Lawmakers wrangle over best way to save state hemp industry

A flurry of legislation – both federal and state – has the hemp industry on alert.

The most draconian measure has already passed at the federal level and is set to go into effect next November. That provision was attached to the continuing resolution that ended the three-week government shutdown earlier this month. Without action in the state government within that time frame, without a state regulatory mechanism for producing guidelines for production, distribution and quality control of hemp-based products, the industry in the state might all but cease to exist.

“It would shut the industry down,” says Craig Thran, owner of Three Tall Pines hemp farm in Plymouth. “There's no saving it. I mean, that bill for all intents and purposes, it's set out to get rid of everything.”

It is motivating hemp farmers in the state and folks in connected industries to step up and take matters into their own hands.

“We need to write our own regulations,” Thran says. “We need to say hemp and cannabinoids are legal in this state.  And then provide a list of rules on how to manage that, from farming to processing to selling. I mean, it's no different than any other agriculture.” 

In Wisconsin, hemp generates $700 million to the state economy and employs thousands of workers. There are nearly 500 licensed producers in the state. Retailers that sell hemp-based goods depend on intoxicating cannabinoid products for a majority of their profit.

Federal government closes hemp loophole

Previously, Republicans in the state legislature introduced a bill that aligns almost precisely with that new federal statute that would effectively close a loophole in the 2018 Farm Bill that permitted the sale of certain intoxicating hemp-based substances, such as gummies, beverages, tinctures and oils and vapes and concentrates. 

The loophole allowed for the sale of products if the concentration of Delta-9 THC didn’t exceed 0.3% per container. The closing of that loophole via the new federal regulations adds two new measurements that would make it all but impossible for farmers and processors to legally produce gummies and other intoxicating products. That’s because, whereas before only Delta-9 THC was counted in the concentration percentage, now both Delta-8 and Delta-10 cannabinoids would be included in that measurement. Worse, the law imposes a strict  0.4 milligram total THC limit per container for finished products, rendering the legal production of intoxicating hemp-based products unachievable.

As it stands now, current legal consumables would not come close to meeting that 0.4 milligram threshold. For instance, a legal low-dose gummy currently contains anywhere from 2.5 to 10 milligrams of Delta-9 THC and if you add in Delta-8 and Delta-10, it would fall even further beyond the new law’s allowable limit.

And with more than 95% of hemp farm revenue derived from intoxicating consumables, farmers would seem to have little recourse but to shut down. 

“My options would be to start growing tomatoes or come up with some other product I can farm,” says Thran. “Eighty percent of my employees will lose their job. There’s an urgency to get this thing done in the state before next November.”

State legislature offers variety of hemp-related bills

Republicans in the past months have offered three bills ranging from, according to Thran and Jay Selthofner, co-owner of Heritage Hemp Farm in Green Lake, really bad to somewhat hopeful. Democrats have offered one bill whose overall effect would support the hemp industry in Wisconsin while also providing regulations regarding age (the legal age would move from 18 to 21), product testing, labeling and packaging, and enforcement and penalties. 

Thran and Selthofner, the founder of Northern Wisconsin NORML, support the Democrats’ bill in that it acknowledges the ongoing legality of hemp-based consumables and provides necessary oversight. Neither think it will get a hearing because of the political divide in state government.

The worst of the bills, according to both men – SB 499 – is the one that would ban intoxicating cannabinoids entirely, mirroring the new federal legislation. Likewise, neither like AB 606, which would hand over regulation to the state’s three-tiered system of the Division of Alcohol Beverages. That system keeps separate the production, distributing and retail phases of a product and makes it hard for farmers to generate profit. 

“This is a bill driven largely by the Republican alcohol establishment,” insists Selthofner. “This would hand control and profit windfalls to distributors and regulators who have nothing to do with Wisconsin’s hemp economy.”

Thran says alcohol lobbyists also played a part in the closing of the federal Farm Bill loophole, noting that Kentucky Sen. Mitch McConnell offered the provision in the recent budget bill. McConnell, he points out, has taken hundreds of thousands from the alcohol lobby while representing a state where alcohol is a mainstay of the economy. Availability of hemp-based products threatens the alcohol industry's market share and profitability.

Thran, who says his business generates $5 million, says that without control of the process all the way through to distribution it’s hard to survive.

“Yeah, it's really about the only way you're going to make a business out of this, I think, is being able to have the opportunity to grow, process and distribute yourself,” he says “Kind of like a microbrewery, And unless we allow that, which the three-tier system would not, there's no chance for farmers.

“Distribution companies can destroy industries,” he adds. “They reap rewards from being the only one that can handle the material. They collect a 30% margin where the farmer ends up with maybe 10, and then the retailer ends up with 30 to 50 at the tail end.”

Latest GOP bill elicits hope, concern

A third Republican bill that has not yet made it to committee is sponsored by Sen. Patrick Testin and Rep. Tony Kurtz, two Republican lawmakers who have generally favored a regulatory attitude toward hemp, rather than an outright ban. Among its provisions are age restrictions (21 or older); oversight from a regulatory agency; testing;  and a licensing system.

What it would not do is change the concentration thresholds, allowing growers, distributors and retailers to continue to sell hemp-based intoxicating products. 

“It's an attempt to preserve the industry as it is,” Thran says. “It's preserving what we have, installing age limitations and packaging requirements and also requiring lab results for all products. So it’s maybe a chance to save what we can here in Wisconsin. I wouldn't say that it’s set in stone yet. We're trying to get the bits and pieces put together.” 

Selthofner, despite reservations over some of the language, is quietly enthused by this potential legislation.

"The Wisconsin Cannabis Activist Network is urging constituents to contact their lawmakers and ask them to support this new bill by signing on as co-sponsors," he said via e-mail. "For many in the hemp industry – farmers, processors, shop owners, and consumers – this newest proposal represents the most promising opportunity for clear, consistent regulation this session."

But much will need to be negotiated, adds Selthofner, who is disturbed by a provision in the bill that creates what he calls “a significant structural shift,” one that removes the Wisconsin Department of Agriculture, Trade and Consumer Protection (DATCP) referral requirement, a critical guardrail, Selthofner says, against potential prosecutorial overreach that might criminally ensnare those within the hemp industry. It’s no small matter, he insists.

“For years, that referral ensured that technical or commercially standard hemp activity didn’t immediately escalate into criminal cases and that enforcement decisions were grounded in regulatory expertise – not just prosecutorial discretion,” he says. “From a policy perspective, this change is not accidental. It’s a deliberate effort to accelerate enforcement, lower the threshold for prosecution, and reduce accountability mechanisms that protect both businesses and consumers.”

'There really is regulation needed'

The shutting down of the state’s hemp industry would not only impact the Wisconsin economy and corresponding state sales and operating tax revenues, it would ripple outward to include processors, retailers and beyond.

“It's what pays the bills, and it pays a lot of bills,” Thran says. “I mean, even from local contractors and the postal service. I bought a commercial kitchen in town that we use now. And a lot of these little mini projects are going to be gone. We hire graphics professionals. We hire packaging companies. We have distribution companies. We have warehouses if we're getting into drinks and anything that needs any sort of lengthy storage.”

Ideally, states can supersede the Supremacy Clause of the Constitution, which gives preference to federal law over state law. It can do so simply by not enforcing those laws or by establishing its own regulatory apparatus, something members from both parties – and the Testin/Kurtz proposal – seem bent on doing. 

“There really is regulation needed,” says State Sen. Kris Dassler-Alfheim (D-Appleton). “The Republican bills are all over the place. The Democratic bills, other than full legalization, are trying to solve the obvious issues like age restrictions. I support establishing a hemp/THC advisory board that includes growers, manufacturers and retailers, along with state officials, to build the long term infrastructure and oversight of the industry.”

The Wisconsin Cannabis Action Network (WISCO-CAN) has long proposed establishing a Wisconsin Cannabis Caucus, through which, it says, it could “streamline cannabis reform legislation at the state level while developing and promoting sensible cannabis policy reform and work to ease the tension between political parties.”

“We can't rely on the feds,” Thran says. “And they're already showing that we can't believe what they say. I mean, they're constantly retracting what they ran for office on so we’ve got to take care of ourselves.

“We really have a tremendous opportunity to have a precedent in this cannabis industry. I mean, we can do things the way we think that we should do to preserve what happens inside of our border. We can control our destiny.”