Market-Moving Changes for CT Cannabis Ahead

The Connecticut cannabis industry is poised for some big changes following the close of the 2026 legislative session. As has become the norm, the process was a roller-coaster ride marked by last-minute changes that left many heads spinning. When the dust settles, the statutory changes reflect both hard-fought victories for cannabis and hemp businesses, but also a seismic expansion of regulatory oversight for social equity businesses. On May 4, 2026, HB 5350 became Public Act 26-8. This comprehensive bill aimed to expand access to cannabis products and improve Connecticut’s competitive market position among neighboring states like Massachusetts and New York. However, House Bill 5222, the “fixer” bill that was approved on May 6, 2026, added significant (and one could argue punitive) restraints on ownership changes and operation of social equity businesses just before the session closed. Both bills are expected to be signed into law by the Governor. Let’s unpack the changes.

Consolidated Cannabis Definition

Read together, the bills establish a new consolidated definition of “cannabis” applicable to both medical and adult-use. “Cannabis” now encompasses:

1. all parts of any plant or species of the genus cannabis, including extracted resin, mature stalks, fiber produced from the mature stalks, the oil or cake made from the seeds, and every other compound, manufacture, salt, derivative, mixture or preparation of such plant or its resin;
2. all high-THC hemp products;
3. manufactured cannabinoids; and
4. cannabinol or cannabidiol and chemical compounds which are similar in chemical structure or physiological effect, which are controlled substances under this chapter, except cannabidiol derived from hemp.

The following are excluded from the definition of cannabis: (i) mature stalks, fiber, seeds, oil or cake made from seeds, and derivatives of the plant with a total THC concentration not exceeding 0.3% by dry weight; (ii) hemp with a total THC concentration not exceeding 0.3% by dry weight and not qualifying as a high-THC hemp product; (iii) infused beverages; and (iv) any substance approved by FDA as a drug and rescheduled or descheduled by DEA.

HB 5350 initially carved out “cannabinol, cannabigerol, cannabichromene or any other minor cannabinoid derived from hemp” from the definition of cannabis, but this change was removed through HB 5222. The practical effect is that hemp-derived minor cannabinoids in final form are still considered cannabis and subject to the full cannabis regulatory regime unless they fall under another exclusion.

Nevertheless, PA 26-8 did create a pathway for hemp producers to produce hemp oil and certain minor cannabinoids for resale to cannabis cultivators and manufacturers. It also permits the sale of hemp oil and “intermediate hemp derivative” (but not minor cannabinoid isolates) to infused beverage manufacturers, as discussed below.

Intermediate Hemp Derivatives and Minor Cannabinoids

In a significant development, the law formally recognizes and provides for the possession and storage of “Work in Progress” or “WIP” material, which the Act terms “Intermediate Hemp Derivative.” Intermediate Hemp Derivative is defined as “an oil or concentrate that (A) is extracted directly and exclusively from raw hemp plant material, (B) contains a total THC, as defined in section 21a-240, as amended by this act, concentration of more than 0.3 percent on a dry weight basis, and (C) is extracted by (i) adding heat, (ii) decarboxylation, (iii) adding (I) a Class 3 organic solvent” or other approved solvent or method, including ethanol, carbon dioxide, or solventless extraction.

Hemp processors may extract, possess, and sell Intermediate Hemp Derivative to cannabis product manufacturers and infused beverage manufacturers. Beginning on 12/1/2026, infused beverage manufacturers may obtain Intermediate Hemp Derivative and incorporate it into their infused beverages. Intermediate Hemp Derivative may not be sold to other hemp producers or at retail. Interstate transport of Intermediate Hemp Derivative is governed by federal law, and thus, may be prohibited as of November of this year if the hemp language from the 2025 appropriations bill is not revised or extended.

As of 12/1/2026, hemp processors may also manufacture cannabigerol (CBG), cannabinol (CBN) or an approved manufactured cannabinoid, provided the manufacturer offers and sells such approved manufactured cannabinoid exclusively to a producer, cultivator, micro-cultivator, product manufacturer or food and beverage manufacturer. Notably, infused beverage manufacturers cannot obtain minor cannabinoids from CT-licensed hemp producers. This provision not only blesses the manufacture of CBN and CBG (in addition to CBD) by hemp processors, but also creates a pathway for the manufacture of other minor cannabinoids.

Expanded THC Limits and Retail Sale for Infused Beverage Manufacturers

Effective 10/1/2026, the law permits infused beverages available at package stores to contain up to 5 mg of total THC per container, and infused beverages available at cannabis retailers to contain up to 10 mg total THC per container—a significant increase from the prior 3 mg/container limit. There is also an allowable variance for cannabis testing laboratory method uncertainty of up to plus or minus 10% of the reported total THC value. The $1/can excise tax remains in place, despite substantial efforts from the industry to abolish it.

Infused beverage manufacturers may also sell infused beverages they manufacture at retail on their licensed premises in an area of the facility that is segregated from manufacturing operations, provided that they may not sell more than 12 containers per day to any single consumer. The existing $1/container Connecticut excise tax applies to these direct-to-consumer sales, as well.

Revised THC Potency Restrictions for Adult Use

Effective 10/1/2026, the THC potency cap for cannabis concentrates has been eliminated. The potency cap for flower remains at 35%, and the potency cap for all cannabis products other than flower, concentrates, and vapes remains at 70%.

Additionally, HB 5222 expands the mandatory high-potency psychosis-risk warning label requirement. Under HB 5350, this warning applied only to cannabis concentrate products with more than 30% total THC; HB 5222 extends the warning requirement to “other cannabis plant material” that contains more than 30% total THC as well.

Social Equity Applicant Backer Replacement

Effective 10/1/2026, a social equity applicant may make a one-time replacement of an original backer during the application or provisional license period, provided the original backer to be replaced is not an individual who meets the criteria of a social equity applicant. Under existing law, no additional backers may be added between the time of initial application and when a final license is awarded; a rule that has substantially hampered ownership changes and increased transaction costs.

Reduced Restricted Period for Social Equity Ownership

Effective from passage, the bills reduce the restricted period during which a change in ownership or control of an equity joint venture is prohibited from seven years to five years. Industry participants advocated for a change from seven to three years, but the Social Equity Council opposed this change. The five-year restriction represents a compromise. The change is subject to a 90-day advance notice requirement, a review process by the Council, payment of an $8,000 non-refundable transaction fee, and repayment of any outstanding revolving loan balance. Note, however, that if the Council determines, in its discretion, that there has been undue influence or coercion of the Social Equity partner, or that the proposed changes do not comply with organizational documents of the EJV, the Council may refer the matter to DCP, who may institute an enforcement action and a fine of up to $10 million against the cannabis establishment’s license.

Social Equity Ownership and Control Restrictions

The “fixer” bill made significant and unexpected changes to the social equity ownership and regulatory oversight which are the subject of substantial controversy and, potentially, litigation. Effective November 1, 2026, social equity partners may no longer enter into any agreement that transfers or delegates operational control of the cannabis establishment to a non-social-equity individual. This provision is intended to eliminate management and consulting agreements that delegate substantial operational control to any person or entity other than the Social Equity partner. Specifically, the prohibition extends to agreements that:

• Transfer or delegate any operational control of the cannabis establishment to a non-SEA person;
• Grant any authority or ability to control, direct, determine, or materially influence decisions concerning hiring, pricing, purchasing, inventory management, or day-to-day operations, regardless of whether the social equity individual retains nominal approval rights; or
• Result in the social equity individual serving as a nominal or passive owner.

The provision of personnel, staffing, operational systems, or vendor relationships by a non-social equity partner is deemed evidence of control if it results in operational dependence, or if the social equity individual does not have authority to override decisions made by such person.

The provision includes some safe harbors: social equity applicants may still engage third-party vendors or consultants for bona fide advisory, technical, or support services, provided those services do not confer operational control, and may delegate operational or management functions provided they retain final decision-making authority. It is unclear what “final decision-making authority” entails, how this will be interpreted in practice by the Council, and whether these restrictions can be operationally feasible.

Each approved cannabis establishment must also submit an annual signed certification (beginning January 15, 2027) attesting whether any material change occurred in ownership, control, or financing arrangements during the preceding year, and must maintain records demonstrating ongoing compliance for at least five years.

The law also gives the Council authority to adopt policies, procedures, and regulations to implement these new provisions and permits it to refer any violation of such policies, procedures, or regulations to DCP, who may impose a fine of up to $10 million against the cannabis establishment’s license.

Out-of-State Medical Cannabis Patients

The bills permit qualifying out-of-state patients and qualifying out-of-state caregivers to purchase medical cannabis from Connecticut dispensary facilities and hybrid retailers. A qualifying out-of-state patient who complies with the requirements of the medical cannabis chapter shall not be subject to arrest or prosecution, penalized in any manner, or denied any right or privilege for the palliative use of cannabis, provided the amount possessed does not exceed five ounces.

Two-Driver Rule Eliminated for Cannabis Transport

The bills remove the prior two-driver requirement for transportation of cannabis. Under current policies and procedures, at least two transporting agents are required per transport vehicle when there is more than two pounds of cannabis flower and cannabis trim (or their equivalency). The new law allows cannabis establishments to deliver or transport cannabis with only one employee when transporting to another cannabis establishment, testing laboratory, or research program, provided the vehicle is equipped with: (1) an electronic recording device that records video of the vehicle's interior at all times during delivery; (2) an electronic GPS tracking device that tracks the vehicle's geospatial location in real time; and (3) a secure container that is permanently affixed to the vehicle and contains all cannabis being transported.

Packaging and Labeling Restrictions Reinstated

HB 5350 originally loosened packaging and labeling restrictions around logos and colors. However, these changes were removed, reinstating the current restrictions including the following:

• Cannabis product logos may contain no more than three colors (with neither black nor white counting toward the three-color limit).
• Packaging must remain uniformly one color (excluding warning labels and the permitted logo and picture of the cannabis product);
• Packaging and labeling for cannabis edibles must be black and white.  

THC Tax Abolished; 10.75% Flat Excise Tax Instated

Effective 10/1/2026, the state has abolished the THC tax on the sale of cannabis and has implemented a new flat excise tax of 10.75% of the gross receipts from the sale of cannabis. This new excise tax is in addition to the 3% municipal tax. This tax is imposed on retailers, hybrid retailers, and micro-cultivators, and must be collected from the consumer. They are not imposed on the sale of medical cannabis.

Tips Excluded from Minimum Wage

The legislature clarified that gratuities earned by cannabis establishment employees shall not count towards the minimum wage that must be paid by such employees’ employer.

30-Day AR Restrictions

Effective 10/1/2026, no retailer, hybrid retailer or dispensary facility may borrow money or receive credit, directly or indirectly, from any cultivator, micro-cultivator, or producer for a period of 30 days or more. In addition, no cannabis establishment may borrow money or receive credit, directly or indirectly, for a period in excess of 30 days. This means that cannabis establishments may not carry a balance with cultivators or testing laboratories for a period of longer than 30 days. This provision of the statute is silent on enforcement mechanisms and regulatory consequences for non-payment.  

Concluding Thoughts

The 2026 session brought many welcome changes, but some last-minute surprises in the fixer bill tempered the positive response from industry. As always, there are many kinks to work out, and clarifying policies, procedures, and regulations to be developed.