A provision in South Dakota's industrial hemp bill will eliminate an entire category of legal products—and most business owners haven't heard about it yet.
Most South Dakota manufacturers and retailers selling hemp-derived cannabinoid products don't realize that a buried provision in SB39 is about to rewrite the rules for their business. And they have less than two years to prepare.
Here's what's changing: Starting January 1, 2027, South Dakota will ban chemically derived cannabinoids from the legal definition of "industrial hemp product." That means delta-8-THC, delta-10-THC, THC-O, HHC, and THCP—compounds currently sold legally in gummies, vapes, tinctures, and other retail formats—will no longer qualify as hemp products under state law.
If your business manufactures, distributes, or retails any product containing these five cannabinoids, you need to pay attention. This isn't a gray area or a warning. Once the law takes effect, continuing to sell these products exposes your business to potential criminal liability. It also forces immediate decisions about existing inventory—most of which will become unsellable waste—and the cost of reformulating product lines or exiting the market entirely.
The provision appears in Section 1 of SB39, which revises § 38-35-1(2) on page 1, and takes effect January 1, 2027, per Section 22.
The timeline matters. You have roughly 24 months to:
Audit your inventory. Identify every product line, SKU, and batch that contains delta-8, delta-10, THC-O, HHC, or THCP. Calculate the financial exposure of inventory that will become illegal to sell.
Review your supply chain. If you're a distributor or retailer, contact your suppliers now. Understand which products will be affected and begin planning transitions.
Evaluate your options. You can reformulate products using only cannabinoids that remain legal under the revised definition (such as CBD derived from hemp), exit those product lines, or exit the market. Each option has different timelines and costs.
Consult your legal and accounting teams. The financial and tax implications of inventory write-offs and business restructuring are significant and warrant professional guidance specific to your situation.
This isn't a minor technical change. For some manufacturers and retailers, chemically derived cannabinoids represent a meaningful portion of revenue. The law doesn't grandfather existing inventory or provide a phase-out period beyond January 1, 2027. After that date, selling these products is illegal—period.
The good news: you have time to plan. The bad news: most business owners in this space don't know this provision exists yet, which means they're not planning at all.
If you operate in this sector, now is the time to understand exactly what SB39 means for your business. A detailed, business-focused summary of this provision is available for manufacturers and retailers navigating this change.