THC Seltzers Find a Foothold in Cannabis Cautious South Dakota

Drinks advertised as THC- and cannabis-infused on the shelves of a Rapid City store in July 2024. (Seth Tupper/South Dakota Searchlight via the North Dakota Monitor)

(North Dakota Monitor) -About a year ago, bar owner Justin Henrichsen started offering THC seltzers and cocktails at his four establishments in Rapid City, Spearfish and Sioux Falls.

Since then, he’s watched the libations’ popularity spike with each passing month, across age groups and demographics, sometimes outselling wine and on pace with craft beers.

What he hasn’t seen are problems. A year in, he can say something about cannabis drinkers he can’t say about beer drinkers.

“We’ve never had to cut anyone off, we’ve never had a bro come in and try to pound 15 of them, and we’ve never had to kick anybody out,” Henrichsen said. “It’s a non-issue.”

The drinks are a natural extension of the adult beverage business, he argues, no more difficult to fold safely into a bar’s daily operations than the higher-alcohol craft beers that began to take hold across the nation a few decades ago.

“It’s no different from serving a beer or a cocktail,” he said. “You need to serve responsibly.”

Jason Sandquist has a similar perspective. He’s a founding partner in Wild Mind Ales, a Minnesota outfit that sells both craft beers and drinks with low-dose, hemp-derived THC, an intoxicant found in higher levels in traditional marijuana. The THC seltzers are also shipped to other states, including South Dakota.

Sandquist’s company has been a vocal backer of hemp drinks, advocating for other states to follow the lead of Minnesota and embrace them as alcohol alternatives. Sandquist doesn’t mind that THC beverage sales now outpace craft beers at the company’s brewery. He also appreciates the THC drinks for the same reasons his customers do, namely that the drinks are low-calorie, low carb, and offer a buzz without a hangover.

“I just turned 40, and my body doesn’t handle beer the way it used to,” he said.

In Minnesota, THC beverages are “taking over,” Sandquist said, with demand fueled by older people who don’t want hangovers and younger people who spend at least some of their days living “California sober,” meaning they use some forms of cannabis but don’t drink alcohol.

“Kids these days that are 21 to 35, they want a healthier thing,” Sandquist said. “All they want to do is drink a seltzer, hit their vape pen and go play pickleball.”

But South Dakotans curious about THC drinks needn’t seek out a Wild Mind product or visit one of Henrichsen’s establishments, which include the Windsor Bar in Rapid City and Monk’s House of Ale Repute in Sioux Falls. Bars, liquor stores and grocery stores around the state carry a variety of the THC-infused drinks from a variety of companies.

Their appearance on shelves at stores across the state has drawn plenty of customers, but has yet to draw much attention from lawmakers or the law enforcement community.

South Dakotans buying THC as lawmakers focus on other cannabis issues

Hemp drinks are so deeply under the radar in South Dakota that even some of the leaders who track cannabis use trends are unaware they exist.

South Dakota’s Medical Marijuana Oversight Committee, created after voters legalized medical cannabis in 2020, was pulled into a lengthy discussion about hemp-derived cannabis alternatives on Aug. 19.

The state banned the sale – but not the possession – of several synthetic, high-inducing categories of THC this year, but committee members learned that other alternatives remain available and continue to cut into the bottom line of medical marijuana producers.

The gummies can be packaged like candy and enticing to children, they heard. Novel, chemically modified cannabinoids pop up all the time. State Health Lab Director Tim Southern said he’s concerned about “garage chemists” and spikes in emergency room calls associated with edibles.

Not a word was spoken about THC seltzers.

The co-chair of the medical marijuana committee, Pierre Republican state Sen. Jim Mehlhaff, said he didn’t know about seltzers before getting questions about them from South Dakota Searchlight.

“We have one more medical marijuana oversight meeting to go,” Mehlhaff said last week. “I think I will ask staff to collect some information on that.”

Sen. Erin Tobin, R-Winner, is the other co-chair of the committee. Tobin told Searchlight that Mehlhaff is not alone in his lack of familiarity with THC beverage trends.

“I guarantee you probably 90% or higher of the Legislature doesn’t even realize it’s happening,” Tobin said.

Law enforcement leaders spoke at length about hemp-derived THC at the Aug. 19 meeting, but like lawmakers, police have focused their attention on products with synthetic ingredients.
Former Rapid City mayor and former Rapid City police chief Steve Allender, who’s also a member of the state’s Law Enforcement Officers Standards and Training Commission, said he hadn’t heard of THC seltzers.

He’s not surprised to hear about them, or to hear that sellers say they’re less potent and problematic than alcohol.

“The question really is, what type of impact does it have on public safety?” Allender said. “Maybe if they’re new, nobody knows that yet.”

Attorney General Marty Jackley has not offered any statements on the beverages’ safety or legality, in spite of multiple requests from South Dakota Searchlight in recent months.

When asked about seltzers most recently, Jackley spokesman Tony Mangan sent Searchlight a statement about the new state law that bans some synthetic categories of THC. The law does not ban the seltzers’ advertised active ingredient.

“This law was approved by the state Legislature and signed by the governor. It is set forth in state statute,” the statement reads. “Violators are subject to prosecution by local law prosecutors or the Attorney General’s Office with the testing results done by the state lab.”

When asked if there is any reason for consumers or retailers to be concerned about the legality of THC seltzers specifically, Mangan reiterated the statement.

Even patrons are sometimes surprised that their cannabis cocktails are unregulated, Henrichsen said. No one who’s of age to drink alcohol needs a medical marijuana card to order them – a fact servers occasionally need to pass along to customers.

“One of the funniest things ever, and we’ve seen it a couple different times, is you’ll have this sweet old couple ordering THC, and all they want to do is show you their med cards,” Henrichsen said. “They’re like, ‘Do you need to see our med card?’ We say ‘no, you don’t need it,’ and they’ll go ‘are you sure?’”

Growth market

Unlike the products pulled from store shelves when the new South Dakota law’s prohibition on chemically modified hemp products took effect in July, THC drinks are still around and apparently growing in popularity.

The seltzers work like a marijuana edible, except most varieties have less THC, and they tend to take effect more quickly. Consumers apparently like the sales pitch for a hangover-free buzz.

The investment information firm Grand View Research tagged the THC seltzer market at $344 million in 2023, and expects the market to grow by 34% a year through 2030, to $1.2 billion.

The growth is expected as more states move to decriminalize marijuana – which South Dakota voters will have the chance to do in November.

“This regulatory shift not only opens new markets but also normalizes cannabis consumption, reducing stigma and increasing consumer acceptance,” the company’s report on THC seltzers says.

The growth trend is apparent in South Dakota.

An online map from Sioux Falls-based Global Distributing, which wholesales several varieties of THC seltzer, shows the company distributing THC drinks to areas including Sioux Falls, Rapid City, Watertown, Aberdeen, Huron, Mitchell, Brookings, Vermillion and Yankton.

Henrichsen’s establishments work with Global, in part because he knows the distributor works with long-established, trustworthy companies. He doesn’t worry about getting a product from a less-than-reputable beverage maker, and the rapid proliferation of THC options means he doesn’t have to.

“I mean, Surly is making these,” Henrichsen said, referring to a Twin Cities outfit known for its craft beers, and for sponsoring charity programs like the Big Sioux River Greenway Cleanup. “We are using manufacturers that we know are quality, that we know are testing. There’s more testing done on THC than there is on craft beer.”

Global Distributing spokespeople declined to speak on the record about the beverages, however, as did a handful of other grocers and beverage dealers.

Those who did respond to Searchlight inquiries cited concerns about being targeted by law enforcement and lawmakers, given those two groups’ historical aversion to policies that smack of pot legalization.

The story is different to the east. Minnesota has embraced the beverages, regulated them and built a framework for folding them into its consumer market in a way Sandquist and other hemp beverage boosters see as a model for other states.

Attempts in other states to regulate the beverages have turned into hassles for Wild Mind Ales. Iowa lawmakers spent part of this year wrangling over and enacting THC limits in low-dose beverages. Sandquist said some of the provisions are unworkable, and in some ways nonsensical and too vague to comply with.

Iowa THC beverage sellers have taken a similar position in federal court, with 10 of them suing to block the restrictions.

Sandquist would like to see the federal government legalize the beverages. Absent that, he said, states should work to put together consistent rules that would allow businesses to service their clientele across state lines.

He pointed to Iowa, but also to Georgia, where lawmakers have passed rules that would require seltzer cans to bear THC testing certificate stickers and a “universal” symbol to signal that the contents contain THC.

Wild Mind already puts a pot leaf on its cans and tests its products, but they don’t have a state-specific label.

“We just want to play in a world where we don’t have to create a new label for every state,” he said.

The legality of seltzers and other liquid pot alternatives – and the varying state-by-state response – is tied to the 2018 farm bill passed by Congress.

That bill declared hemp with less than 0.3% delta-9 THC by weight as legal to cultivate, process and sell.

Gray market in most states

Since the 2018 farm bill, companies have taken advantage of the law to tap into compounds similar to delta-9 THC, such as delta-8 and delta-10, which are present in low levels in the hemp plant and are now being synthesized to use in higher amounts in consumer products.

But the drinks are made from naturally occurring THC from hemp, sellers say, and the 0.3 % limit isn’t hard to comply with for beverages.

The seltzers are often sold in 8- to 16-ounce cans, with 2-10 milligrams of THC – an amount that barely registers in the weight of a beverage but is enough to deliver a buzz to people without a high tolerance for the drug.

Lab results from a company called Melo for its 5-milligram High Roller Grapefruit seltzer put the total THC level of an 8-ounce (227,000 milligram) can at 0.0014% – well below the 0.3% THC limit.

“There’s plenty of wiggle room,” said Caleb Rose, owner of Black Hills Vapors in the Rapid City area and leader of South Dakota Retailers for Better Alternatives. “You’ve got to be careful, there’s so much wiggle room.”

Rose talked about one concentrated THC syrup so strong that he tells customers to treat it like hard liquor. Syrups work like hard liquor, often used by bartenders or consumers to make mixed drinks.

“It’s delta-9, it’s hemp-derived, and it’s legal because by weight, it’s still less than 0.3%,” Rose said. “There’s plenty of THC to make that syrup be treated like a bottle of liquor, where you’d want to be careful with it.”

For Henrichsen, “careful” means using the syrups to make cocktails to fit his customers’ needs and comfort level without overdoing it. Just as with higher-alcohol beers or stronger liquors, he said, establishments need to manage serving sizes.

“Anything under 8% (alcohol by volume) gets put in a 12-ounce glass. Anything over 8% gets put in an eight-ounce glass. That’s the same thing we do with milligrams in THC,” Henrichsen said.

If someone wants a 5-milligram THC cocktail, he said, “we’re not going to make you a double and put 10 milligrams in there, because that wouldn’t be responsible.”

THC drink sellers often instruct first-time users to start with half the beverage. At Windsor Bar, the menu for THC drinks says “recommended one per customer,” though Henrichsen said the warning label, added when the bar first began serving them, has proven unnecessary because THC drinkers have yet to cause trouble or pass out in a booth.

In North Liberty, Iowa, Field Day Brewing co-founder Alec Travis told the Iowa Press-Gazette in February that he tells consumers to start with half of a seltzer and wait half an hour before drinking the rest.

Legislative discussions on the beverages, in turn, have typically involved lawmakers discussing what safely constitutes a “low dose” beverage.

The Hemp Beverage Alliance has a list of best practices for sellers, including no sales to anyone younger than 21, a 10-milligram serving size, and labels warning against consumption while pregnant, about delayed effects (“start low, go slow”), and linking to a product’s lab testing results.

Some in the industry are concerned that low-dose drinks will get a bad reputation based on what they see as an unfair affiliation with synthetically produced THC or beverages too strong for the average bargoer.

Heavy pot users don’t like low-dose seltzers, Sandquist said, because they’re too weak and the price point per milligram of THC is high compared to traditional cannabis.

“The sky didn’t fall” when Minnesota signed off on low-dose drinks, he said, and he’d like to see other states approach the issue with the understanding that sellers aren’t out to turn bargoers into shiftless potheads.

“If every state would copy what Minnesota did, it would be a really easy market to play in,” he said. “You know, there’s options for people that want a lower dose, that haven’t done it ever, and they want to just kind of dip their toes in it. It’s not going to send them to the moon.”

How South Dakota might approach the beverages is an open question.

Legislature playing ‘whack-a-mole’

During the marijuana oversight committee’s most recent meeting, Sioux Falls Police Chief Jon Thum referred to the malleable THC market as “whack-a-mole,” in that new products pop up as quickly as lawmakers move to regulate them.

Jeremiah Murphy, a lobbyist, said several times during the meeting that the legal medical marijuana industry he represents isn’t connected to the hemp alternatives market.

Even so, Murphy argued, the simplest way to regulate the cannabis market would be to legalize recreational cannabis. Do that, he said, and the products consumers clearly want could be regulated and monitored like alcohol.

“If you want to sell alcoholic beverages in South Dakota, you have to get a license, and part of that is you have to sell safe beverages,” Murphy said. “There are requirements there.”

Sen. Tobin told South Dakota Searchlight that there is something to that argument, inasmuch as it simplifies the job of lawmakers and regulators.

“If it were legal, we could regulate it all and be on top of it. I think there is some truth to that, but with every benefit there’s some risk. The people will have their chance to decide in November.”

Tobin said there’s another factor at play with the regulation of hemp alternatives: a laser-like focus from some lawmakers and regulators on keeping medical marijuana from creeping into recreational use.

Lawmakers who focus on tightening access and monitoring for potential misuse in the regulated medical cannabis industry, she said, might miss trends in the unregulated market for alternatives.

With medical marijuana, “a doctor is in charge, and it’s a debilitating medical condition,” Tobin said, “yet somebody who’s perfectly healthy can walk down to the bar and grab a soda, a delta-9 soda, and you’re not worried about that at all?”

Henrichsen isn’t worried. The Rapid City bar owner feels any honest analysis of the risks and rewards of hemp beverages would show lawmakers how easily they can fit into the state’s existing adult beverage culture.

“Everybody fears the unknown, but if we’re doing this responsibly, you can’t tell me that having 5 milligrams of THC is different from having a cocktail,” Henrichsen said. “Ultimately, I think this needs to be looked at like alcohol or beer, where you have all the guardrails in place to make sure that underage kids aren’t getting it.”

THC drinks across the U.S.

South Dakota Searchlight is part of States Newsroom, a nationwide network focused on state-level issues and the legislation surrounding them. Its journalists and partner outlets have written extensively about states’ varying approaches to hemp beverages and other hemp-derived consumables. Here are some examples of how the issue has played out across the U.S.

South Dakota Searchlight is part of States Newsroom, a nonprofit news network supported by grants and a coalition of donors as a 501c(3) public charity. South Dakota Searchlight maintains editorial independence. Contact Editor Seth Tupper for questions: info@southdakotasearchlight.com. Follow South Dakota Searchlight on Facebook and X.