Cannabis board urges rulemaking to shield Vermont hemp businesses from federal shift

Kyle Harris, a commissioner on the Cannabis Control Board, and Gabriel "Gabe" Gilman, the board’s general counsel, told a legislative committee on May 12 that proposed Section 323 would give the board the flexibility to regulate downstream hemp products if federal changes take effect in November 2026.

They said recent federal shifts and an unintended loophole created after the 2018 Farm Bill produced an interstate market for intoxicating cannabinoids derived from hemp and left state regulators scrambling to protect consumers. "My child or yours can take their Venmo card, go on the internet and have mailed to them in many places what anybody would recognize as a cannabis product that would get them high," Gilman said, describing the practical consequence of the federal gap.

The board described Rule 2.17, adopted in 2023, as the state’s working line between non‑intoxicating hemp and regulated cannabis. Gilman told the committee the rule has allowed limited sales for very low‑THC products outside dispensaries but left enforcement and downstream product oversight fractured because the Agency of Agriculture largely stopped operating its hemp program after 2022. "That’s why you see what you do," Gilman said, explaining the proposal to move certain authorities from Title 6 into Title 7 so the Cannabis Control Board can oversee product handling, testing and labeling rather than cultivation alone.

Harris said the board sees four regulatory "pathways" determined by THC levels and product form and emphasized uncertainty about a federal appropriation change staff said was added late in 2025. "If nothing changes at the federal level, it was exciting to hear from at least one business yesterday that wanted to figure out a path for her products in state regardless of what happens," Harris said, while warning the committee that the pending federal change could make many hemp-related businesses economically unviable after Nov. 12, 2026.

Committee members asked whether products that fall in the middle lane of the board’s taxonomy must be sold only in dispensaries. Representative Nelson asked, "So, is this rule now—so it still can be sold but it has to be sold through a dispensary?" Gilman and Harris replied that such products can be sold in dispensaries but that federal illegality complicates banking, parcel carriers, insurance and interstate commerce, which would sharply limit practical market access for many sellers.

The board outlined several areas it would target in notice-and-comment rulemaking if Section 323 is enacted: deciding which testing and labeling standards apply to hemp products intended for human consumption; whether hemp may be processed at licensed cannabis manufacturing facilities and under what safeguards to avoid commingling; how to handle possession and transfer of intermediaries (biomass versus concentrated distillate); and whether age‑gating or sales restrictions are appropriate for specific product types.

On fees, the board proposed a nominal $50 producer registration to enable complaint-triggered sampling, and said processor licensing fees would be set in rule, noting that current cannabis manufacturing licenses range from $2,500 to $15,000. Staff cautioned that any new program would require additional FTE and that fee revenue may not fully cover those costs.

Board counsel acknowledged the policy tradeoffs for small craft producers. Gilman said the board is open to drafting an amendment that would create a narrow intrastate, low‑fee registration for small sellers such as farmers‑market vendors so they could continue to operate if interstate commerce becomes impossible. He emphasized that only the legislature can create a statutory fee carveout and that such an approach would then be implemented by the board in rulemaking.

The committee asked for and received an offer from board staff to work with Legislative Counsel and the Government Operations Committee to refine amendments. The board said it would post the presentation and return to report on rulemaking progress.

The committee did not take any votes during the session; members directed staff and counsel to draft potential amendments and reconvene on the issue later.