THC-infused drinks found a loophole in CT cannabis law

Connecticut lawmakers are making final adjustments to a bill that would, for the first time, regulate the sale and potency of THC-infused beverages and other consumer products containing THC derived from hemp.

While medicinal and adult-use cannabis products are highly regulated in the state, hemp-derived products with levels of THC considered intoxicating have found their way onto retail store shelves, where they’re sold without age restrictions.

That “loophole,” as state Attorney General William Tong and several lawmakers have called it, originated with the federal Agricultural Improvement Act of 2018, which legalized hemp production, and subsequent state legislation that authorized it in Connecticut .

That “allowed hemp producers in the state to make products that have certain amounts of THC in them,” said Rep. Mike D’Agostino, D-Hamden. “I’m not sure if everyone appreciated at the time that these were intoxicating THC products. Nevertheless, that’s the current state of the law in Connecticut and the law that existed before we legalized cannabis.”

The products — which include THC-infused drinks, as well as edibles, oils and concentrates derived from the hemp plant — are currently sold in CBD and package stores, convenience stores, supermarkets and other retailers. Some restaurants and bars offer hemp-derived seltzers on their menus.

Seltzer producers, retailers and their customers pushed back on the regulations initially proposed in House Bill 5150 , which would have limited the products to 0.5 milligrams of THC per serving. That limit was recently adjusted in the bill to one milligram per serving, allowing sales in package stores and cannabis dispensaries.

Joe Grabowski, co-owner of Sarene Craft Beer Distributors in Bridgeport, told legislators that hemp-derived beverages have helped his business remain profitable amid declining sales of alcoholic products.

“We are actively looking to add staff and infrastructure in 2024, but if this bill is passed, as written, we will have layoffs, as our sales will no longer justify current staffing levels,” Grabowski wrote in testimony submitted to the legislature’s General Law Committee, which raised the bill. “This is not a unique situation to just our business. The alcohol industry as a whole is suffering … and some of this is a direct result of the legalization of cannabis in this state.”

But some cannabis businesses, which went through an arduous application and lottery process to obtain licenses to sell THC products, say allowing anyone else to sell those products goes against the spirit of the law.

“The cannabis industry would prefer … to be the ones producing, manufacturing and selling those beverages,” Adam Wood, president of the Connecticut Cannabis Chamber of Commerce, said. “The regulated industry wouldn’t want to see a product offering that is in any way similar to the product it’s selling, because that would sort of destroy the market for cannabis products.”

The latest version of the legislation doesn’t resolve that particular issue, but it would limit sales of the various hemp-derived, THC-infused products to CBD and package stores, as well as cannabis dispensaries. It would also require all products to undergo testing and meet certain other requirements akin to those cannabis products must meet.

“No more convenience stores, no more at your gas station, no more kids can go buy them,” D’Agostino, who co-chairs the General Law Committee, said. “If it’s going to exist, it’s going to be strictly regulated.”

What else is in the bill?

Adult-use retail sales have been up and running for just over a year in Connecticut, and businesses and lawmakers have identified several areas of the state’s cannabis laws that need adjustment. House Bill 5150, currently 90 pages in length, contains more than 30 sections addressing a range of issues that have arisen over the past year.

Supply

Since cannabis is regulated at the state level, only products cultivated in Connecticut can be sold in Connecticut. That has led to supply constraints on several occasions over the past year, as only a handful of growers are up and running so far. The Cannabis Chamber estimates current cultivation in Connecticut covers more than 260,000 square feet in both indoor and outdoor operations, and they expect that to grow to nearly 470,000 square feet by next fall.

H.B. 5150 seeks to encourage the expansion of grow area while maintaining preference in the industry for “social equity” lottery winners — license applicants who’ve met certain income requirements and reside in communities with higher historical conviction rates for drug-related offenses.

The bill allows grower applicants who haven’t yet received a provisional license (in many cases because they weren’t able to find a large enough space for cultivation or haven’t raised enough funding to pay the steep license fee) to apply instead for a “micro-cultivator license.” It also eases location requirements for those applicants, allowing them to establish outdoor growing operations anywhere within a municipality containing a disproportionately impacted area — rather than specifically within the so-called “DIA.” And it expands DIA to include state-recognized tribal lands.

“That would allow for more cultivation to come online and allow for some of these applicants to get into the market at a lower capital investment,” Wood said.

In written testimony to the committee, the chairs of Connecticut’s Social Equity Council, which oversees cannabis social equity programs, wrote: “We believe these proposed changes … improve opportunities for social equity.”

The Connecticut Medical Cannabis Council, however, took issue with the changes to DIA requirements.

“This could work against the program’s goal of having cultivator facilities located in the economically challenged area of a town or city,” the council wrote in testimony submitted to the committee.

Rules for retailers

The sweeping bill contains provisions that met with support and opposition from cannabis retailers and medical dispensaries. It limits costly requirements for on-site vaults, which would reduce costs for businesses — a change they welcome. But it also bans those businesses from offering promotional sales and discounts.

The Medical Cannabis Council called that provision “needlessly more complicated and unwieldy,” saying the language is so broad, “we would be prohibited from giving our customers any kind of ‘swag’ such as a key chain or hand sanitizer with our logo on it.”

The Cannabis Chamber said a ban on promotions “impedes the growth and success of the industry in a state where pricing is already much higher than our neighboring states.” But Chamber members said they expect to broach broader discussions of the issue of cannabis packaging and branding, which is strictly limited in Connecticut, during next year’s legislative session.

“Our roots are sort of puritanical as a state,” Wood said. “We tend to not be the most liberal when it comes to marketing and branding of products like this. I think it’s something that needs to evolve, because it is an issue of wanting to compete with businesses right over the borders. They don’t necessarily have a better product, but [they have] more product offerings because they’re allowed to brand differently and display differently and market differently.”