Cannabis Musings - November 19, 2025

Guest Post: Solving for the Alcohol Industry in Hemp Regulation

Friends - a few weeks ago, we talked about why the alcohol producers were so strongly supportive of closing the hemp loophole:

… the alcohol industry can’t be all too happy about hemp-derived THC beverages being sold alongside their own products without being subjected all of the same federal licensing, labelling, manufacturing, and marketing regulations, and taxation, that their products endure. Which are extensive. … From the alcohol producers’ perspective, why should hemp-derived THC beverages get a free ride while they (the alcohol industry) have to play ball?

As mentioned, that perspective came from Rebecca Stamey-White, alcohol and cannabis regulatory lawyer and adjunct professor extraordinaire. With so many viewpoints coming out of the hemp industry on what to do next, Rebecca penned her own sentiments, thinking about how and why to solve for the alcohol industry, something that (to me) isn’t otherwise being thoughtfully addressed. She graciously agreed to publish her piece in these Cannabis Musings.

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Want the support of Big Alcohol? Here’s what the cannabis regulatory framework should look like.

There have been many hot takes in recent days from cannabis/hemp industry members about what the alternative to prohibition might look like for cannabis/hemp now that the “hemp loophole” that led to a proliferation of hemp CBD-THC conversion products being sold in alcohol-licensed retail stores and online has seemingly been closed. The problem: none of them is viable, both practically and politically.

The hemp industry says it wants regulation and respects the regulatory framework that the states have put together in recent years—regulation that’s less onerous than adult use cannabis regulation and ostensibly closer to alcohol. Except that it’s really cherry-picking a handful of alcohol’s legal restrictions without adopting the core principles of alcohol regulation. As some hemp advocates are discussing ways to get alcohol to support their efforts during the year before hemp products become controlled substances again, they might consider adopting the entire alcohol regulatory framework, not just part of it. And after major alcohol trade groups called for closing the loophole, the cannabis/hemp industry will need to advocate for a regulatory framework that allows alcohol suppliers to compete on a level playing field if they are to garner their support.

If I’ve learned one thing as a regulatory lawyer who has made a career working with the alcohol, hemp, and cannabis industries, it’s that you will have better success with regulators if you can work within an existing framework. Alcohol regulation works because it was intentionally structured to balance the different industry stakeholders to create a healthy regulated marketplace. It starts with the following assumptions:

1. Consumption of these products in excess and by young people can be dangerous, and regulation helps consumers consume more responsibly or not at all.

2. The public will find a way to consume these products in illicit markets if regulated markets are not accessible.

3. Licensing and vetting industry businesses and leaders in the industry keeps bad actors out.

4. Labels and formulas must be accurate for public safety.

5. Marketing these products should be limited to truthful and not misleading claims.

6. Independent licensed retailers and wholesalers support diverse business models and a competitive marketplace.

7. Taxing the products supports a robust regulatory framework and enforcement of the rules.

Most people just know that alcohol can only be sold to adults over 21, so it’s no surprise that some from the hemp industry and others from the cannabis industry believe that age restrictions, labeling requirements, and lab testing alone would do the trick for consumable hemp products. But the reality is that if you don’t have any enforcement resources, which are funded through taxation, and you don’t have any trade practices or advertising laws in place, then this framework does not keep bad actors from participating in the industry and losing consumer trust. It becomes a race to the bottom that is fueled by which brands have the most money for advertising campaigns that often make misleading health statements and offer dubious promises, and which brands can fund slotting fees to get their products on shelves and directly in the hands of customers.

It also makes it very challenging for alcohol beverage producers to participate in the industry if they want to avoid violating their own trade practice and advertising laws and regulations that apply to alcohol beverages, especially where licensed alcohol wholesalers and retailers are the primary sellers of these products, because the alcohol laws apply equally to incentives given for non-alcoholic products as they do alcoholic products. The heaviest burden of compliance in the alcohol industry is on the alcohol suppliers, who must make, market, and sell their products compliantly to keep their licenses, but are also responsible for more indirect violations in connection with non-alcoholic product lines. Alcohol suppliers cannot effectively compete in a hemp beverage marketplace if the hemp laws don’t prevent the kinds of practices that unduly influence retailers to exclude competitor products. And alcohol suppliers that cannot compete will have a hard time supporting legalization of products that compete directly with theirs, but with far less regulation.

I do not speak on behalf of alcohol suppliers, nor can I promise their support of hemp/cannabis legalization efforts, but even if the hemp/cannabis industry didn’t care about having alcohol support its regulation instead of prohibition, the alcohol model is just good policy, which is why it has worked to regulate, instead of ban, alcohol for almost a century.

For a less draconian federal and state hemp/cannabis regulatory framework to be successful, it should involve a robust federal regulatory scheme that focuses on four core elements: (1) collect (revenue), (2) protect (the consumer), (3) ensure (qualified qualification), and prevent (unfair trade). This is the mission of the Alcohol and Tobacco Tax and Trade Bureau, the federal alcohol regulatory agency, and all four elements have been essential in creating and maintaining a responsible and regulated alcohol beverage industry in the United States for the past 92 years.

More specifically, federal excise taxes fund the enforcement and regulation of the industry (bonus if it also creates revenue for the U.S. government). The regulatory agency focuses on consumer protection such that regulations require products to be correctly labeled, subject to standard product definitions, misleading advertising and health claims are prohibited. The regulatory agency is responsible for vetting licensees for criminal history and past disciplinary actions within the industry and must disclose other industry interests, investors, and other sources of financial support. And lastly, trade practice regulations and enforcement prevent bribery, undue influence, coercive selling practices, and money from harming competition. The states are left to regulate local retailers and other in-state licensees and are able to primarily focus on restrictions on sales to minors as well as the time, place and manner of sales directly to the public. It’s not a perfect system, but it mostly works, the regulators know what they are doing, adult consumers can access the products, it would be hard for competitor industries to argue with since it would closely mirror their own regulatory framework, and it’s an easier political solution than asking Congress to create something totally new.

© 2025 Marc Hauser. None of the foregoing is legal, investment, or any other sort of advice, and it may not be relied upon in any manner, shape, or form. The foregoing represents my own views and not those of Jardín, B&Y Ventures, or anyone else who employs/hires me.

Watch me schmooze almost every Friday at Noon ET on This Week in Cannabis LIVE with Jeremy Berke and Jay Rosenthal of Cultivated Media and AnnaRae Grabstein and Ben Larson of the High Spirits Podcast.Access the livestream and recordings here.