The cannabis and hemp industry can be considered chaotic. No two states are the same. The regulations and compliance framework can be confusing because of the differences between full legalization and outright bans. There is also a gap between client expectations and state laws, which further complicates business operations and marketing. What sells legally in Oregon might get pulled from shelves in Texas, or worse, get you arrested.
Understanding the differences in the markets across states is fundamental for a business owner who wants to operate across borders. We will take a look at this chaotic and fragmented reality and how to ensure you survive and grow.
Legal Complications
Understanding the nuances between federal oversight and state-specific laws is critical for anyone selling or distributing in this space, and it’s only getting more complicated.
The legal framework for cannabis and hemp is a gray area. The consumer demand is growing; however, the regulations are not clear-cut. While there is hope that cannabis will be descheduled, it remains a Schedule 1 substance at the federal level, while hemp is technically legal.
The lines become even more blurred when it comes to hemp-derived cannabinoids like Delta-8, Delta-10, and HHC. One state allows hemp in all its varieties, while another bans it.
“The compliance nuance around minor cannabinoids surprised me the most when scaling across states,” says Alexi Schaller, the Founder & former Ceo of Bloom. “Certain markets demand explicit declarations for compounds like CBN and CBC, even in trace quantities. Regulatory misalignment in those cases required reengineering formulas and packaging protocols for specific states, adding approximately eight weeks per SKU launch cycle.”
This sentiment is echoed by Arthur Abramov, the owner of StashMaster “The legal differences are not just found across states but also across individual regulatory bodies. The enforcement laws shift based on leadership. He emphasises, “The most surprising compliance challenge wasn’t from multi-state expansion (we’re focused on mastering our Brooklyn operation first) but navigating the rapid evolution of New York’s regulations. At some point, we had to completely redesign our product labeling system three times in six months as requirements shifted.”
Fifty Markets, Fifty Hustles
How a business in cannabis and hemp does its marketing, product offering, operations, taxation, and licensing differs in every state.
Jayant Surana, Marketing Manager, Everyday Delta, gives a glimpse into this reality. “We operate in 17 states. And every single one requires a different SKU map,” he explains. “The most surprising challenge? California and Minnesota both require THC thresholds, but calculate per serving and per container in opposite ways. That one mix-up cost us 9,200 packages and a three-week halt in two key markets.“
Let’s look at some key corners of the country: the West, the Midwest, the South, and the Northeast.
The Western market has stringent and well-established hemp laws. Retailers must ensure that the products do not contain any controlled substances, and imported hemp components must be tested in the U.S. In some states, like New York, smoke shops are prohibited from selling cannabinoid hemp products intended for smoking without a retail license through the state’s Adult-Use Cannabis Program.
The Midwest is a patchwork of regulations. In Illinois, some local laws have impacted the sales of hemp even though it is fully legalized. For example, Chiga has bans on hemp sales in certain areas, which have affected smoke shop operations. In addition, Nebraska is considering a ban on hemp-based THC products, which could affect 300 businesses in the state.
The South has a more conservative approach to hemp regulations. In Texas, hemp-derived products like Delta-8 THC remain in a legal gray area. Recent legislative efforts, such as Senate Bill 3, aim to ban most edible and smokable THC products, with exceptions for certain beverages. Additionally, Texas prohibits the manufacturing or processing of consumable hemp products for smoking, which has a significant impact on smoke shop inventories.
The Northeast is moving toward broader legalization, but execution challenges are far from over. In New York, smoke shops must obtain a retail license to sell cannabinoid hemp products intended for smoking. New Jersey has implemented a law requiring retailers to have a cannabis license to sell hemp products, which further complicates a smokeshop’s business strategy.
The Customer Experience Gap
Customer experience is one of the most important aspects of any business; it is also the biggest challenge when operating in a fragmented industry. Consumers expect consistent, informed, and seamless buying experiences, regardless of the state. How do you manage customer expectations within these legal limits?
A good example is online shoppers may place an order for a hemp-derived product like Delta-10 or THCV only to learn it can’t legally ship to their state, even though hemp is federally legal. These restrictions make the shopping experience unpredictable and may damage brand trust when orders are canceled post-purchase.
Some states allow hemp-derived THC products as long as they stay under 0.3% Delta-9 THC by dry weight. That’s created a boom in “legal” edibles with real intoxicating effects. Smoke shop owners are left explaining why these potent products are technically legal, while still facing suspicion from law enforcement or local regulators.
Is there hope? How can business owners respond to the challenges that this fragmented reality is causing?
How Business Owners Are Adapting
“Uniformity is impossible. Personalization and agility are the only ways forward,” explains Aspen Noonan, CEO, Elevate Holistics
Inventory flexibility is key. Thus, savvy business owners are diversifying their product lines. This is not just for their consumers but also to stay compliant as regulations shift. Staying vigilant in understanding the changing market and legal implications is crucial.
As a business owner, you have to invest heavily in compliance strategies. You may need to maintain separate product SKUs for each state, use regional legal consultants, and build state-specific training protocols for staff.
The Future of the Fragmented Market
Although the future of retail cannabis and hemp is still unclear, things are moving in the right direction. Federal reform is still slow, but support for loosening regulations and establishing more transparent interstate laws is growing. Regional co-ops and lobbying groups are becoming more popular, and some states are starting to talk about common compliance standards.
It is important to remember that compliance is not a one-time event; it’s a daily practice. Business owners who remain agile will find many opportunities ahead.
