A Wrong Turn for the US Hemp Industry

Hemp or Marijuana? Seems the Law is still figuring it out… 

The hemp industry has undergone seismic shifts since the 2018 Farm Bill which legalized hemp. What began as a promising era for CBD wellness products which helped support a growing medical cannabis industry, has devolved into the exploitation of regulatory loopholes creating legal challenges ahead.

As of January 2026, cannabis has been rescheduled to a Schedule III substance and a new federal hemp law now imposes strict THC limits on all CBD products. The industry is poised for a contraction since the closing of the intoxicating “THCA Loophole” and a new beginning towards legitimate therapeutic and industrial uses for hemp.

Majestic Sunlight shining through our Eureka hemp field in San Luis Valley Colorado

Phase 1: Rise of CBD Isolate Products (2018–2021)

In the immediate aftermath of the 2018 Farm Bill, the hemp market exploded with CBD as its star product. Derived from the hemp plant, CBD isolate is pure cannabidiol stripped of other cannabinoids. This product had a perceived safety, consistency, and broad appeal for wellness uses like pain relief, anxiety reduction, and sleep support; though in reality the full spectrum CBD products made from the raw oil of the hemp plant, has the most therapeutic effects (aka “the entourage effect”).

The CBD market in the United States grew rapidly, with projections at the time estimated multi-billion dollar valuations driven by tinctures, topicals, edibles, and beverages. CBD oil offered a federally legal alternative to medical marijuana based products without the psychoactive effects of THC.

Full Spectrum Cannabis Oil in the Lab

Phase 2: Flood of THCA and Intoxicating Hemp Products (2022–2025)

The market soon shifted towards intoxicating hemp alternatives which exploited a perceived loophole in the 2018 Farm Bill. Producers began offering high THCA (tetrahydrocannabinolic acid) flower, delta-8 THC, and other chemically isolated cannabinoids. THCA flower in particular became the game changer of the evolving hemp industry. It tested below 0.3% THC before harvest, but converted from THCA to psychoactive THC when heated (e.g., smoked or vaped), delivering identical effects to traditional psychoactive marijuana.

This gray market boom created a massively unregulated sector, especially in online stores and gray area states such as Texas where new THCA stores boomed. Industry estimates pegged the intoxicating hemp derived cannabinoids market (excluding CBD products) at nearly $28 billion in 2023, with explosive growth from only $200 million in 2020.

THCA products gained rapid traction, with retail “hemp stores” surging from fewer than 1,500 locations in early 2024, to approximately 8,000 retail locations by late 2025. It is estimated that these stores, in addition to other gas stations and convenience stores, totaled over 100,000 locations nationwide in which consumers were able to purchase THCA Flower and other psychoactive cannabinoid products.

This flood directly competed with regulated medical and recreational marijuana markets as well as the CBD products inside of the hemp industry. Consumers in non-legal states turned to cheap and accessible THCA products that were being sold at gas stations and smoke shops, and hemp stores, bypassing licensed dispensaries and the state taxes they create.

Short Path Distillation used to extract individual Cannabinoids from the full spectrum cannabis oil

Phase 3: Regulatory Reckoning (2026 and Beyond)

In late 2025, Congress addressed this "THCA loophole" through a government funding bill (effective November 12, 2026, after the one year grace period). The new law redefines hemp with a 0.3% total THC limit (including THCA) on a dry-weight basis for plants, and also caps finished consumer products at 0.4 mg total THC per container. This effectively bans most intoxicating hemp derivatives including THCA flower.

Dark industry clouds warn of severe impacts with up to 95% of the estimated $28 billion gray market THCA hemp sector could collapse. As enforcement ramps up over the next year, these changes could jeopardize up to 300,000 jobs. 

Simultaneously, the rescheduling of cannabis to Schedule III (accelerated by Trump's executive order) recognizes marijuana's medical value, eases research barriers, eliminates punitive Section 280E taxes (saving operators around $2 billion annually), and improves banking access to cannabis businesses. This may bolster regulated cannabis markets, drawing consumers away from unregulated THCA hemp alternatives.

Eureka Effects Full Spectrum CBD Tincture

For companies like ours at Eureka Effects, this regulatory shift represents not a setback for us, but an affirmation of our long standing principles. We have always believed in the healing powers of hemp through naturally extracted, full-spectrum CBD oil. This holistically preserves a wide variety of cannabinoids, terpenes, and flavonoids found in the oil to deliver a synergistic entourage effect that amplifies the therapeutic benefits beyond that of CBD isolate products.

Our lasting commitment to full-spectrum formulations will position us perfectly for the next era of CBD. As we phase our products to comply fully with the upcoming 0.4 mg total THC per container cap, we will continue to prioritize your comprehensive wellness experience you've been able to trust.

While the market retracts from intoxicating THCA loopholes, Eureka Effects stands ready to serve. Compliancy, testing, and transparency are deeply rooted in our approach to creating the uplifting power of our full-spectrum CBD products.

Thank you for helping us spread our healing message! Much Love & Respect.

Written by Jason L. Knox

January 21st, 2025

Bibliography

• Brightfield Group. (2024). How Cannabis Bans Fueled A $28 Billion Hemp Revolution: 2023-2024 National Cannabinoid Report. Chicago, IL. (Supports the $28 billion market estimate and growth from $200 million in 2020).

• Whitney Economics. (2023, October). 2023 U.S. National Cannabinoid Report: Executive Summary. (Authored by Beau Whitney, Chief Economist. Provides data on the 328,000+ jobs supported by the hemp-derived cannabinoid industry).

• CRB Monitor. (2026, January 15). 2025 Cannabis Market Review: A Year of Volatility. (Details the surge in retail "hemp stores" to approximately 8,000 locations and the broader 100,000+ point-of-sale network).

• Agriculture Improvement Act of 2018 (2018 Farm Bill). Pub. L. No. 115-334, 132 Stat. 4490. (The foundational law defining hemp and the 0.3% Delta-9 THC limit).

• Continuing Resolution and Appropriations Package of 2025 (H.R. 5371 / FY2026 Agriculture Appropriations). Section 781, "Regulation of Hemp-Derived Cannabinoid Products." (Enacted November 12, 2025; effective November 12, 2026. Codifies the 0.3% Total THC limit and the 0.4 mg per container cap).

• Congressional Research Service (CRS). (2025, July 17). Hemp Restrictions in FY2026 Agriculture Appropriations (IN12565). Washington, D.C.: Library of Congress.

• Executive Office of the President. (2025, December 18). Executive Order on the Rescheduling of Marijuana and Preservation of Lawful Hemp Access. (Directing the Attorney General to expedite Schedule III reclassification and Addressing Section 280E tax implications).

• U.S. Department of Justice. (2026, January). Notice of Proposed Rulemaking: Rescheduling of Marijuana to Schedule III of the Controlled Substances Act. Federal Register.

• DLA Piper. (2025, November 18). New Federal Restrictions on Hemp and Hemp-Derived Products: Key Compliance Points. (Legal analysis regarding the "Total THC" dry-weight basis and the elimination of the THCA loophole).