This week, two more states enacted laws restricting intoxicating hemp derivatives (IHDs) in spite of legal challenges to both polarizing statutes. On Monday, a new hemp law took effect in Iowa just days after a lawsuit disputing the measure's legality was denied by a federal judge.
According to numerous local and national media outlets, last Friday, Judge Stephanies Rose of the U.S. Southern District rejected a request filed by two hemp-based THC drink manufacturers to limit enforcement of the state's new law aimed at limiting THC levels in consumable hemp products to four milligrams per serving and 10 milligrams per container.
The plaintiffs in the suit, Climbing Kites in Des Moines and Field Day Brewing in North Liberty, argued that federal law, namely the 2018 Farm Bill, supersedes Iowa's new hemp law regarding packaging and label requirements for food items.
Per the lawsuit filed against the Iowa Department of Health and Human Services (DHHS), that new limit directly conflicts with the 2020 law that states "a consumable may contain up to 10 milligrams of THC per container." As a result, the companies assert that "the department will criminalize all (of their) beverage containers smaller than 12 fluid ounces" once the new law takes effect, rendering roughly 80% of their current inventories illegal.
"Products that account for approximately 85% of plaintiffs' revenue will become illegal because of the department's interpretation," the lawsuit claims.
"Products that account for approximately 85% of plaintiffs' revenue will become illegal because of the department's interpretation."
- Details of Lawsuit Brought Against the Iowa Dept. of Health and Human Services
While in her ruling, Judge Rose found House File 2605 vague, she declared, "Those concerns were not raised by the plaintiffs," nor did the plaintiffs prove that federal law usurps state law.
In response to the judge's decision, eight additional hemp companies filed a lawsuit against the state, challenging the constitutionality of House File 2605 and a second regulatory measure, House File 2641. In their suit, the companies allege that the new state rules and guidelines they are mandated to comply with "are not expected to be finalized until July 17 at the soonest," making the businesses non-compliant with the law and leaving them in "regulatory limbo."
Similar to the legislative and legal drama in Iowa, a new law, House Bill 1125, signed into law in March by Gov. Kristi Noem (R), targets five types of hemp cannabinoids that appear at low levels in the plant. Through a synthesis process, technicians can transform those chemicals to mimic the intoxicating effects of delta-9 THC, the most well-known intoxicating cannabinoid produced by hemp and cannabis.
The new law would ban the five derivative compounds, severely restricting the economic prospects for many hemp manufacturers and retailers in the state. In early June, Hemp Quarters 605, a Pierre-based shop that sells items containing the targeted cannabinoids, filed a lawsuit in the U.S. District Court in South Dakota, claiming the new law is unconstitutional and directly in conflict with federal law.
The company sought a preliminary injunction to block the law from taking effect while the case played out in court. During a hearing on the injunction last Thursday, representatives from Hemp Quarters 605 testified that hemp-based products comprised more than two-thirds of the company's retail business.
They further contended that the new statute violates the U.S. Constitution's commerce clause by inhibiting the sale of federally legal items across state lines. Thus, they concluded that an injunction would be appropriate considering the irreparable harm the company would suffer, most notably the closing of the business, if and when the law is allowed to take effect.
However, U.S. District Judge Eric Schulte had a different view of the new law. In his ruling, Judge Schulte denied the company's request for an injunction, writing that Hemp Quarters's arguments did not meet the standard necessary to invoke an injunction, even if the law might cause potentially irreparable harm.
According to Schulte, the 2018 Farm Bill did not expressly prohibit states from passing laws to regulate the hemp industry. The judge took it a step further, saying the law did the opposite, granting states the right to impose "more stringent" regulations for hemp. He even cited a case in Virginia where hemp businesses challenged a new law regulating hemp. In that suit, the judge ruled in a very similar manner to Schulte.
“The Legislature’s passage of HB 1125 falls squarely within the police powers traditionally reserved to states, as it is intended to promote the health and welfare of South Dakota’s citizens,” Schulte wrote.
"The Legislature’s passage of HB 1125 falls squarely within the police powers traditionally reserved to states, as it is intended to promote the health and welfare of South Dakota’s citizens."
- U.S. Southern District Judge Eric Schulte
The Iowa and South Dakota cases represent a new reality for hemp advocates and stakeholders. Much like many other controversial and polarizing economic, health and safety issues, the question of what to do with hemp is increasingly becoming a state responsibility, with very little, if any, guidance or assistance from the federal government.
Until the Farm Bill renewal finally and definitively articulates what is and what isn't legal concerning hemp, state governments and hemp companies will have to work together to formulate regulations and guidelines that appropriately address public safety while still allowing hemp businesses to survive and thrive in the over $30 billion nationwide industry.
