What the 2026 Federal Hemp Ban Means for Unsold Hemp Inventory

Most commentary on the “hemp ban” included in the November funding bill has focused on two related questions: (1) which products and activities may become unlawful on November 12, 2026; and (2) whether Congress will materially amend or delay the ban before then.

I recently discussed another consequence operators should be considering as the deadline approaches: bankruptcy eligibility. But focusing only on insolvency planning misses a much more immediate operational problem: inventory.

Many hemp operators are currently holding large volumes of unsold material. At the same time, portions of the domestic cannabinoid manufacturing sector are already contracting. Some manufacturers are shutting down, others are reducing intake, and many are unlikely to purchase new raw material as November approaches. The closer we get to November without any change or extension to the law, the more unsold inventory will be at risk of destruction rather than sale. The predictable result is that a significant amount of compliant hemp may have no viable domestic buyer before the legal landscape changes.

There is, however, a potential solution receiving far less attention than it should: exporting that material to markets where demand still exists.

Why November 12 creates a domestic market failure

The November 12 deadline is not just a regulatory change. It is a market-structure event.

If the law takes effect as written, hemp plant material exceeding the new statutory threshold of 0.4 mg of total THC will effectively become unlawful to transport across state lines. In addition, operators in states without a closed-loop internal (intrastate) hemp market may be unable to participate in local commerce at all. Even for material cultivated lawfully beforehand, downstream purchasers will not want to hold inventory that may soon become legally risky to process, store, transport, or resell. Businesses operating in states without intrastate markets will be particularly exposed, and even robust state markets are likely to prioritize in-state sourcing to ensure supply stability after November 12.

Recent reporting that Chicago’s United Center has begun selling Señorita and RYTHM hemp-derived THC beverages at certain events illustrates the point. Those products are associated with Illinois cannabis operator, Green Thumb Industries, and their production and distribution appears structured to occur entirely within a single state. As long as Illinois and local law remain unchanged, those beverages can continue to be sold because no interstate transport is required (assuming no other applicable federal law will prohibit sales at the United Center). Opportunities like these will only be available to cultivators and producers that operate in states with intoxicating hemp programs. Those that operate in states that prohibit such products won’t be so lucky.

For operators whose business model depends on interstate distribution, this creates a classic end-of-regulatory-cycle dynamic:

• processors stop buying
• manufacturers draw down existing inventory
• wholesalers delay purchases
• prices collapse
• cultivators hold unsold stock

In other words, the problem for many operators will not be compliance but liquidity. Starting material that was lawful to grow may simply become commercially stranded.

Why the EU matters

Unlike the rapidly changing U.S. consumable hemp market, many European Union jurisdictions regulate hemp differently. Several EU countries permit the importation of raw hemp plant material. Once imported, goods may circulate within the EU and, in some cases, move into non-EU markets such as the United Kingdom.

These markets often value U.S. hemp for consistency and production scale. As domestic U.S. demand contracts, lawful foreign demand may still exist, but primarily for certain categories of raw material.

Important limits

This strategy is narrow and operators should understand its boundaries.

The opportunity primarily concerns:

• hemp flower
• hemp biomass
• hemp kief

It does not apply to:

• finished products
• consumable goods, especially those that contain any measurable amounts of THC
• vapes, edibles, or retail extracts

It also does not address exporting THCa plant material. That presents a separate and substantially higher-risk legal analysis involving both U.S. enforcement interpretation and destination-country controlled-substance law.

The discussion here concerns exporting raw agricultural hemp material, not cannabinoid consumer products.

Why timing matters

The operational point is straightforward: the legal window may close before many operators act. After November 12, exporting hemp plant material that no longer qualifies as federally lawful hemp will become unlawful, even if the crop was cultivated prior to the deadline. Once the material is treated as non-compliant cannabis under federal law, cross-border shipment, even between U.S. states, becomes problematic simultaneously under federal controlled substances law, customs export procedures, carrier policies, and foreign import certification requirements.

At that stage, inventory may not merely be unsellable but effectively immovable.

The practical implications

The industry has been treating November 12 primarily as a future compliance date. For many operators, it is more accurately a sales deadline.

If, by late summer or early fall, domestic processors shift to in-state sourcing or stop purchasing raw material altogether, cultivators may be left holding product that was lawful when grown but has no viable domestic buyer before the regulatory change takes effect.

Exporting to the EU or other countries may therefore function as a bridge strategy – a way to monetize inventory that might otherwise go unsold. Unlike restructuring strategies, this approach cannot wait for legislative certainty. Exporting agricultural material requires documentation, phytosanitary compliance, logistics planning, import-country regulatory verification, customs coordination, and buyers. Each step requires lead time, and the regulatory deadline is fixed.

Start planning now

Congress may amend the law, delay implementation, or do nothing. Operators should not base operational strategy on legislative uncertainty. If the deadline remains, the purchasing slowdown will likely begin well before November 12, meaning the practical deadline for selling inventory may arrive months earlier.

For some hemp businesses, the question is no longer simply whether they can remain compliant after November. It is whether they can convert existing inventory into revenue before the market disappears.

If you interested in learning more about exporting hemp material, corporate structuring, regulatory compliance, or evaluating how the November 12 deadline may affect your operations, please contact me to discuss your specific situation.

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A look back at the Leafly Strain of the Year hall of fame

Talk a walk through the hall of fame with our look back at past Leafly Strain of the Year winners. This year's winner is announced March 4th.

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IRC 280E Still Applies to Your Marijuana Business, Unfortunately

In the last year or two, we have seen a growing number of marijuana businesses take the position that IRC 280E no longer applies to them. Some of these businesses have taken that position in consultation with lawyers and CPAs. This shift in strategy predates Trump’s Executive Order of December 18, 2025, to reschedule marijuana under the federal Controlled Substances Act (CSA). In any case, I believe this is a misreading of the law and a dangerous position for these businesses to take.

What is IRC 280E?

IRC 280E is a federal tax provision that prohibits businesses engaged in the “trafficking” of Schedule I or Schedule II controlled substances from deducting ordinary and necessary business expenses on their federal tax returns. This rule applies to state-legal marijuana businesses, and it forces many of them to pay federal income tax on gross income (revenue minus cost of goods sold) rather than net income (profit). It’s harder on some businesses than others, but overall IRC 280E is a scourge for any marijuana taxpayer.

Has IRC 280E been challenged?

Yes, cannabis businesses have challenged the law repeatedly over the past decade or so, on constitutional and “as applied” grounds. We have supported those efforts, including in litigation brought by clients of this law firm. Still, I’ve explained that “except for Champ v. Commissioner, no cannabis taxpayer has won an IRC 280E case (and there have been a bunch of them).”

I stand by the statement, while acknowledging that parties have achieved limited successes via COGS adjustments and refund requests. Overall, though, courts have consistently upheld the validity of IRC 280E as applied to marijuana businesses, and they have cast aside every constitutional challenge to date. It’s just a very difficult situation.

The current litigation to watch is a tax court case known as New Mexico Top Organics, Inc. d/b/a Ultra Health v. Commissioner (“NMTO”), filed last October. The primary argument is that marijuana is no longer “within the meaning” of Schedule I of the CSA, despite being listed there. The case relies on a 2023 determination by the Department of Health and Human Services (HHS) that marijuana should be placed in Schedule III. It also relies on Congressional spending bills, and finally, on the proposed rescheduling that began under President Biden.

I don’t find the arguments persuasive. Without analyzing the merits, though, it’s important to note that the NMTO plaintiff is a medical marijuana business. The plaintiff is not arguing that IRC 280E doesn’t apply to generalized adult-use sales (which are most sales nationwide, at this point). It’s also important to note that any decision by the tax court could be appealed by either party to the Tenth Circuit, and a ruling likely would not grant immediate relief to anyone–let alone non-litigants.

What advice are marijuana businesses getting these days on IRC 280E?

I’d like to think that most of advice is along the lines of what we tell our clients, viz. that marijuana is still a Schedule I controlled substance, unfortunately, and IRC 280E still applies. And I think that is what a clear majority of attorneys and CPAs are saying. That said, we’ve seen outlying and aggressive advice from professionals on whether marijuana businesses are still subject to IRC 280E, and even on whether marijuana remains in Schedule I (it does). Here’s a prominent example:

I’m not sure what the law firm there was thinking, and to be fair, they deleted the post following my comment. On the CPA side, the position I first vetted last year parrots the arguments in NMTO. The CPA I spoke with argued that marijuana is no longer “within the meaning of Schedule I” (despite its placement there), and that NMTO’s arguments apply equally to income from adult-use sales. The kindest thing I can say, euphemistically, is that it’s an interesting position.

What does the IRS say? What about Congress?

In June of 2024, following the HHS recommendation that marijuana be moved to Schedule III, the IRS published a memo titled “Marijuana remains a Schedule I controlled substance; IRC 280E still applies.” The Service stated that this would be true “until a final federal rule is published.” That never happened under the Biden administration’s flawed rescheduling process, and still hasn’t occurred following Trump’s executive order.

For good measure, the IRS followed on its memo six months later with another straight-ahead publication, observing that “some taxpayers have taken the position of disregarding the section 280E limitation using a variety of rationales that do not constitute reasonable basis.” The term “reasonable basis” is a relatively high standard of tax reporting (see 26 CFR 1.6662-3(b)(3)), and a myriad of penalties may ensue where the standard is not met. Straight talk.

For its part, Congress has failed to pass legislation to nullify the effects of IRC 280E, and every bill to de- or reschedule marijuana has ultimately failed. However, the Congressional Research Service, which I like, issued relevant guidance on IRC 280E earlier this month. The February 6 report is titled: “The Application of Internal Revenue Code Section 280E: Selected Legal Issues.” Notwithstanding the IRS publications discussed above, the CRS report maintains there is “little tax guidance concerning the application of Section 280E.” It then discusses a series of proposals that, if enacted, “would no longer prohibit marijuana businesses from taking deductions and credits.” In other words, without the enactment of any of these proposals, IRC 280E still applies.

Conclusion

I’m sure any business paying tax on gross receipts would love to enjoy the same deductions as other U.S. taxpayers. For this reason, and because certain advisors have jumped the shark with rescheduling in the air, we’ve seen more cannabis businesses filing returns that ignore IRC 280E. We’ve also had clients file amended returns seeking refunds for taxes paid under the IRC 280E regime, contrary to IRS warnings (not to give anyone any ideas!). Some of these refunds have been processed, and our best advice is “set that cash aside, at least through the audit window.”

Let’s hope the rules change for tax year 2026, and that the Department of Justice picks up the ball with President Trump’s rescheduling order. Specifically, let’s hope for a final rule, or better. For now, though, I believe the correct advice is that IRC 280E still applies to marijuana businesses. Unfortunately.

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WTF is The New York Times’ problem?

The New York Times has published a poorly researched, misleading op-ed on the cannabis industry and the effects of legalization. Read our response.

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Oregon Cannabis 2026: Legislative Forecast and Report

Oregon’s 2026 legislative session began last week on February 2. The biennial “short session” will last but 35 days, and focus on budget shortfalls, transportation and housing—which is to say that cannabis is not a priority. That said, of the 300 or so introduced bills, there four cannabis-related submissions. That’s where I come in.

Each bill is linked below, with explanation and editorial.

House Bill 4139

This is the annual omnibus cannabis bill. My source tells me it collapsed a few weeks ago when marijuana and hemp folks couldn’t agree on core items around intoxicating hemp products, or on how to implement the new federal hemp laws and rules. That’s unfortunate, because time is of the essence in any short session.

At this point, HB 4139 has been kicked to an interim working group driven by the Governor’s office and the Cannabis Industry Association of Oregon (CIAO). They met yesterday at 1 p.m., apparently.

Here’s what the bill would do in its introduced form, with a few comments by me:

• Defines “container” and “industrial hemp-derived cannabinoid product.” This seems like a moving target with some federal definitions also due soon.
• Changes the definition of “adult use cannabis item.” (But just in relation to the above.)
• Imposes a 17% retail sales tax on industrial hemp-derived cannabinoid products. This is the same percentage levied on sales of marijuana items in the Oregon Liquor and Cannabis Commission (OLCC) system. The bill has no provision for the local jurisdiction 3% add-on, which typically pertains to OLCC sales.
• Directs OLCC to immediately suspend a marijuana producer license for specified reasons. The language includes a “probable cause” standard, which seems potentially problematic from a due process standpoint. This section also provides that an OLCC producer license suspended under this subsection “is nontransferable until the final disposition of the commission’s action related to the suspension,” and it prohibits OLCC from issuing a new license at the premises for 10 years.
• Directs OLCC to inspect a premises licensed by the commission without advance notice for specified reasons, and to request that law enforcement accompany OLCC to the premises. This one is also tied to a probable cause standard. Feels less dicey if we’re just talking inspection. (“Inspect” is defined, endearingly, as “to examine or review officially.”)
• Requires the Oregon Department of Agriculture (ODA) to complete a criminal records check on an applicant for an industrial hemp handler license. Fine. Like with OLCC licensees.
• Requires an applicant for an industrial hemp grower license to provide a land use compatibility statement and information related to land ownership to the department. Fine. Like with OLCC licensees.
• Directs ODA to inspect a licensed premises without advance notice for specified reasons, and to request that law enforcement accompany the department to the premises. See comment above re: OLCC licensee inspections.

House Bill 4142

This is a medical marijuana bill, focused on patients and caregivers. I’m told it has traction and a work session meeting tomorrow. Here are the salient provisions:

• Expands the definition of “debilitating medical condition” for the medical use of marijuana, to include “the need for hospice, palliative care, comfort care or other symptom management, including pain management.” This feels like non-controversial, clean-up work.
• Requires an organization or residential facility that is designated as an additional caregiver for a medical marijuana cardholder to create and maintain a written policy and provide educational training for certain staff regarding the medical use of marijuana. Fine.
• Exempts hospitals and hospital-affiliated clinics from the requirements. This is due to federal law and insurance issues, I’m pretty sure.
• Protects an organization or residential facility and its employees and contractors from certain criminal liability related to the medical use of marijuana. Long overdue.
• Prohibits the Oregon State Board of Nursing from taking disciplinary action against a nurse for discussing the medical use of marijuana with a patient. Long overdue.

House Bill 4162

This doofus bill was brought by the United Food and Commercial Workers Local 555, who are trying to get their own initiative repealed. My guess is UFCW is doing this because the U.S. District Court ruled that the initiated law is unconstitutional, as predicted, and they don’t want “more bad law” when the Ninth Circuit upholds that ruling.

I’ve written lots about the waste of taxpayer money the Ballot Measure 119 saga represents. See here, here, here, here, here, here, here, here and here. In short, BM 119 required most Oregon cannabis businesses to enter into labor peace agreements with “approved unions”, in order to renew or obtain licensure. On May 20^th, the Oregon District Court struck it down. The case is up on appeal, but HB 4162 could quietly moot that, if passed.

In all, HB 4162 is tantamount to the Union saying “hey legislature, please repeal this law that you warned us would be legally deficient, but which we convinced voters to approve directly regardless. We will stop wasting taxpayer money if you help us overrule ourselves. (At least for now.)”

Senate Bill 1548

This is a public health and prevention bill brought by the Chair of the Senate Behavioral Health Committee. I’m told the hearing on Monday was contentious as between that side of the aisle, and industry. Here are the key provisions:

• Requires cannabinoid edibles to be individually packaged, and allows up to 10 milligrams of adult use cannabinoid per individual cannabinoid edible. The industry argument here is that cannabis packaging requirements generate tremendous waste, and are an affront to sustainability. It’s a good argument.
• Requires cannabinoid edibles and other cannabinoid products to be packaged in a manner that is tailored “judiciously” to the specific purpose of protecting minors from the negative health effects of “unlawfully using” cannabinoids edibles and other cannabinoid products. See comment above.
• Allows local governments to establish buffer zones of more than 1,000 feet around adult use cannabis and medical marijuana operations in the interest of public health and safety. The legislature has worked on the buffer zone plenty over the years, on grandfathering concepts and everything else. There is no compelling health or safety reason I can think of for local jurisdictions to buff out the siting radius; this should be left alone.

Wrapping up, for now

I’ll check back at the end of the session and report on what has passed, if anything. Aside from the farcical HB 4162, anything that gets through will likely look markedly different in final form than the enrolled drafts we see today.

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Jersey (Territory) Cannabis Reform Proposals: What Could Have Been, and What May Be–After The Election

Earlier this month, the Bailiwick of Jersey appeared poised to take a measured, evidence-based step toward re-examining its approach to non-medical cannabis. Three reform proposals put forward by Tom Binet, Minister for Health and Social Services, were expected to be debated by the States Assembly of Jersey on February 3, 2026.

That debate has now been canceled and deferred until, at least, after the June election.

While postponements around elections happen, the decision is nonetheless disappointing. The proposals were expressly designed to be cautious, incremental, and compliant with international obligations. Their removal from the Assembly agenda suggests that short-term political considerations have, for now, outweighed a substantive discussion about public health, criminal justice efficiency, and regulatory realism.

Background: reform driven by evidence, not urgency

The proposals arose from a June 2024 Assembly decision directing the Council of Ministers to explore potential approaches to decriminalization, legislation, and regulation of non-medical cannabis. That mandate reflected a recognition that Jersey’s current framework—rooted primarily in criminal enforcement—may no longer align with contemporary evidence or policy outcomes.

Importantly, none of the options would have resulted in immediate legal change. Approval of any proposal would merely have authorized further research, consultation, and policy development, followed by additional Assembly debate and Attorney General review.

In that context, the cancellation of the debate is not just a procedural delay; it is a missed opportunity to engage in a fact-based discussion about reform options that were deliberately modest in scope.

The three cannabis reform options Jersey may revisit

When the issue returns to the Assembly, if it does, members may again be asked to consider three non-exclusive, high-level options.

1. Alternative strategies for offences involving small amounts of cannabis

Under this approach, possession, cultivation, and social supply of cannabis would remain criminal offences, but prosecution would cease for personal possession and associated cultivation of small quantities, subject to indicative thresholds. Personal cannabis use would be treated as a public health issue, shifting lower-level offences from a prosecutorial model to harm reduction and prevention strategies. This option represents the most conservative form of reform and is explicitly permitted under international drug control treaties.

2. Decriminalization of small amounts of cannabis

This option would go a step further by removing criminal liability entirely for possession or cultivation of small quantities within defined limits. Cannabis use would remain limited to personal use, and commercial supply would continue to be criminalized.

Decriminalization of this kind is no longer novel. Comparable frameworks already operate across several European jurisdictions and have not resulted in the negative outcomes often cited by opponents.

3. State-run commercial pilot program

The most ambitious proposal, though still modest to some, would authorize a tightly regulated, government-controlled pilot program for the production and sale of non-medical cannabis.

Participation would be limited to registered Jersey residents, with strict controls on access, quantity, and distribution. Activity outside the pilot would remain criminal. The purpose of the program would be empirical: to assess whether regulated access can improve public-health outcomes without increasing harm or diversion.

Assembly members could, of course, reject all three options and maintain the status quo.

Politics over policy: the significance of the canceled debate

According to reporting by Bailiwick Express, the scheduled Assembly debate was canceled outright and will not be revisited until after the election. While this may be politically expedient, it is difficult to avoid the conclusion that electoral caution has taken precedence over common-sense policy evaluation.

None of the proposals required Assembly members to endorse legalization. None committed Jersey to a commercial market. All were designed to gather evidence, reduce unnecessary criminalization, and align enforcement with public-health realities. Postponing even that discussion underscores how cannabis policy continues to be treated as politically radioactive, despite decades of data suggesting that prohibition-first approaches are ineffective.

United Kingdom’s Influence

The United Kingdom remains a central constraint. As the internationally responsible state, the UK’s view is decisive if any proposal advances toward legislation.

Past experience, most notably the UK’s refusal to grant Royal Assent to Bermuda’s adult-use legalization bill, demonstrates the limits of Crown Dependency autonomy in this area. That history is precisely why Jersey’s proposals were incremental rather than sweeping.

Option one relies on enforcement discretion expressly allowed under the 1988 UN Convention. Option two mirrors decriminalization regimes already functioning in Europe. Option three aligns with tightly controlled adult-use pilot programs in Switzerland and the Netherlands, and a similar program authorized (but likely not to be implemented) in Germany as part of its phased cannabis reforms.

In other words, these proposals were crafted to survive scrutiny. Delaying their consideration does not resolve the UK issue; it simply postpones a conversation that will eventually have to occur.

Conclusion: delay driven by politics, not substance

The cancellation of the Assembly debate is not a rejection of cannabis reform, but it is a clear signal that politics, not policy, has prevailed for now. That outcome is disappointing, particularly given the restraint and evidence-based nature of the proposals on the table.

When the election concludes, the next Assembly will face the same underlying realities: ongoing criminalization of low-level cannabis conduct, enforcement costs with limited public-safety benefit, and growing divergence between Jersey’s law and modern regulatory approaches elsewhere.

Whether the next Assembly chooses to confront those issues remains to be seen. What is clear is that common-sense cannabis reform has been delayed—not because the proposals were unsound, but because the timing was politically inconvenient.

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The best weed products for Valentine’s Day 2026

Leafly Picks editors selected the best weed products for Valentine's Day 2026 to help you infuse the holiday with canna-friendly romance.

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