I’ve been writing about the insurance risks of intoxicating cannabis products since 2021, when delta-8 THC gummies first started showing up in convenience stores and gas stations across the country. At the time, our message to the cannabis, cannabis and insurance industries was simple. These products violate the spirit, if not the actual letter, of the 2018 Farm Bill, and the hemp and hemp industries and their insurance companies should be wary of the government’s response. It took more than five years for Congress to respond, but the response was powerful.
federal ban
Congress rewrote the federal definition of marijuana in legislation passed by the end of 2025. The changes were scheduled to take effect on November 12 and have wide-reaching consequences. Congress has since approved delaying most regulations until December 11, but synthetic and lab-converted cannabinoids like delta-8 and HHC are still excluded, regardless of dosage, and are on track to comply with the November 12 ban.
The new law implements a “total THC” standard, counting all forms of THC, not just delta-9, and limiting the total THC content of finished cannabis to 0.4 milligrams per container. Industry estimates indicate that approximately 95% of cannabis-derived cannabinoid products currently sold would become federally illegal under the new definition. Products that exceed these limits will be classified as cannabis under the Controlled Substances Act.
The cannabis industry fights back
The cannabis industry isn’t growing quietly. Texas has become ground zero for court battles as lawsuits and legislative efforts are underway to stop the ban from taking effect. In early August, cannabis industry groups sued the Texas Department of State Health Services in federal court after the agency reclassified delta-8 and other cannabis-derived THC compounds as Schedule I controlled substances. The plaintiffs argue that the state’s ban, which was preempted by the 2018 Farm Bill, violates due process and creates an unconstitutional burden on interstate commerce. They sought a temporary restraining order to stop the execution. However, a federal judge declined to block the ban, arguing that industry challengers were unlikely to prevail on their constitutional claims.
A separate state court challenge to related marijuana smoking rules is pending before a Travis County judge, and more lawsuits have been filed alleging that the ban creates a monopoly on the state’s medical marijuana program. A similar fight is playing out in Missouri, where the state’s marijuana industry is challenging the state’s intoxicating marijuana ban, calling it unconstitutional.
On the legislative front, Congress is considering several bills aimed at softening or delaying the ban. The most notable is the Marijuana Cultivation Predictability Act, a bipartisan effort that would delay the effective date by two years to November 2028, giving industry and regulators time to develop a workable framework. Other proposals seek to develop non-toxic CBD products or increase the 0.4 mg cap to a more commercially viable threshold. There is real momentum behind some of these efforts, and even the White House has expressed support for protecting non-toxic cannabis products from the undue impacts of prohibition.
RELATED: Delta-8 among products banned as Texas THC lawsuit continues
The most concrete development occurred on August 8, 2026, when the U.S. Senate voted 90 to 6 to pass HR 6500, a provision that would delay the ban on natural hemp THC products from November 12 to December 11. On September 1, the U.S. House of Representatives gave final congressional approval to the bill in a bipartisan vote of 370 to 48, sending it to President Trump’s desk.
The delay provision is based on the bipartisan Marijuana Cultivation Predictability Act introduced by Sens. Amy Klobuchar (D-Minn.), Rand Paul (R-Ky.) and Jeff Merkley (D-Ore.). Synthetic cannabinoids continue to face an immediate ban on November 12, while naturally derived cannabis THC products receive a one-month reprieve until December 11. This delay is modest and does not change the underlying law. The president is expected to sign it, but it remains to be signed.
We expect more lawsuits and more bills. We also expect most lawsuits to fail. The constitutional argument is creative, but under the Commerce Clause, Congress has broad authority to define what a controlled substance is, and the new definition makes its intent clear.
The derivatives loophole in the 2018 Farm Bill promoted products containing delta-8, delta-10, THC-O, THCA flower, and even delta-9 THC derived from hemp, but Congress never intended to do so. It took Congress more than five years to close the loophole, but now it has taken action. Courts are generally reluctant to second-guess such legislative amendments.
Long-term legislative goals for the industry remain uncertain, including the standalone Cannabis Cultivation Predictability Act (H.R. 7024), which would push the date back three years. Whether Congress can enact a more comprehensive regulatory framework by Dec. 11 is far from certain.
Companies and insurance companies must take immediate action
Our advice is don’t wait. Congress has provided a brief reprieve, but marijuana companies and the insurance companies that cover them should prepare now for Dec. 11 and not count on a federal judge or another last-minute bill from Congress to come to the rescue. Postponing it for a month is not the answer. Waiting is the worst risk management strategy. The real impact of this ban will be felt in nearly all insurance coverages.
Start with product liability and property. When prohibition takes effect, stock that was perfectly legal yesterday becomes a controlled substance today. Product liability policies created to cover cannabis-derived products may suddenly cover the sale or distribution of federally illegal cannabis.
This raises immediate coverage issues. Does the policy contain an unlawful conduct exclusion? Is there a controlled substance exclusion? What happens to coverage if the insured continues to sell these products after December 11? Underwriters now need to review the policy language and decide how to address this issue.
Freight and inventory throughput plans are also directly affected. Wholesalers, distributors and brands across the cannabis and hemp product categories should expect complexities with coverage terms, exclusions and inventory shipping insurance that may be reclassified in transit. If the product leaves the warehouse as legal marijuana and arrives at its destination as federally illegal marijuana, who bears the risk? These are not hypothetical questions. They have until December 11 to receive a response.
In addition to the policy itself, collateral risks are diverse. Companies with existing leases may face landlord disputes if they are used to stock or sell new illegal products. Contracts with suppliers and customers must be revisited to understand how risks and losses are shared. E-commerce platforms may remove products from their shelves, cutting off revenue streams overnight.
Existing product liability claims related to cannabis products may take on a different look when the products in question become illegal. Loans secured by marijuana stocks could default. Investors who back cannabis companies and expect continued legalization may have claims against management. All of this increased uncertainty could lead to more claims and litigation, potentially triggering a policy response.
An important nuance to understand is that some state laws explicitly allow the sale of hemp-derived THC products, and these laws do not automatically disappear due to a change in the federal definition. If a state continues to allow legal cannabis product sales, we recommend that insurers and operators treat these situations in a manner similar to the regulated in-state cannabis models that have been operating successfully for many years. The risk management playbook is similar – know your customer, understand your state’s regulations and stay compliant.
Companies cannot ignore tax concerns yet. If cannabis companies continue to sell products currently classified by the federal government as cannabis, they should expect that Section 280E of the Internal Revenue Code will apply. That means most ordinary business deductions disappear, effective tax rates soar, and the economics of businesses fundamentally change. The regulated cannabis industry has been living with 280E for years, and it’s brutal. Marijuana companies that are just waking up to this reality should get their tax advisors involved immediately.
The intoxicating cannabis market is always on borrowed time. We said the same thing when delta-9 THC gummies started being sold in convenience stores as “legal cannabis,” while the regulated cannabis operators next door were paying dearly for compliance. This imbalance is unsustainable. The correction is here now.
Cannabis operators would be wise to diversify into compliant products or participate in the regulated cannabis market if allowed by state law. For insurance companies, it’s time to review your books, update your forms and make sure you know exactly what you’re covered come December 11th.
Stewart is co-chair of Wilson Elser’s cannabis law practice and regional managing partner of the firm’s Los Angeles and Orange County offices.
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