Can a South Dakota city-owned liquor store legally sell THC drinks and other THC-infused products?

Plain-English summary

The City of Brookings runs its own liquor store and wanted to know if it could legally add THC-infused drinks and other THC products to the shelf. The Finance Director, Ms. Rentsch, asked the AG because she couldn't get a straight answer from the Department of Health or the Department of Revenue.

AG Marty Jackley's answer is: it depends on exactly what's in the product, but the working assumption should be that most THC beverages on the market right now are illegal to sell in South Dakota. Three big rules drive the analysis:

1. 0.3% Delta-9 THC ceiling. Any product with naturally-occurring Delta-9 THC above 0.3% is "marijuana" under SDCL 22-42-1(7), which is Schedule I and illegal to sell outside the Medical Cannabis Program.
2. No synthetic cannabinoids, period. SDCL 34-20B-14(47) puts synthetic cannabinoids on Schedule I.
3. No chemically-converted hemp products. SDCL 34-20B-118 bans the sale of any "industrial hemp or industrial hemp product that contains chemically derived cannabinoids or cannabinoids created by chemically modifying or converting a hemp extract."

That third rule is what catches most THC beverages on shelves nationally. The standard manufacturing path is: take legal CBD from hemp, run it through an acid- or alcohol-driven chemical conversion to produce Delta-8 THC, Delta-10 THC, THC-O, HHC, or similar isomers, then put the result in a drink. South Dakota's 2024 amendments explicitly outlawed both the conversion process and the sale of products containing those isomers, regardless of buyer age.

The AG explicitly tells municipal liquor managers that the question can't be answered without a "reputable laboratory report" on the chemical makeup of a specific product. If a beverage's THC came from a chemical conversion of CBD, the city store can't sell it. If a product contains hash oil or any other resin extracted from cannabis, the city store can't sell it. If a product is a synthetic, the city store can't sell it.

The narrow space where a sale would be legal: naturally-occurring CBD products made without a chemical catalyst, topical creams, and seed-derived products are excluded from the chemically-derived ban. Naturally-occurring Delta-9 hemp drinks at 0.3% or less would be legal, but the AG notes this is rare in practice because most products on the market use the chemical-conversion pathway.

What this means for you

If you manage a municipally-owned liquor store

Do not stock THC beverages or edibles without a chain-of-evidence laboratory report from the manufacturer showing:

• Total Delta-9 THC concentration is at or below 0.3%;
• The cannabinoids in the product are naturally occurring, not produced by chemical conversion of CBD or any other hemp extract;
• The product contains no synthetic cannabinoids;
• The product contains no hash oil or other cannabis resin.

In practice this rules out most of what distributors will offer you. The supply chain for compliant naturally-derived hemp Delta-9 beverages is small. If a sales rep cannot produce that lab report, decline the order. The criminal exposure from selling a Schedule I substance is on the city and on you personally.

The opinion specifically notes Brookings' Finance Director was "right to question the city's entry into this corner of the market." Take that as a strong signal that the AG views municipal liquor stocking of THC products as risky and largely unworkable under current law.

If you are a city council member overseeing a city liquor operation

Before authorizing your liquor store to add a THC product line, ask staff:

• What is the laboratory documentation for every product proposed for shelf space?
• Who is the city's controlled-substances counsel of record for these decisions?
• Has the Department of Revenue weighed in on excise tax treatment of any compliant product?
• What is the city's liability and insurance position if a product turns out to test outside the 0.3% Delta-9 limit?

The AG's opinion is a defensive document. It does not give a green light to any specific product, and it puts the burden of proof on the seller. Treat it that way.

If you make or distribute THC-infused beverages and want to sell into South Dakota

Most of your product line is unlawful here. The conversion-based pathway your industry standardized on after the 2018 Farm Bill is specifically banned by SDCL 34-20B-118. To sell into South Dakota you would need to:

• Produce a product where Delta-9 THC at or below 0.3% is naturally occurring in the hemp extract, with no chemical conversion step in the cannabinoid pathway;
• Provide third-party laboratory documentation of the cannabinoid pathway and final concentrations;
• Not include hash oil, resin concentrates, or any synthetic cannabinoid in the product.

That is a meaningfully more expensive supply chain. Many distributors will choose to skip South Dakota.

If you are a consumer in South Dakota wondering about hemp drinks at the gas station

The AG opinion notes that "laboratory testing also shows that many products don't contain what's claimed on the label." The widespread availability of these products is not evidence they are legal: it is evidence that enforcement has lagged behind the market. If you have a 21+ ID, products containing Delta-8, THC-O, or HHC can legally be sold to you under the prior age-gate statute (SDCL 34-20B-117), but a 2024 amendment then made the underlying sale of any chemically-converted product illegal at the seller side, even to adults. So if you see Delta-8 gummies on a shelf, the shelf is not necessarily compliant; the products are probably being sold in violation of SDCL 34-20B-118.

If you advise a cannabis or hemp business

The South Dakota framework has shifted significantly in 2024-2025. Three updates to track:

1. SDCL 34-20B-118 (chemical-conversion ban) is the operative limit on hemp-derived THC products in South Dakota.
2. SDCL 38-35-1(7) was amended to explicitly exclude Delta-8, Delta-10, THC-O, HHC, and THCP from the "industrial hemp product" category.
3. The 0.3% Delta-9 line still controls the marijuana/hemp split.

The Medical Cannabis Program (separate from this opinion) creates a narrow pathway for cardholders, but that is not a retail-license pathway and does not apply to a municipal liquor store.

Common questions

Q: Is selling Delta-8 THC legal in South Dakota?
A: Effectively no. Delta-8 THC almost always comes from chemical conversion of CBD, and SDCL 34-20B-118 bans the sale of any hemp product made through that pathway. The Legislature also explicitly excluded Delta-8 from the "industrial hemp product" category in SDCL 38-35-1(7).

Q: What about Delta-9 THC drinks at "0.3%" advertised concentration?
A: Two questions matter. First, is the Delta-9 naturally occurring or chemically derived? If derived through conversion of CBD or another extract, it's banned regardless of concentration. Second, is the 0.3% claim accurate? The AG opinion explicitly flags that product labels often misstate actual concentrations.

Q: Can South Dakota residents buy these products in Minnesota or Iowa and bring them home?
A: SD's possession laws would still apply. SDCL 22-42-2 criminalizes possession of Schedule I substances, which includes synthetic cannabinoids and Delta-9 THC over 0.3%. Crossing a state line does not change in-state legality.

Q: Does this opinion apply to private liquor stores too?
A: Yes. The opinion was directed to a municipal liquor store because that's what Brookings asked about, but SDCL 22-42, 34-20B, and 38-35 apply to any seller in South Dakota. Municipal liquor stores happen to be common in the Dakotas because of the state's licensing structure, but the controlled-substance rules are the same.

Q: What happens if a city sells a banned product?
A: The criminal statutes apply to any seller. A city could face the same Schedule I sale exposure as a private business, and individual employees and managers could be charged. There is no governmental-immunity carve-out for controlled substance violations.

Q: How did the Legislature define "synthetic cannabinoid"?
A: SDCL 34-20B-14(47) lists synthetic cannabinoids as Schedule I when they are not in another controlled-substances schedule, not FDA-approved, and contain any quantity of various specifically listed substances. The list is technical; the practical effect is that lab-made cannabinoids of any kind are off-limits.

Q: Are CBD-only products still legal in South Dakota?
A: Yes, with caveats. SDCL 38-35-1(3) excludes naturally-occurring CBD (occurring without a chemical catalyst), non-psychoactive cannabinoids, and topical cream CBD from the chemically-derived ban. CBD oil and CBD topicals that meet those criteria remain legal. CBD products that secretly contain Delta-8 or other converted isomers (a known industry quality-control problem) would not.

Background and statutory framework

After the 2018 federal Farm Bill, hemp (Cannabis sativa L. with less than 0.3% Delta-9 THC) became federally legal. The industry quickly figured out how to chemically convert legal CBD into psychoactive THC isomers (Delta-8 THC, Delta-10 THC, THC-O, HHC, THCP) using simple acid- or alcohol-driven chemistry. Those isomers occupy a gray zone in federal law: they come from hemp, but they're psychoactive like marijuana.

States have responded differently. Some banned everything, some allow it freely, and South Dakota landed in the middle: hemp is legal in itself, but anything made from hemp by chemical conversion is illegal to sell. The 2024 statutory amendments to SDCL 34-20B-118 were the load-bearing change.

The opinion documents three statutory layers:

1. Schedule I baseline (SDCL 34-20B-14): synthetic cannabinoids (47), Delta-9 THC over 0.3% (20), hash oil and other cannabis resin (10) are all Schedule I.
2. Hemp carve-outs (SDCL 38-35): legal hemp is defined narrowly. Industrial hemp for smoking or inhaling is banned (§ 38-35-21). Delta-8, Delta-10, THC-O, HHC, and THCP are explicitly excluded from the "industrial hemp product" category (§ 38-35-1(7)).
3. Chemical conversion ban (SDCL 34-20B-118): the operative practical limit. Selling or distributing any hemp product made by chemically modifying or converting a hemp extract is illegal regardless of the buyer's age.

The opinion is unusually heavy on industry context (Cannabis Law Deskbook citations, Harvard Health Publishing on CBD efficacy) because the Finance Director's underlying complaint was the lack of clear guidance from agency regulators. Jackley substitutes the AG opinion for the missing agency rulemaking. That is a clear signal to the Department of Revenue and the Department of Health that the AG views their silence as a problem, and to legislators that any further movement on hemp policy needs to be in statute.

Citations and references

Statutes:
- SDCL 22-42-1(7) (marijuana definition, 0.3% Delta-9 line)
- SDCL 34-20B-14 (Schedule I controlled substances, including hash oil, Delta-9 THC, synthetic cannabinoids)
- SDCL 34-20B-117 (age limits on Delta-8, THC-O, HHC distribution)
- SDCL 34-20B-118 (ban on sale of chemically-converted hemp products)
- SDCL 38-35-1 (definitions of hemp, chemically-derived cannabinoid, industrial hemp product)
- SDCL 38-35-2 (hemp seed possession)
- SDCL 38-35-21 (industrial hemp smoking/inhaling ban)

Source

• Landing page: https://atg.sd.gov/OurOffice/OfficialOpinions/opinions.aspx
• Original PDF: https://atg.sd.gov/OfficialOpinions/Official%20Opinion%2025-04.pdf

Original opinion text

OFFICIAL OPINION No. 25-04

Re: Official Opinion Concerning Legality of Selling THC-Infused Beverages or Products in a Municipally-Owned Liquor Store

Dear Ms. Rentsch,

In your capacity as the Finance Director for the City of Brookings, you have requested an official opinion from the Attorney General's Office based on the following question:

QUESTION:

Can a municipally-owned liquor store sell THC-infused drinks or other THC-infused products under South Dakota law? If so, what specific concentrations or chemical processes are allowed?

ANSWER:

The legality of the sale of THC-infused and hemp-derived products is fact-specific and depends on the type of hemp derivative used, its concentration, the extraction method from the cannabis plant, and how the derivative was prepared. Currently the Legislature has declared it illegal to sell all synthetic cannabinoids, to sell naturally-occurring cannabinoids with more than 0.3% Delta-9 THC, and to sell industrial hemp or industrial hemp products that contain chemically-derived, chemically-modified, or chemically-converted cannabinoids.

FACTS:

The City of Brookings owns and operates a liquor store. As Finance Director for the City of Brookings, you oversee the liquor store. You have observed an opportunity to sell THC-infused beverages and do not want to deprive the city of a potential revenue stream. However, you are concerned that selling THC-infused beverages and products is illegal. You have indicated you have been unable to receive clear guidance from various state agencies including the Department of Health and Department of Revenue.

IN RE YOUR QUESTION:

Since the late 2010's, the consumables market has been flooded with hemp-based and hemp-derived products. As you stated in your request, this widespread availability suggests that these products are legal. But "[t]he only thing that is clear at this point" is that "the marketing of and enthusiasm for them has gone way ahead of the science." Dr. Peter Grinspoon, M.D., CBD Products are Everywhere. But Do They Work?, Harvard Health Publishing, (2024). At the outset, these "products aren't standardized and will vary." Id. On top of that, marketing schemes add to the confusion of the products' effectiveness and legality by using "egregious and unfounded claims" to market these products. Id. Worse yet, "laboratory testing also shows that many products don't contain what's claimed on the label." Id. You are right to question the city's entry into this corner of the market. Addressing your question requires a look at what these products are, and how the laws have changed over recent years.

Both marijuana and hemp come from the cannabis plant. SDCL 22-42-1(7) (defining "marijuana" as "all parts of any plant of the genus cannabis. . ."); SDCL 38-35-1(5) (defining "hemp" as "the plant Cannabis sativa L. . . ."). The definition of hemp embraces several parts of the Cannabis sativa L. plant, like seeds, derivatives, extracts, cannabinoids, isomers, acids, salts, and salts of isomers . . ." SDCL 38-35-1(5). There are more than sixty "cannabinoid compounds. . . ." Serrin Atakan, Cannabis, a complex plant: different compounds and different effects on individuals, Ther. Adv. Psychopharmacol, Dec. 2012, 241-254. "The two most well-known types of cannabinoids are tetrahydrocannabinol (THC) and the non-psychoactive cannabidiol (CBD)." Cannabis Law Deskbook, 24:3: Practical differences, pg. 694-95 (Bernstien et al. eds., 2021-2022). Both THC and CBD occur naturally and can be synthetically manufactured. See SDCL 34-20B-14(47) (listing synthetic cannabinoids as a Schedule I controlled substance when they are not listed in another controlled substances schedule, not an FDA-approved drug, and contain any quantity of various specifically listed substances).

Prior to 2018, it was illegal to possess, sell, or distribute all cannabis, including Delta-9 THC and its concentrations, under South Dakota and federal law. Since the passage of the 2018 Farm Bill, "hemp is increasingly being grown for its cannabinoid content . . ." Cannabis Law Deskbook, 24:3: Practical differences, pg. 695. "CBD products are primarily produced by extracting or concentrating the CBD from the cannabis flower." Cannabis Law Deskbook, 25:5: Cannabidiol, pg. 716. Along with using CBD in products, companies are "converting CBD into Delta-8 THC" and the other derivatives, like Delta-10 THC and THC-O. Cannabis Law Deskbook, 25:11 Regulatory challenge of new hemp products—Delta-8 THC and other cannabinoids, pg. 729. CBD is converted into these THC derivatives by using acids or alcohols to change the chemical structure of the CBD. Patricia Golombek, Maro Muller, Ines Barthlott, Constanze Sproll, & Dirk W. Lachenmeier, Conversion of Cannabidiol (CBD) into Psychotropic Cannabinoids Including Tetrahydrocannabinol (THC): A Controversy in the Scientific Literature (published June 3, 2020).

The evolution of these conversion processes and passage of these laws have resulted in the prevalence you see on shelves today: both natural and synthetic CBD- and THC-infused products widely available. Our communities have witnessed an explosion of products on the market, "including CBD concentrates and extracts, CBD vape products, CBD topicals (applied to hair or skin), CBD beverages, and CBD edibles (candies, gummies)." Cannabis Law Deskbook, 25:5: Cannabidiol, pg. 716. These CBD products "are sold through a variety of retailers including direct-to-consumer online sales, grocery stores, gas stations, farmers' markets, and large retailers." Id. Given the burst of hemp-derived products on the market and the overlap between those products and marijuana products, the Legislature has worked to ease the confusion.

Regarding hemp, the Legislature has specified "[n]o unlicensed person is subject to criminal penalties for possession or distribution of hemp seed." SDCL 38-35-2. In contrast, the Legislature made it illegal to sell or use industrial hemp for smoking or inhaling. SDCL 38-35-21.

Regarding cannabinoids in the hemp plant, the Legislature excluded naturally-occurring CBD, occurring without the use of a chemical catalyst, as well as non-psychoactive cannabinoids and topical cream CBD, from the definition of chemically-derived cannabinoids. SDCL 38-35-1(3). The Legislature also excluded hemp-derived Delta-9 THC with a concentration of less than 0.3% from the definition of marijuana. SDCL 22-42-1(7). That said, the Legislature made a host of cannabinoids and their variations illegal.

First, manufacturing, distributing, possessing, or selling products with a Delta-9 THC content of more than 0.3% is illegal unless done under the strict guidelines of the Medical Cannabis Program. That is because Delta-9 THC above that 0.3% threshold is a Schedule I controlled substance that is illegal for all persons, except those with a valid medical marijuana card from the Department of Health. SDCL 22-42-1(7); SDCL 34-20B-14(20).

Second, the Legislature criminalized the sale or distribution of products that contain Delta-8 THC, THC-O, or hexahydrocannabinol ("HHC") to people under twenty-one years old. SDCL 34-20B-117. Last year, the Legislature also made it illegal to "chemically modify or convert industrial hemp . . . or engage in any process that converts" CBD into Delta-8 THC, Delta-9 THC, Delta-10 THC, "or any other tetrahydrocannabinol isomer, analog, or derivative[.]" SDCL 34-20B-118. In line with that move, the Legislature explicitly removed Delta-8 THC, Delta-10 THC, THC-O, HHC, and THCP [tetrahydrocannabiphorol] from the definition of authorized "industrial hemp product[s]." SDCL 38-35-1(7)(a)-(e).

Central to your concern, the Legislature made it illegal, regardless of the person receiving the product, to "sell or distribute industrial hemp or an industrial hemp product that contains chemically derived cannabinoids or cannabinoids created by chemically modifying or converting a hemp extract." SDCL 34-20B-118. Most hemp-derived THC on the market is made through a chemical conversion or extraction process, which means the South Dakota Legislature made it illegal to sell most THC products to any person of any age. Id. In that same vein, the Legislature prohibited the manufacture, distribution, possession, or sale of synthetic cannabinoids and named them Schedule I controlled substances. SDCL 34-20B-14(47); SDCL 22-42-2; SDCL 22-42-5. Similarly, THC products that contain any quantity of resin extracted from the cannabis plant, called "hashish and hash oil," are also considered Schedule I controlled substances. SDCL 34-20B-14(10). This Schedule I resin can also be used to make THC beverages and products.

CONCLUSION

Thus, I conclude the legality of the sale of THC-infused beverages cannot be answered without a reputable laboratory report as to the chemical makeup, properties, and content. The Legislature is tasked with specifying what derivatives and processes are outside the law, and as you can see in SDCL chs. 38-35, 34-20B, and 22-42, the complexities are many. The Legislature has determined it is currently illegal to sell all synthetic cannabinoids, to sell naturally-occurring cannabinoids with more than 0.3% Delta-9 THC, and to sell industrial hemp or industrial hemp products that contain chemically-derived, chemically-modified, or chemically-converted cannabinoids. For several products on the market, it remains unclear what hemp derivatives and concentrations they contain, how those derivatives were extracted, and how they were subsequently altered or prepared. The Legislature has the power to change statutes regarding these matters going forward.

Sincerely,

Marty J. Jackley

ATTORNEY GENERAL

MJJ/MWT/SLT/dd