Detonating the hemp-derived cannabinoid market November 12 was business as usual in many ways. Prohibition-minded legislators slipped 11th-hour language banning any form of psychoactive products derived from hemp into the must-pass H.R. 4121, which reopened the government after a 43-day partisan stand-off. That kind of legislative cramdown is how sausage gets made in the DC slaughterhouse these days.

For prohibitionists, it was also the same old same old: ever since 1937’s Marihuana Tax Act they have been doing everything they can to get the federal government to prevent legal access to cannabis by what is now the one-quarter of Americans that enjoy cannabinoid products regularly. But the forces of prohibition may have shot themselves in the foot this time.

Did Prohibitionists Just Do a Solid for Legal Cannabis?

First, by closing the loophole in the 2018 Farm Bill, prohibitionists clearly did an inadvertent favor for the state-licensed market they revile. The growth of that market has been crimped in recent years by what some licensed players like to derogate as “gas-station weed.” If the hemp ban works, it could reignite growth even in the most mature state-legal markets, at least those with plenty of dispensaries to meet the demand.

Secondly, the move puts legalization on the front burner in Washington. With the ban scheduled to go into effect as Americans go to the polls for a mid-term election in November 2026, every candidate will now have to take a stand on cannabis legalization. In deciding that stance, they will have to reckon with two key facts: 1) about two-thirds of Americans approve of legal cannabis, and 2) only 15% of Americans approved of the job Congress is doing in Gallup’s early-October polling.

Thirdly, by passing a ban it has no way to enforce, the federal government has highlighted how impotent it has always been to implement its non-sensical cannabis policies. The 40 states with at least medical licensing regimes (and hence tax revenue to protect) have probably now won the 10th Amendment debate about who will regulate non-medical cannabis markets in the long term.

The New Terms of the Debate

Not everyone agrees that there is any upside to DC sticking its finger in the hemp-derived dike, as was evident from discussion at the fortuitously scheduled November 17 IgniteIt “Cannabis Capital and Policy Conference” in DC.

Those in the hemp-derived space couldn’t help but be horrified. “It’s not going to be good for cannabis in the long term,” said Jim Higdon, COO of Cornbread Hemp and VP of Outreach at the US Hemp Roundtable. “We need an extension on the 360 days (sic), but in an election year the likelihood is very low.”

Of course, some from the licensed space that has struggled with hemp-derived competition were delighted. “Get ready for all the fun to come back into the state-licensed market,” said Jushi’s Chief Strategy Director Trent Woloveck.

“Finally, everybody now needs to get together to get one piece of transparent legislation,” said Boris Jordan, executive chairman of the industry’s biggest company Curaleaf, one a handful of the licensed-market giants (along with GTI, Trulieve, Canopy Growth and Tilray) to expand into hemp-based products and channels in recent years.

In line with Jordan’s goal of “One set of rules around the plant for the whole industry,” the newly formed One Plant Alliance released its manifesto in the wake of H.R. 4121’s signing, setting up Three Golden Pillars for federal regulation modeled on US alcohol law: requirements for lab testing, accurate labeling, and age verification.

Of course, moving cannabis entirely out of the Controlled Substances Acts’ FDA-centric schemata would also be required for the federal government to play the same role in cannabis as it does in alcohol. But as OPA founder Steve DeAngelo noted to me in a LinkedIn discussion, “We believe there is opportunity in crisis…now is the time for boldness, not compromise.”

What’s at Stake Here?

There are three directions revenue currently going to companies in the hemp space could go now: the licensed cannabis business, the illicit market, or up in smoke. We think most of it will come into legal channels, but very slowly given the fact that an outsized portion of hemp-product sales occur in states where, at least for now, there is no licensed market or too few dispensaries.

So, the impact of the ban will vary dramatically by state. The biggest upside could be seen in states currently seen as oversaturated at retail and without state-level hemp bans like New Mexico and Montana. Medical-only states like Texas and Florida, despite enormous hemp-derived markets, will only see big gains as they add dispensaries and finally legalize adult use.

Nationally, our analysis below suggests the ban should make an appreciable difference in licensed-market growth going forward. It’s difficult to nail down the current size of the hemp-derived cannabinoids market with certainty, given its diverse retail channels. The most comprehensive approach we’ve seen was taken by Whitney Economics in its “2023 U.S. National Cannabinoid Report.” which derived its projection of $28 billion in consumer spending that year on survey responses from 800 businesses in 45 states, and per-capita spending averages derived from the handful of states that provide hard data on hemp sales. We’ve seen other estimates as low as $20 billion.

But WE chief economist Beau Whitney (who was present with me at the 2016 creation of BDSA’s Industry Intelligence group) told me at the IgniteIt event that his estimate doesn’t even include gas stations, few of whom responded to his survey.

To generate a ballpark estimate of the upside for licensed-market sales, we started with Whitney’s 2023 estimate of $28 billion in sales and generated a hemp-derived “what-if” forecast out to 2029. That forecast assumes no change in the pre-November 12 laws, and growth of hemp-derived product sales from 2023 to 2029 at the same modest rate BDSA forecasts for the licensed market, a compound annual growth rate (CAGR) of 5.4%.

The exercise suggests that, even if only one-quarter of what otherwise could have been $38 billion in 2029 hemp-derived sales goes to legally licensed operators, it would nearly double the state-licensed market’s growth to a 9% CAGR through 2029, putting spending at $49 billion, rather than $39 billion BDSA currently forecasts.

That theoretical $10 billion in incremental 2029 legal revenue could well be an underestimate. Many adult-use markets have been shrinking in the face of hemp-derived competition (see my October 22 “The Hemp Loophole Takes Its Toll” column). In fact, the licensed market may well have gone into decline going forward.

In fact, Adams Research’s analysis of the 15 states in BDSA’s Tier 1 point-of-sale universe shows that they eked out a mere 4.5% growth rate in first-half 2025, with nine of the 15 (including most of the biggest ones—California, Michigan and Massachusetts) posting declines. Thus, even if the gains are less than the incremental $21 billion over four years suggested by this analysis, the hemp ban may have thrown the legal cannabis industry a much-needed lifeline. Just a month before H.R. 4121 forced a likely retreat over the next year by publicly traded retailers, mass merchandiser Target began rolling out THC-containing beverages in 10 Minnesota stores. E-commerce and delivery services were also piling into the hemp-derived market through the loophole in the 2018 Farm Bill.

Licensed operators were losing one of the few positives they have in their overly taxed and regulated industry: limited competition from America’s retail behemoths. As Charlie Bachtell, CEO of Creso Labs and chairman of the US Cannabis Roundtable trade group, told the IgniteIt conference, “All of us should be optimistic.”