South Dakota law aimed at hemp intoxicants is likely to wipe out CBD market

A proposed South Dakota law intended to crack down on products that contain high concentrations of intoxicating delta-8 THC and other cannabinoids also threatens the CBD market in one of the country’s biggest hemp-growing states.

The State Senate this week reverted to a highly restrictive version of a House Bill (HB 1125), which was softened by amendment before the lower body unanimously passed it.

The version of the bill that ultimately passed the House of Representatives would have prohibited only products containing high-concentration, synthetically processed compounds made from hemp. It would not have prohibited CBD and other extracts that contain the trace amounts of delta-8 THC and other cannabinoids that occur naturally in hemp flowers.

By broadening the restrictions, the Senate now appears to have put those products at risk.

Products targeted

The current version of the bill targets gummies, vape pens, pre-rolled joints and smokable flowers that come from the hemp plant – “high” inducing products that have proliferated in South Dakota and all across the U.S. due to loopholes in the 2018 U.S. Farm Bill, which legalized hemp federally but failed to account for the full range of potential outputs from hemp flowers.

In addition to the highly popular delta-8 THC, intoxicating cannabinoids synthetically made from hemp include delta-10 THC, THC-O, HHC and THCP.

Sen. Ryan Maher, who unsuccessfully tried to amend the law to restore the exemption for trace cannabinoids as it moved through the upper house, said the full ban could result in a flood of products on South Dakota streets this spring as retailers move to clear their soon-to-be illegal inventory of flower-based hemp goods – both intoxicating and non-intoxicating.

Following Senate passage, HB 1125 has moved to a conference committee which will reconcile it with the House version before it goes to Gov. Kristy Noem, who is expected to sign the law.

Minimal CBD production

Despite the squabbles, growing hemp for CBD never had much of a chance to catch on among farmers in South Dakota, which didn’t pass a hemp bill until 2020, two years after the 2018 Farm Bill legalized hemp federally – and in the midst of a massive bust of the CBD business that turned off farmers and producers.

South Dakota hemp farmers overwhelmingly put in grain and fiber crops from the start, with only 35 acres dedicated to CBD flower production in 2021, for example, according to state figures.

According to analysis by the South Dakota Industrial Hemp Association (SDIHA), the state was the second biggest grower in 2022, when harvested fields increased 35% to 2,540 acres, up from 1,674 in 2021. And farmers in the state harvested virtually all of their hemp crops that year. In addition to adding acreage, the state’s Department of Agriculture and Natural Resources reported that the number of hemp producers doubled from 20 in 2021 to 40 in 2022.

South Dakota, Montana and Idaho were the top producers of both fiber and grain in 2023, accounting for nearly half of the country’s total fiber acreage, and three-fourths of the national total for grain, according to analyst Hemp Benchmarks. Final production figures for last year are expected from the U.S. Department of Agriculture in April.

Noem and cannabis

Gov. Noem, a Republican, has a history of flip-flopping on cannabis legalization but has leaned toward tight restrictions. She vetoed a bill to legalize industrial hemp production in the state in 2019, saying it would create challenges law enforcement could not meet, and suggesting it would be a first step to eventually legalizing recreational marijuana. She eventually dropped her opposition and signed a hemp bill in 2020.

Noem later did a similar about-face on medical marijuana, endorsing a proposed 2021 bill that would have decriminalized possession of small amounts of marijuana by legal patients. That was after her failed attempts to use the South Dakota legislature to block the medical marijuana law approved in 2020 from taking effect in July 2021.