’ hemp industry, which is estimated to be the most profitable in the country, is on shaky ground as Gov. Greg Abbott contemplates whether to sign or veto one of the most restrictive regulatory bills in the country. Restrictions also passed this year in Kentucky, Tennessee and Alabama, and a handful of other states have bills making their way through the legislative process.
There are also efforts at the federal level. Last week, the House Agriculture Committee released the first draft of its farm bill proposal – the first of many steps in farm bill negotiations – which would close the “loophole” in the federal law that has allowed the products to proliferate.
“Products that have delta-8 and things like that have become a very significant part of the revenue of the (hemp) industry as a whole,” said Katharine Harris, a drug policy fellow at Rice University’s Baker Institute for Public Policy. “Large restrictions on that part of the industry are going to affect multiple components of it. Not just the retailers, but all the way down to the farmers.”
‘It’s time for Congress to act’
The hemp industry was created by the farm bill. The next farm bill could destroy it.
The 2018 Farm Bill removed hemp, a type of cannabis plant from the same genus as marijuana, from the Controlled Substances Act. That made hemp and all of its derivatives legal, so long as it contains less than 0.3% of delta-9 THC by dry weight. Delta-9 THC is the main psychoactive compound, called a cannabinoid, in marijuana.
“Many people in Congress probably assumed that as long as they had that limit, that 0.3% delta-9 threshold, that they would not be legalizing an intoxicating substance,” Harris said. “We have now seen that is wrong.”
There are hundreds of cannabinoids present in hemp. Most prevalent are cannabidiol (CBD) and cannabigerol (CBG), which have no psychoactive properties but do have potential therapeutic uses. It also includes delta-8 THC, a milder cousin to delta-9 THC, and THCa, which transforms into delta-9 THC when heated, smoked or vaped. Even very small quantities of delta-9 THC are present in hemp.
Through a chemical process called isomerization, hemp-derived CBD can be transformed into other cannabinoids like delta-8 THC and delta-10 THC. The resulting compounds are sometimes called semi-synthetic cannabinoids, as they are naturally present in hemp but are manipulated to increase potency. Delta-9 THC can also be derived from hemp through isomerization, though there are various other extraction methods.
The appropriations bill from the House Agriculture Committee proposes redefining hemp to cap the total allowable THC concentration at 0.3%, instead of only applying the cap to delta-9 THC. It would change the definition of hemp to explicitly exclude cannabinoids that aren’t naturally produced in the hemp plant or that are synthesized outside of the plant. That would outlaw most novel cannabinoids extracted from hemp.
“This bill closes the hemp loophole from the 2018 Farm Bill that has resulted in the proliferation of intoxicating cannabinoid products, including delta-8 and hemp flower, being sold online and in gas stations nationwide under the false guise of being ‘USDA-approved,’” said U.S. Rep. Andy Harris of Maryland, the chair of the House Appropriations Committee, during a markup hearing on June 5. “As many states have stepped in to curb these dangerous products from reaching consumers, particularly children, it’s time for Congress to act to close this loophole while protecting the industrial hemp industry.”
Hemp organizations are sounding the alarm about including the proposal in a new farm bill. But Jonathan Miller, attorney for advocacy organization U.S. Hemp Roundtable, said he thinks legislators understand that the farm bill isn’t an appropriate forum to regulate hemp. A similar proposal failed in 2024.
State regulations take many forms
At least 32 states have enacted some kind of regulations on intoxicating hemp products, and several other states have proposed regulations that are still making their way through the legislative process.
Some states have age restrictions, or prohibit smoking or vaping products. A few states with recreational marijuana programs only allow for hemp-derived cannabis products to be bought at marijuana dispensaries.
South Dakota, North Dakota and Wyoming prohibit all cannabinoids created through isomerization, which impacts newly popular cannabinoids like delta-8 THC and delta-10 THC. Hemp-derived delta-9 THC remains available in these states, so long as it is not created by isomerization.
Colorado, Minnesota and Iowa place a cap on the total milligrams of THC allowed per serving: Colorado is capped at 1.75 milligrams; Iowa at 4 milligrams; and Minnesota at 5 milligrams.
“With caps like that, the products are technically legal, but you’re not going to have very potent products on the market,” Harris said.
Utah, Nevada and New Hampshire cap the THC content of any cannabinoid – not just delta-9 THC – at 0.3% by dry weight. Nebraska’s failed bill sought to do the same.
“The patchwork of state laws is a real challenge,” Miller said. “There are a lot of hemp companies that want to sell to all 50 states. And when you’ve got different rules in each state, it becomes more difficult.”
Texas ban in limbo
Should it be signed into law, the Texas ban will be a case study in how the hemp industry handles the transition from a wide-open market to one of the most restricted in the nation.
Texas is home to “probably the most successful hemp industry in the country,” Miller said. The Texas Hemp Business Council estimates that the industry employs more than 53,000 people across more than 10,000 businesses.
As the bill awaits Abbott’s signature, Texas looks likely to join the few states that have entirely prohibited hemp products with even trace amounts of THC. The bill would make it illegal to sell or possess hemp products with any amount of any cannabinoid other than CBD or CBG. The only state with similarly restrictive regulations is California.
A fiscal note for the bill estimates that it would result in “nearly all” licensed hemp shops in Texas shuttering “due to a combination of decreased product sales and significantly higher fee rates.”
It’s possible that Texas Gov. Greg Abbott will veto the bill, which has been sitting on his desk since May 27. Abbott has remained tight-lipped about his intentions, and he has until June 22 to make a decision. If Abbott takes no action, the bill will become law without his signature.
Both Harris and Miller said they feel increasingly unsure that Abbott will sign the bill into law as time goes on.
“If you asked me (if Abbott would veto the bill) two weeks ago, I would have been very pessimistic,” Miller said on June 2. “I’m growing more optimistic every day.”
Nebraska bill likely to be revived
Nebraska’s industry is much smaller, but it’s attracted just as much criticism from state officials.
Nebraska Attorney General Mike Hilgers has campaigned relentlessly against delta-8 THC and other “synthetic cannabinoids” since late 2023. His office has sued more than two dozen dispensaries and smoke shops for alleged deceptive marketing practices, leading some to shutter and others to enter lengthy legal battles. More than 100 retailers across the state also received cease-and-desist letters telling them to pull products from store shelves or face litigation.
Hilgers supported the bill proposing regulations in the state, which would have significantly limited access to hemp-derived cannabis products by capping the total THC level at 0.3% for any cannabinoid, not just delta-9 THC. It would also cap the total THC content at 10 milligrams per package.
Though the bill was passed over, hemp producers and sellers in the state are wary as threats of litigation and restrictive legislation loom. The bill, or some form of it, is likely to come back in the 2026 legislative session.
Sweetwater Hemp Company has sought to educate state senators about the industry. Four Nebraska representatives took the business up on the offer of a tour of the farm’s ice water extraction facility, Mayo said.
He hopes education can help senators understand how to craft legislation that will regulate the industry while still allowing Nebraska’s hemp businesses to thrive.
“It’s really unfortunate how the bills with hemp are being written, because (lawmakers) don’t really understand what they’re writing the bills about,” Mayo said. “That’s what I’m really trying to do, is just educate them. What they’re trying to do is one thing, and how they’re writing it is another.”
This story was produced in partnership with Harvest Public Media, a collaboration of public media newsrooms in the Midwest and Great Plains. It reports on food systems, agriculture and rural issues.
