The hemp industry is bracing for layoffs, production cuts and billions in lost revenue after Congress slipped a surprise provision into a government funding bill late Wednesday that would ban nearly all hemp-derived consumer products.

Hemp, a form of the cannabis plant, was legalized for industrial uses such as rope, textiles and seed by the 2018 Farm Bill. But that law’s broad definition opened a loophole in federal THC rules, experts say, letting producers extract psychoactive cannabinoids from federally legal hemp. Companies used that gap to flood the market with gummies, drinks and vapes that can produce a marijuana-like high.

The new ban, tacked onto legislation that ended the longest shutdown in U.S. history, outlaws products containing more than 0.4 milligrams of total THC per container. Industry executives warn that threshold will wipe out roughly 95% of the $28 billion hemp retail market when it takes effect in a year. For context, a single hemp gummy typically contains 2.5 to 10 milligrams of THC, according to the Journal of Cannabis Research. “We have lost the battle this time,” said Jonathan Miller, general counsel for the U.S. Hemp Roundtable. “In effect, this is a total, all out, complete ban on hemp products in the United States.”

Cannabis beer and other cannabis-infused drinks were featured at a “Mary Jane” hemp trade fair. (Monika Skolimowska | Picture Alliance | Getty Images)

The 0.4-milligram cap replaces the 2018 Farm Bill’s definition of hemp, which was based on THC concentration and allowed products with less than 0.3% THC by weight rather than a hard total-amount limit. “We have a year to figure this out but in the meantime you could see losses across the industry if we can’t,” Miller said.

More than 300,000 jobs tied to the hemp economy are at risk, according to Whitney Economics — from farmers and extractors to manufacturers, logistics firms and retailers. The fallout could ripple into land use, contracted acreage and equipment financing, as farmers who scaled up hemp cultivation after 2018 could suddenly face canceled or restructured contracts, said Michael Gorenstein, CEO of Cronos Group. States with the most hemp infrastructure, including Kentucky, Texas and Utah, are likely to see the steepest economic pain, hemp executives said. “There’s a lot of the small retailers, small businesses and farmers that are relying on hemp sales to survive,” Gorenstein told CNBC. “It’s going to create a lot of pressure when they start losing business, losing jobs and losing crops.”

The crackdown marks a dramatic reversal from 2018, when Sen. Mitch McConnell, R-Ky., championed hemp legalization to create a new national agricultural commodity and economic driver for Kentucky. After the bill passed, the lack of federal rules produced a patchwork market with documented safety problems — from mislabeled and untested products to items with potency rivalling recreational marijuana, government officials and industry experts say.

McConnell and other Republicans argue the new restriction “restores the original intent” of the Farm Bill. Closing the loophole, McConnell has said, is key to protecting his agriculture-policy legacy before his retirement next year. “This was his [McConnell’s] signature law, the hemp law, and he wanted to correct it,” Boris Jordan, CEO of Curaleaf, told CNBC. “Usually the Senate will back a retiring senator, particularly someone as senior as him, as their last action. This was a request by him at the last minute.”

Not all Republicans agree. Kentucky Sen. Rand Paul has sparred with colleagues for months over hemp and blasted the provision as an overreach that is “killing jobs and crushing farmers,” warning that “every hemp seed in the country will have to be destroyed.” “This is the most thoughtless, ignorant proposal to an industry that I’ve seen in a long, long time,” Paul said after the ban was passed.

In a July 5, 2018 photo, then-Senate Majority Leader Mitch McConnell inspected a piece of hemp at a processing plant in Louisville, Ky., after leading the push to legalize hemp. (AP Photo | Bruce Schreiner)

This article was adapted from an original report published on cnbc.com. All rights belong to the original publisher.