What the Federal Hemp Loophole Closure Means for Washington Cannabis Shoppers
By Jeff Eckenrode
Image credit : Shutterstock
Quick Answer: The 2018 Farm Bill’s federal hemp loophole closure ends the sale of untested, untaxed intoxicating THC products online and in smoke shops. For Washington shoppers, this levels the playing field for licensed dispensaries, protects state tax revenue, improves product safety, limits youth access, and aligns federal rules with Washington’s SB 5367.
The 2018 Farm Bill, a United States law that reauthorized agricultural and food programs through fiscal year 2023, included a unique provision which had a major impact on cannabis markets throughout the United States.
That provision centered around the legalization of hemp and removed it from the Controlled Substances Act, the law that makes the sale and possession of cannabis illegal at the federal level.
But what did the Farm Bill actually change? And how did the “Hemp Loophole” upend legal cannabis markets?
Image credit: Harold Mendoza
The Problem: How a Loophole Changed the Market
In 2018, The Farm Bill offered a new legal definition for hemp to distinguish it separately from cannabis.
So what was that defining difference? That hemp should contain no more than 0.3% delta-9 THC, the psychoactive compound found naturally in cannabis plants. The goal of this definition was to separate non-intoxicating hemp from recreational cannabis.
The outcome of this decision, however, had a major impact on cannabis customers and businesses in state-regulated cannabis markets.
Image credit: Shutterstock
The Fallout: What the Loophole Meant
Although the 2018 Farm Bill defined hemp as separate from cannabis, using THC as a key differentiator had significant, albeit unintended, consequences.
In practice, almost all cannabis flower tests below that 0.3% THC threshold in its raw form.
But many hemp products contain high levels of THCA, which becomes intoxicating delta-9 THC when smoked or baked.
This oversight in the Farm Bill created a legal gray area. Suddenly, gas stations, smoke shops, and online sellers could offer intoxicating THC products with:
No testing for quality or safety
No age verification
No taxes for state or federal governments
Over time, this unregulated market grew into a nationwide system that competed with Washington’s licensed cannabis shops.
Image credit: Chad Morehead
Washington State Took Action Early
Washington saw this coming and passed SB 5367 in 2023, regulating intoxicating hemp products at the state level.
“Washington’s LCB guidance and the SB 5367 legislative record make clear that the state already prohibits retail sale of products with any detectable THC outside the licensed cannabis system.”
The law set clear rules, testing standards, and protections for consumers.
Even with SB 5367, the federal loophole allowed online sellers and smoke shops to keep operating outside Washington’s system. Licensed dispensaries lost sales to cheaper, unregulated products, especially in urban areas where online shopping is common.
Image credit: Joel Arbaje
What the Federal Closure Changes
The new federal rule finally closes the loophole nationwide.
The Washington Post reported that:
“Congress’s recent funding legislation includes a provision that caps total THC at 0.4 mg per container and excludes synthetic/intoxicating cannabinoids from the federal hemp definition.”
As of November 2025, that means:
1. Levels the Playing Field
Regulated dispensaries no longer compete with untested, untaxed intoxicating hemp products. Prices and quality are now more consistent.
2. Supports Local Retailers
Shops that follow Washington’s rules can recover lost sales, especially in busy urban markets.
3. Protects State Tax Revenue
Previously untaxed products avoided the 37% Washington excise tax and federal 280E rules. Now revenue stays in the state, funding schools, health programs, and local communities.
According to a recent Beverage Digest report:
“Industry reporting has noted that many unregulated hemp products previously avoided state excise taxes; federal closure helps ensure taxed sales occur in licensed channels.”
Image credit: Cambridge Jenkins IV
4. Improves Safety and Youth Protections
Products that once shipped nationwide with no age checks are now regulated, keeping unsafe items out of the hands of consumers and minors.
As reported by KOLN/KGIN News:
“Lawmakers and public health officials cited concerns about unregulated gummies and beverages that resembled candy and were linked to increased accidental exposures among children.”
5. Validates Washington’s Approach
The federal closure mirrors SB 5367. Washington’s early action is now recognized, strengthening the state’s cannabis regulations.
6. Enforcement Is Key
Rules alone won’t fix the market. Federal and state agencies must actively enforce the new standards, especially online, to stop unregulated sellers from bypassing the system.
Foley Hoag commented that:
“Legal practitioners note that while the federal language is binding, effective market change relies on coordinated enforcement by federal agencies, state regulators, and customs/commerce enforcement.”
Image credit: Cova Software
Why This Matters for Shoppers
For you, the cannabis consumer, these changes mean:
Safer, tested products
Clear labeling and reliable potency
A more consistent shopping experience
Support for local dispensaries you trust
This is the kind of regulatory alignment that makes buying cannabis safer and more predictable for everyone.
Image credit: David Gabrić
Looking Ahead
The hemp loophole is now closed, but the story is just beginning.
Strong enforcement and collaboration between state and federal agencies will determine how much the market changes.
For Washington shoppers, the future looks safer, fairer, and more reliable.
Where can I Find Safe Cannabis in Washington?
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