North Carolina Just Invited Tennessee to Explain How It Regulates Hemp. Here Is What Happened in Tennessee.

On September 23, a subcommittee of North Carolina's cannabis advisory council spent forty minutes listening to regulators from another state. The presenters were officials from the Tennessee Alcoholic Beverage Commission, including the agency's hemp regulatory advisor. The third item on the meeting agenda carried a plain title: “Recommendations from Tennessee to North Carolina.”

The meeting got almost no public attention. But Tennessee is worth understanding in detail, because it is one of the few states that has already moved its hemp market under its alcohol regulator and lived with the results. Those results are now part of the public record.

What Happened at the September 23 Meeting

The session was held by the Public Safety Subcommittee of the Governor's Advisory Council on Cannabis, which is co-chaired by the commander of the State Highway Patrol and a representative of the North Carolina Sheriffs' Association. According to the posted agenda, the Tennessee presentation covered three topics:

•        How Tennessee licenses and permits cannabis suppliers, wholesalers, and retailers

•        How its enforcement branch operates

•        Tennessee's recommendations to North Carolina

What Tennessee actually recommended is not yet known. Minutes for the meeting have not been posted, and no recording is available. What is available is Tennessee's own track record, and that is where the story gets interesting.

How Tennessee Moved Hemp Under Its Alcohol Regulator

In 2025, Tennessee lawmakers passed a law transferring oversight of hemp-derived products from the state Department of Agriculture to the Alcoholic Beverage Commission, effective January 1, 2026. Businesses that held Agriculture Department licenses were allowed to keep operating under them through June 30, 2026, after which a new license from the alcohol commission was required.

A Three-Tier System Modeled on Alcohol

The new law created three general hemp license categories modeled in part on alcohol regulation: supplier, wholesaler, and retailer. Unlike Tennessee's alcohol system, the same business is not barred from holding more than one type. Retail sales were limited to businesses that serve only adults 21 and older, retail package stores, and businesses licensed to serve alcohol on site. Grocery stores, convenience stores, drug stores, and gas stations were excluded from the permitted retail categories.

The law also set demanding requirements for wholesalers, including a dedicated warehouse in Tennessee and proof of substantial available capital. Retailers were then required to buy from those licensed wholesalers.

A New Tax Structure

Tennessee also changed how the market was taxed. A 6 percent retail tax on hemp products was repealed and replaced with a tax collected at the wholesale level, calculated largely by THC content and product type.

What Happened to the Market

The transition produced a significant licensing backlog. As the June 30 deadline approached, roughly 2,000 businesses had applied for a new license and nearly half were still waiting for approval, according to reporting by WBIR in Knoxville.

State licensing figures show the market that came out the other side is smaller. A 2025 state fiscal analysis counted about 2,634 licensed hemp retailers under the Agriculture Department. By late summer 2026, published licensing lists under the alcohol commission showed fewer than 2,000 licensed retailers and only a few dozen licensed wholesalers.

Those numbers do not tell us exactly why each business left. Some may have closed, some may have chosen not to reapply, and some may have been unable to meet the new requirements. But the direction is clear: fewer licensed businesses, and a much narrower wholesale tier.

What Happened to the Revenue

The fiscal side is the part of Tennessee's experience most likely to get attention from lawmakers, and it is worth laying out carefully.

•        The old 6 percent retail tax brought in about $17.5 million in fiscal year 2024 to 2025, up sharply from the year before

•        The state had used an estimate of about $55.8 million in hemp tax revenue for February through July 2026 in its budgeting

•        Actual collections over that period came to about $1.4 million, according to reporting by the Tennessee Lookout and WPLN

That is a comparison between a projection and actual collections, and it should be read that way. New taxes often start slowly. But the Tennessee Lookout reported that, if July's pace continued for a full year, the hemp tax shortfall could reach roughly $110 million.

Reporting on the shortfall has pointed to one reason in particular. A large share of the projected revenue was expected to come from a per-ounce tax on hemp flowers. The same law also tightened how THC is measured in a way that removed much of that flower from the legal market. The revenue estimate and the product rules did not line up.

What Tennessee's Experience Does and Does Not Show

It would be easy to overstate what Tennessee proves, so a few limits are worth stating plainly:

•        North Carolina is not Tennessee, and a different design could produce different results

•        Tennessee's numbers reflect several changes at once, including licensing, taxes, and THC rules, so no single policy explains every outcome

•        Tennessee's own rules still allow products well above the incoming federal per-container limit, so its compliant market faces a separate federal deadline on December 11, when the new federal hemp definition takes effect

What Tennessee does offer is a documented, recent example of what happened when a state moved hemp under its alcohol regulator. It is the kind of record that is useful to have in front of decision makers before recommendations are finalized.

Why This Matters for North Carolina Now

North Carolina's advisory council is working toward a final report due to the Governor by December 31. The state's hemp industry is estimated at roughly 2,197 storefronts and more than 16,000 jobs, according to a Whitney Economics analysis. How the council handles licensing, wholesale requirements, and taxes will shape what that industry looks like afterward.

The Tennessee presentation shows the council is looking closely at alcohol-style models. Tennessee's own results show what one version of that model produced. When the minutes from September 23 are posted, they will show what Tennessee advised. Its public record is already available now.