February 25, 2025
By Stew Weiss
In the past few years, communities across the nation have seen a proliferation of stores offering “cannabis-like” products. These products, sold as “delta-8”, “THC-O”, and other variants, are readily available at smoke shops, vape stores, and even gas stations. These products often offer the same intoxicating effects of cannabis, but can be sold outside of state-licensed dispensaries (in fact, state-licensed dispensaries are prohibiting from selling them). They can be sold to minors and remain largely untested and unregulated. Both municipal officials and operators of licensed cannabis dispensaries in Illinois have been frustrated by the largely unregulated spread of these products.
In January, the Illinois General Assembly attempted to resolve the issue of unregulated intoxicating hemp products. Despite Governor Pritzker’s vocal support, the proposed legislation died without a floor vote, leaving local governments to decide whether and how to regulate hemp products. This alert provides a brief summary of the legal status of these products and municipal options for local regulation.
Cannabis vs. Industrial Hemp
Both “cannabis” and “hemp” refer to the same plant, botanically known as Cannabis Sativa L. More than a hundred different chemical compounds called cannabinoids naturally occur in the cannabis sativa plant. The most well-known categories of cannabinoids are tetrahydrocannabinol (THC) and cannabidiol (CBD). THC is commonly recognized as the primary intoxicating compound in cannabis. The Cannabis Sativa L. plant can be cultivated to produce different concentrations of cannabinoids like THC and CBD. The legal distinction between “cannabis” and “hemp” generally depends on the amount of a specific variant, or isomer, of THC, designated as “delta-9”, that is contained in a cultivated strain of the plant.
In 2018, the United States Congress included a provision in the annual federal Farm Bill that classified Cannabis Sativa L. with concentrations of 0.3% delta-9 THC or less on a dry weight basis as “industrial hemp.” The Farm Bill also removed industrial hemp from the Drug Enforcement Agency’s controlled substance schedule and authorized the cultivation and sale of industrial hemp nationwide. This change was based on the widespread belief that plants containing low concentrations of delta-9 THC were psychoactively inert. In other words, no one believed industrial hemp could be processed in a manner that would result in an intoxicating product. Further, industrial hemp was primarily touted for its material uses including in fiber and cloth, not for consumables. The cultivation of industrial hemp is regulated at the federal level by the USDA and at the state level by the Illinois Department of Agriculture.
In 2019, the Illinois General Assembly adopted the Cannabis Regulation and Tax Act (CRTA), which legalized the cultivation, processing, sale, and recreational consumption of cannabis by adults in Illinois. Mirroring the Farm Bill’s threshold, the CRTA defined “cannabis” as Cannabis Sativa L. with concentrations of more than 0.3% delta-9 THC on a dry weight basis. Cannabis remains a controlled substance at the federal level and is regulated at the state level by the Illinois Departments of Agriculture and Financial and Professional Regulation.
Emergence of Consumable Products Derived from Industrial Hemp
Almost immediately after the legalization of cannabis, consumable products derived from industrial hemp appeared on the market touting therapeutic health benefits. These products originally contained minimal amounts of THC, but boasted high-levels of CBD cannabinoids. These products were sold outside of licensed dispensaries, even in health food aisles of grocery stores. As these products did not have strong intoxicating effects, they did not inspire much concern.
However, the legal-imposed distinctions between intoxicating “cannabis” and therapeutic “hemp” soon became blurred. Enterprising parties quickly determined that they could cultivate strains of industrial hemp containing less than the legal threshold of 0.3% delta-9 THC but nevertheless held sufficient concentrations of variant isomers of THC to produce the same intoxicating effects of legal cannabis.
These intoxicating hemp-derived products effectively exist in a legal grey area. They are not considered “cannabis” and therefore are not regulated under the CRTA. They can be sold outside of licensed dispensaries, are not subject to age limits, are not required to be tested for purity or contaminates, and are not subject to the high state and local wholesale and retail taxes imposed on cannabis. And since these products are not cultivated or processed in licensed facilities, they cannot be sold in licensed dispensaries. Further, no state or federal agency has been willing to claim regulatory jurisdiction over the products, allowing sales to proliferate in smoke shops, gas stations, convenience stores, and even bakeries selling infused-baked goods and beverages.
Local Government Actions
Although legislators at the federal and state level have discussed closing the “hemp loophole” for years, no action has been taken in Washington or Springfield. In response to concerns regarding sales to minors and the impact of untested products, a number of cities and villages in Illinois have begun to impose local bans on the sale of intoxicating hemp-derived products pursuant to their municipal police power, authority to regulate harmful substances, and home rule authority. Some communities prohibit sales of hemp products by any establishment holding a tobacco sales license. Others simply impose a minimum sales age. Even more go further, completely banning the sale of these products and imposing heavy fines pursuant to home-rule authority. In the City of Chicago, two Alderpersons pushed through ward-specific bans on the sale of intoxicating hemp products. Although owners of targeted businesses appeared at public meetings to speak out against these local regulations, we are aware of no successful legal challenges to these bans. Notably, almost all of these ordinances used slightly different definitions for prohibited substances. Without a state or federal standard defining what constitutes intoxicating hemp-derived products, the risk that local ordinances could be side-stepped by innovations in chemistry and botany remains.
Springfield Steps Up and then Steps Back
In January 2025, Governor Pritzker publicly endorsed House Bill 4293, the “Hemp Consumer Products Act” (“HCP Act”). First and foremost, the HCP Act proposed to broaden the definition of “THC” to include not just delta-9, but also delta-8, delta-10, THC-A, and other psychoactive isomers and derivatives of THC as well as “any other substance determined to have similar intoxicating effects.” This broad definition was intended to capture any additional intoxicating isomers or variants that may be derived from industrial hemp in the future. The HCP Act also would have created a new regulated class of consumable products: “Hemp-derived intoxicating product.” These would have been consumable products derived from industrial hemp that nevertheless had greater than 0.3% THC and a high ratio of THC to CBD. Under the HCP Act, hemp-derived intoxicating products would be treated as cannabis for all practical purposes. They could only be sold at licensed cannabis dispensaries and would be subject to the same taxes as cannabis. In addition, the HCP Act would create a new and distinct category of non-intoxicating consumable products — “hemp consumer CBD products” containing less than 0.3% THC and having a very low THC to CBD ratio. Notwithstanding their non-intoxicating effects, hemp consumer CBD products would be subject to many of the same regulations as cannabis, including prohibitions on packaging attractive to children and requiring that products be tested for potency and contaminates. The Illinois Department of Agriculture would be responsible for the regulation of the cultivation, production, testing, and sale of hemp consumer CBD products.
Despite strong support from Governor Pritzker and a number of prominent municipal leaders from around the collar-counties, HB 4293 died without a final vote in the Illinois House due largely to dissent in the House Democratic Caucus. Speaker Welch determined that there were not 60 votes within his caucus to support the bill. Opponents of the bill included supporters of small minority-owned businesses that currently sell hemp-based products. Many of these business owners argued that they were locked out of the legal cannabis market due to Illinois’ slow rollout of dispensary licenses, which has been plagued by litigation and accusations of discriminatory preferences. Chicago Mayor Brandon Johnson also opposed HB 4293, arguing that the regulation of these products is best left to local and municipal governments.
Notwithstanding the failure of HB 4293 in the 103rd General Assembly, a nearly identical bill has been introduced this session as Senate Bill 20 by Senator Kimberly Lightford. As of the date of this alert, SB 20 has been referred to the Senate’s Assignments Committee.
Local Options Remain
While municipalities wait for Springfield to adopt statewide policies for hemp-derived intoxicating products, they have a number of regulatory options. These include:
- Imposing total sales bans within municipal boundaries or prohibiting holders of certain business licenses from selling these products.
- Imposing a minimum purchase age or minimum distance requirements from sensitive locations like schools and churches.
- Licensing local sellers of hemp-derived products, whether intoxicating or not.
- Requiring specific labeling or packaging elements including potency and dosage amounts.
Municipalities can utilize the definitions of THC and hemp product classes from HB 4293 or SB 20 to support and refine these regulations.
Although municipalities are generally prohibited from imposing special sales taxes on products based on gross receipts under Section 8-11-6a of the Illinois Municipal Code (65 ILCS 5/8-11-6a), local governments do have the option to impose taxes based on other measures. Hemp taxes could be imposed on a per unit sold, on a dry weight basis, or even based on the amount of THC included in the product. Each of these methods would bring their own challenges regarding collection and audits, but could be accomplished with sufficient training and oversight.
For additional information regarding any of these issues, please contact Stew Weiss or any Elrod Friedman attorney.