Can Hemp Businesses Continue Selling After December 11 If Their State Still Allows Hemp?

I’ve been getting a lot of questions from hemp businesses about what happens on December 11, 2026, if the new federal hemp restrictions take effect but their state laws remain unchanged. My clients ask, “If my products remain legal under state law, can I keep selling them despite the federal ban?“

My answer is a qualified “yes”. In some states, continuing sales may be permissible under state law. However, this creates significant federal legal exposure and a host of business problems that operators need to understand before deciding to continue.

Let’s use North Carolina as an example.

North Carolina’s Hemp Law Is Not Automatically Changing

Under North Carolina General Statutes § 90-87(13a), hemp is defined by its delta-9 THC concentration, which cannot exceed 0.3% on a dry-weight basis. The state definition does not impose a total THC standard that includes THCa.

The new federal hemp definition, enacted through Section 781 of Public Law 119-37, is scheduled to take effect on December 11, following a temporary extension enacted in September. Among other things, it replaces the current delta-9 THC standard with a total THC standard that includes THCa. It also excludes certain chemically manufactured cannabinoids and finished cannabinoid products containing more than 0.4 milligrams of combined THC and specified THC-like cannabinoids per container.

A narrower restriction involving cannabinoids that cannabis cannot naturally produce, such as THCO, takes effect November 12.

These are significant changes. Many products currently sold as federally lawful hemp, including high-THCa flower and many intoxicating hemp products, will no longer qualify as hemp under federal law.

Importantly, the federal amendments do not automatically rewrite North Carolina’s statutes. North Carolina has considered legislation that would substantially restrict its hemp market, particularly House Bill 328. As of this writing, however, HB 328 has not become law.

Assuming North Carolina’s existing law remains unchanged, a product containing no more than 0.3% delta-9 THC could continue to satisfy the state’s definition of hemp even if it no longer satisfies the federal definition. Of course, the product would still have to comply with all other applicable state and federal requirements.

This creates an unusual situation in which a cannabis product can be lawful “hemp” under North Carolina law but illegal “marijuana” under federal law.

Does State Legality Mean You Can Continue Selling?

From the standpoint of North Carolina’s Controlled Substances Act, potentially yes. State law generally determines which substances North Carolina considers controlled substances.

However, federal law operates independently. Under the federal Controlled Substances Act (CSA), cannabis products that no longer qualify for the hemp exclusion will generally be classified as marijuana. Merely complying with North Carolina’s hemp definition will not protect an operator from federal liability.

This is not a new legal principle, of course. States have operated medical and adult-use marijuana programs for years despite the federal prohibition. The federal government has often exercised enforcement discretion, meaning that it has chosen not to enforce federal law against state marijuana operators, but that does not make the underlying activity federally lawful.

The U.S. Supreme Court also made clear in Gonzales v. Raich, 545 U.S. 1 (2005), that federal marijuana laws can reach activities conducted entirely within a single state.

So, what does this mean for a North Carolina hemp operator who decides to continue selling products that become federally classified as marijuana? Unfortunately, it means a lot things. 

The Legal and Business Problems

1. Federal taxes and Section 280E

Under Internal Revenue Code § 280E, businesses distributing federally prohibited Schedule I or II controlled substances generally cannot deduct ordinary business expenses. This includes expenses such as rent, employee compensation, advertising, and many other operating costs. The treatment of cost of goods sold is different, but Section 280E can still create a devastating tax burden. This is arguably the biggest issues that the marijuana industry has faced. 

The federal government’s April 2026 decision to move certain medical marijuana products into Schedule III does not solve this problem for an ordinary North Carolina hemp retailer selling federally classified marijuana outside an authorized medical program.

Before deciding to continue, operators should have a cannabis-experienced CPA model their anticipated federal tax liability.

2. Banking and credit card processing

Many hemp companies currently maintain ordinary business checking accounts and accept credit card payments because their products are federally lawful. That could change, and operators should not assume that their current banking or merchant-processing arrangements will continue.

Banks and payment processors have compliance obligations involving federally controlled substances and proceeds from marijuana sales. Once a company is selling products classified as marijuana, its bank or processor may terminate services, freeze or review transactions, or require a more restrictive cannabis-related banking arrangement.

North Carolina does not have a comprehensive marijuana licensing system that a business could simply join to obtain ordinary cannabis dispensary credentials.

3. Insurance, leases, and other contracts

Insurance policies, commercial leases, financing agreements, and vendor contracts often require compliance with federal law. A business that begins selling federally prohibited marijuana could trigger default provisions or jeopardize coverage, depending on the contract.

For example, a landlord may object to activities that violate federal law even though they remain lawful under North Carolina law. An insurer may raise coverage questions involving federally illegal products or activities.

These consequences are not necessarily automatic, but operators should review their agreements before December 11. They should also avoid making inaccurate representations about their operations when applying for insurance or financial services.

4. Federal bankruptcy protection

This is another substantial concern, particularly for businesses with significant debt. Federal bankruptcy courts generally cannot be used to administer ongoing marijuana businesses or marijuana assets because doing so would involve the courts and bankruptcy trustees in federally prohibited activity.

Although the law has some exceptions and unresolved questions, operators should assume that ordinary business bankruptcy protection may be unavailable if their business depends on federally illegal marijuana sales. 

5. Interstate commerce and the supply chain

This is one of the most complicated issues. The 2018 Farm Bill protects interstate transportation of qualifying hemp. Once a product no longer qualifies as hemp federally, those protections no longer apply.

A company seeking to operate only within North Carolina would therefore need to examine its entire supply chain, from cultivation and processing through distribution and retail sales. Moving federally classified marijuana across state lines creates additional federal legal exposure.

For products that become federally classified as marijuana, keeping the entire plant-touching supply chain within North Carolina may be necessary to avoid interstate movement. But it is not sufficient to make the business federally lawful.

Shipping presents further problems. USPS cannot be used to mail federally prohibited marijuana in ordinary commercial transactions, even between locations within the same state. Private carriers also impose their own restrictions. A local pickup or in-state delivery model may avoid some transportation issues, but it does not eliminate the underlying federal prohibition.

6. Law enforcement

This is the elephant in the room. Will the DEA and DOJ actively pursue hemp operators who continue selling products that remain lawful under state law? I don’t know. Nobody does.

Historically, the federal government has often declined to prioritize marijuana businesses operating under state regulatory systems. However, there is no guarantee that this approach will continue, particularly in states such as North Carolina that lack comprehensive cannabis regulatory systems.

Federal enforcement could involve investigations, arrests, prosecution, and forfeiture of products or other assets. State and local law enforcement also present concerns. Officers may investigate controversial products, challenge their compliance with state law, seize products based on disputed interpretations or testing, or coordinate with federal authorities.

THCa flower and high-THC vapes are obvious candidates for increased scrutiny, especially considering the recent uptick in raids across North Carolina and other states regarding THCa products. State officers cannot simply treat every federal violation as a state crime, but that distinction will not necessarily prevent an expensive and stressful investigation or seizure.

7. Other regulatory and business consequences

There are additional issues worth considering. Federal trademark protection may become more difficult for products that violate the CSA. Businesses may encounter problems with commercial financing, investment agreements, or contracts requiring federal-law compliance.

And we cannot forget that products must still comply with applicable FDA requirements, consumer-protection laws, advertising restrictions, and other product-specific rules. Meeting a state’s hemp definition does not automatically satisfy these requirements.

My Recommendations for Hemp Operators

I do not have a blanket recommendation that hemp businesses automatically close on December 11 if Congress does not enact another extension. However, I also do not recommend continuing business as usual merely because their cannabis products continue to meet their state’s definition of hemp. 

Operators should take several steps now:

1. Review products individually. Obtain current, reliable certificates of analysis (COAs), review total THC and THC per container, and document cannabinoid manufacturing methods. Determine which products remain lawful federally and which may be lawful only under state law.
2. Evaluate the financial consequences. Work with legal counsel and a qualified CPA to assess Section 280E, banking, insurance, existing debt, and contract exposure.
3. Map the supply chain. Determine where products are grown, manufactured, stored, transported, and sold. An in-state retail sale does not resolve problems involving federally unlawful cultivation or interstate distribution.
4. Develop alternatives. Consider federally compliant products, smaller inventory commitments, supplier return agreements, and other ways to preserve the business without unnecessarily assuming federal criminal exposure.
5. Monitor developments. Congress may extend the deadline or change the law. States may also enact new restrictions. Neither outcome is guaranteed, so operators need a plan based on the laws actually scheduled to take effect.

The Bottom Line

I have consistently advocated for reasonable cannabis regulation rather than prohibition. The impending federal hemp restrictions are a poor way to address legitimate concerns about intoxicating products, quality control, labeling, and youth access.

Unfortunately, the fact that I disagree with the federal law does not make it any less consequential.

Can a hemp business continue selling products after December 11 that remain lawful under its state’s laws but no longer qualify as hemp federally? In some states, including North Carolina, there may be a path to continued sales under state law. However, those sales could constitute federal marijuana trafficking, with all the associated criminal, tax, financial, and business consequences.

This is theoretically possible as a state-law business model. It is not a workaround that makes the conduct federally legal. Operators who choose this route need to understand the risks fully and be prepared to manage them. They should not assume that a lack of immediate federal enforcement means they are operating legally.

Every state is different. Some states may retain definitions similar to North Carolina’s, while others incorporate federal standards or impose separate product restrictions.

At Kight Law, we can help operators evaluate their products, analyze the laws applicable to their markets, assess the consequences of continued operations, and develop practical plans for December 11 and beyond. Schedule a consultation to discuss your business and the December 11 deadline. 

November 9, 2026