Viola Founder Says Hemp Ban Crushes Companies Following Rules

Compliance Infrastructure at Risk

Harrington told MJBizDaily that licensed operators invested millions in testing labs, seed-to-sale tracking, and state excise-tax compliance while hemp vendors sold identical products with no regulatory overhead. Viola operates in Michigan, California, and Colorado under state cannabis licenses that require third-party lab testing, child-resistant packaging, and potency labeling. The company pays effective tax rates exceeding 70% under IRC §280E, which disallows ordinary business deductions for Schedule I controlled substances.

Hemp sellers faced no such burden. On a strict reading of the 2018 Farm Bill, any cannabis plant containing ≤0.3% delta-9 THC qualified as hemp, exempt from DEA scheduling. That loophole allowed delta-8 THC, THCA flower, and HHC products to proliferate in gas stations and online retailers without state licensing.

DEA Interim Final Rule Closes Loophole

DEA interim final rule 1362-F, published August 15, 2026, reclassified all intoxicating hemp-derived cannabinoids as Schedule I controlled substances regardless of delta-9 THC concentration. The rule defines "intoxicating hemp-derived cannabinoid" as any substance extracted from cannabis that produces psychoactive effects, including delta-8 THC, delta-10 THC, THCA, HHC, and THCP. It took effect August 20, 2026. The comment period closed September 19, 2026.

The rule doesn't distinguish between state-licensed cannabis operators selling hemp-derived products and unlicensed vendors. Both face federal criminal liability. That outcome punishes companies that chose the regulated path, Harrington said.

State-Licensed Hemp Programs in Limbo

Fourteen states—including Oregon, Minnesota, and Vermont—created licensed hemp-derived cannabinoid programs in 2024-2025, requiring lab testing, potency caps, and excise taxes. Those programs now conflict with federal law. Oregon's hemp-cannabinoid license, established under HB 3000 (2025), imposed a 20% excise tax and required cannabinoid profiles on all labels. Minnesota's Office of Cannabis Management issued 47 hemp-derived THC licenses under Minn. Stat. §342.33 in early 2026.

The DEA rule doesn't preempt state hemp programs, but it exposes licensees to federal prosecution. The uncertainty will force licensed operators to abandon compliant product lines or risk asset forfeiture, Harrington said.

Economic Impact on Licensed Operators

Viola projected $12 million in 2026 revenue from THCA flower and delta-8 vape cartridges sold through Michigan's licensed retail network. That figure represented 18% of the company's total revenue. Harrington said Viola paid Michigan's 10% excise tax on those sales and remitted an additional 6% sales tax. The company also absorbed third-party lab testing costs averaging $150 per batch.

Unlicensed hemp sellers faced none of those costs. The math is brutal. Licensed operators paid 16% in state taxes plus §280E federal tax burdens while competing against untaxed online retailers. The DEA ban eliminates the product category but doesn't refund compliance investments.

Industry Response and Legal Challenges

The U.S. Hemp Roundtable and National Hemp Association filed a joint petition for review in the D.C. Circuit Court of Appeals on August 22, 2026, arguing the DEA exceeded its statutory authority under the Controlled Substances Act. The petition, case number 26-1204, claims the 2018 Farm Bill explicitly legalized hemp and hemp-derived compounds, and the DEA can't unilaterally reverse that determination without congressional action.

Harrington said he supports the lawsuit but doubts it'll resolve before licensed operators exhaust their capital. Viola isn't a party to the litigation.

What Comes Next

The DEA will review public comments submitted by September 19, 2026, and may issue a final rule in Q4 2026. Until then, the interim rule remains enforceable. Harrington said Viola has paused all hemp-derived product manufacturing. The company is evaluating whether to divest its THCA cultivation contracts in Michigan.

For full background on the federal intoxicating-hemp ban and its state-level implications, see the CannIntel topic hub on the federal hemp ban. The next signal to watch: whether the D.C. Circuit grants a preliminary injunction halting enforcement of the DEA rule pending judicial review. Oral arguments are expected in October 2026.