When Minnesota legislators passed House File 4065 in 2022 — legalizing the sale of certain hemp-derived THC edibles and beverages — few could have predicted that a multimillion-dollar THC-infused beverage market would result. Yesterday, Minnesota consumers enjoy access to THC beverages in many places traditionally reserved for alcohol — liquor stores, breweries, bars, and restaurants.
Minnesota’s regulatory approach, which notably allows businesses serving alcohol to register and serve THC beverages for on-site consumption, likely contributed to speedy consumer uptake in this market. As we discuss below, other states’ hemp laws tend not to provide for on-site consumption. Please note that “hemp” refers to the Cannabis Sativa L. plant with delta-9 THC concentration of 0.3% or less on a dry weight basis.
Minnesota’s Approach to Hemp-Derived THC Beverages
Under Minnesota law, sellers of hemp-derived THC products must register with the Minnesota Office of Cannabis Management, but no product-specific license is currently required. Regulators have indicated, however, that a separate licensing process will be implemented and enforced once rules are adopted in 2025. Sellers of hemp-derived THC edibles and beverages are also subject to a 10% excise tax on gross receipts from retail sales, in addition to Minnesota’s general sales tax and any applicable local sales taxes of the jurisdiction in which the sale occurs.
Importantly, Minnesota’s framework also allows for THC beverages and edibles to be sold in many of the same settings where alcoholic beverages are sold. For instance, liquor stores are subject to the same registration requirements as other retail establishments, allowing them to offer a selection of alcoholic beverages alongside hemp-derived THC products. If the registered business also holds an on-site alcohol consumption license, it may also allow on-site consumption of hemp-derived THC beverages and edibles. Further, effective July 1, 2024, these businesses may offer THC beverages on tap, as opposed to only in bottles and cans. This regulatory framework allows consumers to drink THC beverages in social settings like bars and restaurants similarly to alcoholic beverages.
The result? Minnesota’s THC beverage market is now reportedly worth nearly $200 million, with roughly 4,000 registered retailers. Looking ahead, however, the future prospects of Minnesota’s THC beverage market may depend on whether consumer demand can weather the forthcoming rollout of recreational marijuana sales in 2025. As of this publication, the Office of Cannabis Management is accepting applications for social equity license preapproval—a process by which prospective cannabis business owners who have been verified as “social equity applicants” can apply first for licenses. These applications will go through review and a vetting process, and if qualified, be entered into a lottery that will award licenses. For further discussion on methods of awarding licenses, see our team’s prior coverage of a challenge to Alabama’s medical cannabis license awards.
Other States’ Approaches to Hemp-Derived THC Beverages
Other states, by contrast, tend not to promote on-premises consumption of THC beverages, which may impact consumers’ exposure to the product category. For instance, Florida’s regulatory regime for hemp-derived products does not contemplate on-premises consumption. Businesses may sell pre-packaged hemp products, including hemp-derived THC beverages, if they are permitted as a “Hemp Food Establishment.” This permit allows a business to sell hemp products at retail, but it does not extend to cover the sale of such products for on-premises consumption. Similarly, under Georgia’s recently-signed hemp bill, licensed “retail consumable hemp establishments” may sell prepackaged consumable hemp products to consumers. This new law, effective October 1, does not contemplate on-premises consumption at any retail locations.
Although THC beverages will appear on store shelves in these states, they may not appear in bars and restaurants. The approaches of Florida and Georgia may therefore inadvertently dissuade consumers from viewing hemp-derived THC beverages as analogous to alcoholic beverages. In other words, these states’ frameworks could serve to uphold norms regarding the social use of THC versus alcohol generally.
Why It Matters
In the fragmented U.S. cannabis legal environment, natural case studies in consumer response are extremely valuable. THC beverages could represent a new frontier for the cannabis industry, with some consumers’ interest piqued by low-dose beverage options or alternatives to alcohol generally. Market participants—current and prospective—should therefore pay attention to these developments regarding hemp-derived THC beverages in states like Minnesota.
