HBA Fact Sheet: Lawful Hemp Protection Act
Reps. Andy Barr and Angie Craig today announced the Lawful Hemp Protection Act, a bill to regulate the hemp industry. Here are the highlights from that proposed legislation as it relates to hemp beverages (click here to download the full legislation).
Overview - The Lawful Hemp Protection Act creates a comprehensive federal framework for hemp-derived cannabinoid products with a dedicated regulatory, tax, and distribution structure for hemp beverages modeled on alcohol. Hemp beverages would be regulated as food by the FDA, taxed and permitted through the Treasury Department (via the Alcohol and Tobacco Tax and Trade Bureau (TTB)), and sold through a three-tier system that separates supplier, distributor and retailer.
Five milligrams of THC per serving - FDA must set maximum cannabinoid limits for all products within 12 months of enactment. If it misses that deadline, a statutory cap of five milligrams of THC per serving applies, until FDA sets a limit.
Three-tier distribution - Manufacturers sell only to wholesalers; wholesalers sell only to retailers; retailers only buy from wholesalers. No person may hold permits or any interest in more than one tier. This system replicates the existing three-tier system for the alcohol industry.
Federal excise tax - Beverage manufacturers pay a five percent tax on annual revenue. Beverages are taxed at a rate of five cents per milligram of THC.
3 milligrams of THC: 15 cents
5 milligrams of THC: 25 cents
10 milligrams of THC: 50 cents
For comparison, alcohol is taxed at the following rates:
1.5 ounces of liquor: 13 cents
12 ounces of beer: 5 cents
5 ounces of wine: 4 cents
Federal permits - Beverage manufacturers and wholesalers must hold Treasury permits, keep inventories and records, and are subject to inspection. Businesses operating at enactment may continue if they apply within 30 days after regulations take effect.
Alcohol-style trade practice rules - Tied-house arrangements, exclusive outlets, commercial bribery, and consignment sales are prohibited for beverage manufacturers and wholesalers. This mirrors the Federal Alcohol Administration Act.
Age-gating - Sale to, and possession or consumption by, anyone under 21 is a prohibited act under the FDCA.
Labeling and testing - Labels must state THC per serving and per package, carry a government warning, and link (QR code) to a certificate of analysis from an ISO/IEC 17025-accredited lab. Packaging that appeals to children is prohibited.
American-made requirement - Products must be made exclusively from hemp grown in the U.S. and processed, finished, packaged, and labeled in the U.S.
Interstate commerce protected - States may regulate as or more stringently than an alcohol-comparable scheme, but may not block compliant products from passing through their borders.
Impaired driving - States must treat hemp impairment like alcohol impairment (same field-sobriety standards and penalties) or lose 10% of federal highway funds starting FY2027; no per se blood-THC threshold is required. One percent of beverage tax revenue supports state enforcement.
State authority preserved - States, territories, and Tribes keep full authority to enact stricter rules; federal compliance is not a shield against state law.
Timing - FDA provisions apply to products entering commerce 180 days after enactment; Treasury must issue tax and distribution regulations within one year, with the permit and tax regime effective once those regulations are published.
Work-in-progress (WIP) hemp protected -A new “unfinished hemp-cannabinoid ingredient” category lets extracts, concentrates, and other intermediates exceed the 1% THC threshold during processing without losing hemp status.WIP material must stay with licensed operators, may only be sold or shipped to federally permitted manufacturers for further processing, and can never be offered for retail sale or consumer use.
Hemp redefined at 1% total THC - Raises the federal hemp threshold from 0.3% to 1% total THC (including THCA) on a dry-weight basis, and repeals the hemp restrictions in the FY2026 appropriations law (§ 781).
FDA framework for all products -Hemp-derived cannabinoid products are regulated as food, with a recognized hemp dietary supplement category, uniform manufacturing/testing rules, and adulteration standards (e.g., no harmful combinations with alcohol, caffeine, or melatonin). Default caps if FDA misses its deadline: 50 mg per serving for inhalables and topicals.
Synthetics excluded - Chemically synthesized or modified cannabinoids (HHC, THC-O-acetate, THCP, and similar) fall outside the definition of hemp.
Please note: This information is current as of July 22, 2026 and is provided by the Hemp Beverage Alliance for general informational purposes only. Laws and regulations change frequently, and this summary does not constitute legal advice or substitute for the advice of qualified counsel.
