Michigan Senate Tightens Controls on Intoxicating Hemp Derivatives

LANSING – In a bipartisan push to close regulatory gaps, the Michigan Senate approved a package of bills that would classify most high-potency hemp-derived THC items as Cannabis, folding them into the state’s established Cannabis oversight system. The measures, which cleared on 27-8 votes, now head to the Republican-led House for review when lawmakers reconvene next year.

At the center of the effort stands Senate Bill 599, the lead measure in a quartet sponsored by Sen. Dayna Polehanki (D). It proposes the Industrial Hemp Processing Act, which would require licenses for anyone handling consumable hemp products [from processing to sales] while repealing a 2014 research-focused law that critics say has allowed intoxicating variants to proliferate unchecked. Under the bill, hemp items exceeding 0.3% delta-9 THC concentration, or surpassing total THC caps set by the Cannabis Regulatory Agency (CRA), would lose their hemp designation and face Cannabis rules: mandatory lab testing, child-resistant packaging, and distribution solely through licensed dispensaries.

The legislation zeroes in on products like delta-8 gummies and vape pens, often stocked at gas stations and corner stores without age checks or potency disclosures. These items, derived from hemp under a 2018 Farm Bill loophole, have drawn fire for inconsistent dosing and synthetic additives that mimic Cannabis’s effects but dodge state taxes and safeguards. Polehanki framed the bills as a straightforward fix: “We need to bring structure and accountability to this space, so consumers know what they’re getting.”

Support crossed party lines, with eight Republicans joining Democrats in backing the core provisions. That consensus reflects growing unease over unregulated sales, which industry watchers estimate siphon tens of millions in potential excise taxes annually, funds that could bolster Michigan’s $3 billion Cannabis market.

Yet the bills also permit low-THC consumable hemp goods [CBD tinctures and non-intoxicating edibles] under a defined “nonintoxicating cannabinoids” category, while exempting non-consumable industrial hemp products [like those for textiles or biofuels] from the new licensing requirements.

Processors of consumable hemp products could continue operations with a new CRA-issued license, valid for one year and requiring an annual fee of $1,350, along with record-keeping obligations such as retaining sales invoices for three years. Violations, including unlicensed sales or improper labeling, could result in civil fines up to $5,000 for individuals or $10,000 for licensees, with certain offenses [like processing without a license] also carrying misdemeanor charges, fines from $10,000 to $50,000, and potential imprisonment up to one year.

From a business standpoint, the shift demands scrutiny. On one hand, integration promises steadier revenue streams for compliant players. On the other, compliance costs, including the new $1,350 annual licensing fee for processors of consumable hemp products, could strain family farms and startups that expanded under the 2018 Farm Bill. Hemp industry advocates have raised alarms that the regulations might tilt the field toward established Cannabis companies, further concentrating a market bracing for a 24% wholesale tax set to launch in January 2026, which could erode operator margins by 15-25%. The timing compounds the stakes. A federal ban on synthesized intoxicating hemp products, effective November 2026, will force Michigan’s rules to align or risk snarling interstate supply lines.

As these bills land in the House, where companion measures already simmer, the real challenge will lie in balancing consumer access with fiscal prudence. Lawmakers there could tweak thresholds or phase in licenses to soften the blow on independents, but any delay risks clashing with the federal clock.

For Michigan’s Cannabis trade, these bills mark less a rupture than a refinement, ones that could fortify the sector’s base if executed with an eye toward all stakeholders. Highly Capitalized Network-HCN will track developments as the session unfolds, offering data-driven insights for investors navigating these regulatory currents.