Erin Kelly did everything right.
The federal government and the state built a framework for an industry, and she followed it to the letter: a business plan, an LLC, a seller’s permit, a storefront in Wauwatosa. Since 2021, Kelly’s Greens has sold legal hemp products. The IRS and the Wisconsin Department of Revenue have cashed her checks every year since.
Now, barring a last-minute reversal in Madison or Washington, Kelly – along with the rest of Wisconsin’s $700 million hemp industry – could be out of business. “You think it’s the American dream,” Kelly says. “The federal government, the state government set up a plan and rules to follow for eight years. Eight years is not a loophole. Now we’re watching this industry and thousands of jobs and people’s lives go away overnight.”
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Here’s how it happened. In 2018, Congress passed a farm bill that removed restrictions on commercial and industrial uses of hemp. It differentiated hemp, which contains trace amounts of the high-inducing compound THC, from the more psychoactive varieties of the same plant by defining hemp as containing no more than 0.3% by weight of delta-9 THC. The catch: The law only affected delta-9, leaving unregulated chemical cousins like delta-8 or THCP, which can be just as intoxicating. And even 0.3% threshold of delta-9 can get people high in certain products.
Wisconsin copied the federal language into its own 2019 law, and just like that, the state’s hemp shops, farmers and producers could legally sell products loaded with those other compounds, so long as delta-9 stayed under the limit.
That catch is what built the mood-altering hemp industry in Wisconsin and many other states that haven’t legalized marijuana.
Now, Washington has closed it. A federal law passed in late 2025 rewrites the definition, capping total THC at 0.4 milligrams per container – a threshold so low it disqualifies nearly every product on shelves today. The move leaves an entire industry, and its 3,500-plus jobs in Wisconsin, staring down a regulatory Armageddon. That deadline was Nov. 12, but a federal spending bill approved by Congress and signed by President Donald Trump extended the deadline a month, giving proponents of more permissive regulation more time to develop a proposal and gain support. But even if that emerges, conflicting federal and state rules could leave the industry tangled for years to come.
For now, the legal ground hemp businesses have stood on for eight years is set to vanish overnight – and on Dec. 12, Kelly and thousands like her may simply not have a business left to open.
The Legislative Failure
No THC legislation ever reached the floor for a vote, but over the past two legislative sessions, state lawmakers have attempted to create a regulatory framework.
Rep. Rob Swearingen (R-Rhinelander) took the lead around February of 2025. His initial impetus for authoring a bill was safety. After hearing stories about kids mistaking the products for candy or consumers accidentally purchasing products infused with THC that left them unintentionally intoxicated, he felt that rules ensuring appropriate labeling, lab testing and age restrictions were needed.
However, as Swearingen consulted dozens of stakeholders including the Tavern League of Wisconsin (Swearingen is its former president), restaurants, and beer, liquor and THC distributors, he says the bill “exploded” in scope. It ballooned to sweep all consumable THC products, from drinks to edibles and vapes, under the same three-tier system (separating producers, distributors and retailers) that regulates alcohol.
“The bottom line is these products are intoxicating. The three-tier system creates a layer of safety so none of these products, or alcohol, are laced with anything,” Swearingen says. “The fear we heard was that businesses would have to start dealing with beer and liquor wholesalers. We actually made room for a new distributor tier that would just sell THC, so that fear wasn’t really legit. I think now they wish they would’ve gotten behind us.”
Sen. Patrick Testin (R-Stevens Point), who was the lead author of the 2019 bill that brought the industry into existence in the state, didn’t support that approach. A proponent of lab testing, age restrictions and those “common sense” safety regulations, Testin says he could not get behind the three-tier system for all hemp products, which he described as “heavy-handed” and benefiting only distributors and harming the hemp industry.
“While THC beverages in the state don’t have to, they already operate under the three-tier system,” Testin says. “I’m fine with that. But, for small, local or independent farms and companies selling vapes and gummies that are doing direct-to-consumer sales, that would be a huge disruption to their business. Talking to a number of manufacturers, they said [the costs of third-party distribution] would essentially shut them out of business.”
In response, Testin drafted his own bill. He consulted exclusively with hemp industry businesses across the state, from retailers to growers. They lobbied for the same regulations as Swearingen’s bill, without the three-tier requirement.
Ultimately though, that difference led to stalemates for both bills. Despite bipartisan support, neither moved beyond its public hearing. Talks between all parties involved were had to find a joint consensus. At the eleventh hour, concessions were nearly agreed upon, but nothing materialized.
Neither bill even received a vote, and the legislative session ended in March with no action taken.
Livelihoods on the Line
That inaction leaves hemp businesses in the state in a tight spot. Entrepreneurs have invested their lives and capital into their businesses, but how do they sell a federally illegal product in a state with no regulations?
For the moment, that comes with myriad complexities and complications that have caused businesses to close, scale back workforces, halt expansion plans and production, and wonder if they will still be around in 2027. “I’d prefer to have a bank that protects my money and an insurance policy that covers my property and our liability,” Kelly says. “What FDIC bank is going to work with a business with a product that’s federally illegal?”
Kelly says that this, among many reasons, is why she will close her doors and let go of her seven employees when the federal ban arrives. She will try to keep the business afloat and pay her mortgage as long as she can while she waits to see if the state Legislature takes another stab at regulation in 2027. She hopes a temporary tenant can fill the space.
Some businesses, like Kind Oasis in Milwaukee, plan to continue operations in some capacity.
President and CEO Jason Handal says Kind Oasis is exploring other products to offer if it loses the ability to sell hemp-derived products. But it would be a major pivot from its business model, into which its owners have invested millions since opening in June 2020. Future investment and hiring are all on pause right now for Kind Oasis and its 50 employees in Wisconsin.
Even if the state provides some clarity, though, the closure of the federal loophole eliminates interstate commerce for hemp-derived products, which is at least 50% of Kind Oasis’ annual business, Handal says.
“There’s a willingness to continue to invest in the growth of this industry if we can get clarity,” he says. “There’s capital and hiring sitting on the sidelines right now because of the current state of things. It’s scary, but we’re fighting to keep this industry alive and thriving.”
Austin Wszolek, co-founder of La Crosse-based hemp and CBD processing company Carbon Cannabis, has seen Wisconsin retailers scaling back orders, dwindling their supplies and making exit plans for THC products come the end of the year – even as Carbon just completed an expansion this January.
All of the businesses spoken with for this story agreed they will continue to lobby at the state level for regulations and for the future of the industry here. They are hopeful for action come January when the next legislative session begins. But no one is holding their breath.
“Legislators on both sides of the aisle have been called on for years to put regulations and plans in place to protect these businesses,” Kelly says. “Now, we’re gonna watch an industry leave the state because of lobbying by alcohol groups and the inability to compromise – nothing that we did, but we’re the ones that will pay the price.”
