Tennessee alcohol regulators are getting ready to oversee the legal hemp industry next year.
The state’s Alcoholic Beverage Commission on Wednesday released guidelines for regulating hemp products, like vapes, edibles and smokeable flower, which are set to go into effect on Jan. 1, 2026. The commission was tapped to regulate hemp in a law passed this year and will take over from the state’s Agriculture Department.
The new regulations are poised to take Tennessee’s most popular hemp product, smokeable THCa, off the market.
That could push some businesses, like The Flower Shop on Chattanooga’s Glass Street, to move outside Tennessee. THCa flower makes up at least 75% of the shop’s sales, owner Benjamin Whitelaw said, and another roughly 15% comes from THCa vapes, he estimated.
(READ MORE: Facing Tennessee hemp law changes, group urges tax refunds)
Whitelaw said he plans to open a retail store in North Carolina, close to the Tennessee border. He’s fed up with the constantly changing legal landscape here, he said, and feels it confuses customers, too.
“That way folks can come see us if they want,” Whitelaw said by phone. “I’m not going to encourage people to bring it back into Tennessee, but I’m also not going to put myself 500 miles from the border.”
Online and delivery sales are also set to be outlawed under the new regulations.
River City Green, which provides same-day hemp delivery in Chattanooga, plans to close by the end of the year, owner Bradford Peters said. He started the business in September after seeing a lack of delivery options in the area.
“In my opinion, this industry is dead,” Peters said by phone. “And quite honestly, I wouldn’t want a retail location without the ability to sell flower anyway.”
Meanwhile, a bill being considered by federal appropriators could further threaten Tennessee’s hemp industry, said Ryan Moses, chief executive of Best Brands, an alcohol wholesaler that has moved into cannabis in recent years.
Hemp products are a single-digit percentage of the company’s business, Moses said, but are growing exponentially.
The proposal, tucked into the Agriculture Department’s budget, would effectively outlaw all intoxicating hemp products, Moses said. That would shut down Tennessee’s industry overnight, he said.
“It’s alarming,” Moses said. “We now have to be cautious and a little more reserved in how we approach this growing business.”
NEW RULES
The change coming in January means hemp products will be regulated similarly to alcohol in Tennessee.
They’ll be taxed at the wholesale level based on how much intoxicating material is present, rather than the 6% blanket tax on retail sales that was introduced in 2023.
There will also be a new license specifically for wholesalers. The license will require a $5,000 annual fee and proof that a company has access to a minimum of $750,000 in credit, cash or as a bond. Now, wholesale distributors have largely been operating under supplier licenses from the Agriculture Department.
“Since 2018, our industry has built distribution routes,” Whitelaw, with The Flower Shop, said. “We have our own wholesalers, our own distributors and all of that is gone. None of those are going to be licensable next year.”
Hemp will be legally sold in four types of places: liquor stores, bars or restaurants with consumption licenses, hemp shops attached to a manufacturing facility and retail locations that don’t allow customers under 21.
Most hemp businesses won’t have to get a new license from the alcohol commission until their existing license from the Agriculture Department expires, according to the department. Those licenses expire on June 30, 2026, about six months after the new regulations are set to take effect.
The ban on online and delivery sales applies to any products delivered in Tennessee, whether they’re sent from inside or outside the state, according to the guidelines.
(READ MORE: Chattanooga area has most hemp shops per capita in Tennessee)
Kelley Hess, executive director of the hemp lobbying group Tennessee Growers Coalition, said she doesn’t think that prohibition does anything to protect public health.
“It’s a huge segment of the industry,” Hess said by phone. “They’re still going to be able to ship to Tennessee – the law didn’t criminalize possession. So my people are moving to North Carolina, Florida, they’re moving out of the state just to be able to keep their Tennessee customers.
“I don’t know how they’re even going to be able to regulate in-state online sales,” she said. “A lot of people aren’t going to take that chance, but again, if nobody’s enforcing it, what’s the point? We’re not doing any favors to our small businesses.”
The biggest difference to come from the alcohol commission’s oversight will be the level of enforcement, Hess said. New laws also impose harsher penalties for businesses who sell to minors.
“Everybody needs to be carding,” Hess said. “No ifs, ands or buts. They’re going to crack down very hard.”
WHAT’S NEXT?
Whitelaw said he worries that lumping hemp products in with alcohol will confuse consumers. He feels cannabis products are less dangerous than alcohol.
“This was 100% about established alcohol distributors and manufacturers being upset because cannabis was taking away from their sales,” Whitelaw said.
Moses, with alcohol wholesaler Best Brands, said his company moved into cannabis to cater to a wider range of customers. Tennessee’s industry is thriving while the wine and spirit space is flattening, Moses said.
“I see this as a category in the next five years that could be as big as the wine category, as big as the beer category,” he said. “It’s an exponentially growing category that’s, in my opinion, is here to stay.”
Tennessee’s regulations are already cutting-edge, Moses said, and he feels the alcohol commission is already equipped to oversee these age-restricted products.
If federal law changes to ban all intoxicating products, Moses said some states could still operate their own programs, much like states with legal marijuana – but he doesn’t expect Tennessee to be one of them.
“I feel comfortable selling hemp-derived cannabinoids because I am doing this in a legal manner, both federally and on a state level,” Moses said.
If it’s no longer federally legal, he said, “I’m going against federal licensure and I’m putting my license at risk. So I can no longer be in the cannabis industry as well.”
The changes are leaving Bradford Peters in a bind.
Before he started River City Green, Peters worked in California’s cannabis industry for years. That, he said, has made it hard for him to find jobs outside the hemp industry.
Other cities, including Nashville and Knoxville, had hemp delivery services, Peters saw, but not Chattanooga. Under his model, customers place and pay for orders in advance, then a delivery person will verify their age when they bring the products.
People were skeptical it would work at first, Peters said, but his business has grown significantly in the last nine months. He serves some customers with chronic illnesses that make it difficult to get out and buy hemp products at a store, he said.
“It’s still medicine for a lot of people,” he said.
When his company shuts down, Peters said he worries about how he’ll be able to support his family, including two young kids. And even if he and other small businesses shut down, he said, the demand doesn’t go away.
“Everyone’s just looking for their black market plug at this point,” he said.
Contact Ellen Gerst at egerst@timesfreepress.com or 423-757-6319.
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