A new federal rule could slow down Minnesota’s fast-growing THC market as early as January.

The bill, created by U.S. Sen. Mitch McConnell (R-Ky.), could reverse the legalization of THC from a 2018 bill, according to the Minnesota Reformer. 

State Sen. Matt Klein, who chairs the Commerce and Consumer Protection Committee, said the bill would effectively ban hemp-derived THC drinks. 

“The biggest thing that will be affected are hemp-based beverages,” Klein said. “They’ve become a huge industry for breweries across the state and a major consumer choice for Minnesotans pursuing alcohol avoidance or low-calorie options. They’re just going to be eliminated in January if this goes through.”

Klein said those businesses now face major financial losses if the federal government moves forward.

“They’re really left holding the bag if we suddenly say they can’t do this any longer,” Klein said. “They’ve developed an entire economy around this.”

Katy Mutschler, a program administrator at the Minnesota Department of Agriculture, said most licensed hemp growers in the state focus on industrial hemp grown for grain and fiber, and those operations will not be affected.

“The majority of our hemp growers are actually growing for industrial purposes,” Mutschler said. “Those growers would not be impacted by the federal changes.”

Processors face a more direct impact. Most Minnesota hemp processors extract cannabinoids to manufacture edible hemp products.

“Those processors would greatly be affected because the majority of the products they are creating would be those hemp-derived edible canonoid products, which would be impacted by the changes on the federal level,” Mutschler said.

Beginning in 2026, the Minnesota Office of Cannabis Management will license processors who extract cannabinoids.

“OCM will definitely have changes to their process, and they will be working with those processors and retailers,” Mutschler said. “On our side, we don’t anticipate creating new documents because this change doesn’t directly affect our growers focused on industrial purposes.”

Minnesota Industrial Hemp Association president Dave Ladd said the state’s shift did not alter the federal definition of hemp but instead targeted dosage levels and synthetic THC found in edibles and beverages. Those products will be phased out over the next year.

“What’s going to happen to some of these smaller businesses once that year-long transition elapses?” Ladd said. “People made investments based on what the 2018 farm bill allowed for.”

The impact will fall unevenly across industrial hemp growers and companies that built their business around hemp edibles or beverages, Ladd said. 

“It’s a bit of a setback, especially if you’ve made investments and you’re trying to grow a business,” Ladd said. “But again, you do have this year to work with.”

Despite concerns, Ladd noted Minnesota’s broader hemp economy remains strong. 

“The economics have to work out, like any agricultural product,” Ladd said. “This bill doesn’t stifle that side of the industry.”

Mutschler said total planted acreage has increased over the last three years because Minnesota has more growers interested in industrial purposes. 

“Minnesota was ranked sixth in the nation for most acreage planted for hemp in 2023,” Mutschler said. “Minnesota is very high on the list and very involved in hemp production.”

The new federal guidance ignores the state’s existing regulatory framework, which includes lab testing and a 21+ age requirement. Klein said the industry is stable and widely used by Minnesotans.

“It’s a good, safe, well-established industry, and there’s really no reason to undercut it,” Klein said.

Klein also criticized the federal approach as overly aggressive and disconnected from Minnesota’s needs.

“This is a very heavy-handed federal imposition on Minnesota’s commerce and economy,” Klein said. “It’s coming from people in Washington, D.C., who don’t know a lot about Minnesota, have never been to Fulton Brewery, but are telling them what they can and can’t sell.”