In a long-awaited opinion, the Fourth Circuit Court of Appeals weighed down on a state’s right to restrict hemp-derived cannabinoid products based upon total THC content.
A three-judge panel of the appellate court issued its ruling Jan. 7 on a motion for a restraining order filed by a hemp manufacturer, a resident HDC product user and an out-of-state retailer seeking to block Virginia’s hemp law, SB 903, enacted in 2023.
Virginia, which allows for marijuana possession but not legal sales, banned the sale of HDC products containing more than 0.3% total THC. The 2018 Farm Act legalized hemp containing up to 0.3% delta-9 THC, as well as derivatives and isomers of that legal hemp. The Farm Act also allows states to enact regulations that are “more stringent” than federal law, except it cannot impede interstate commerce under the dormant commerce clause.
While many hemp advocates support state safety regulations and restrictions on sales to minors, they draw the line when they feel a state law is redefining legal hemp itself.
In Northern Virginia Hemp and Agriculture, et al. v. the Commonwealth of Virginia et al., the plaintiffs alleged the state law violates the Farm Act and the dormant commerce clause. It sought a preliminary injunction to prevent the law from taking effect, but it was denied by a U.S. District Court judge. They then appealed to the Fourth Circuit.
Testimony was taken in May of last year. Meanwhile, the Farm Act was up for renewal, and many in the industry expected the matter of HDC’s to be clarified in a new bill. But Congress failed to act and postponed the Farm Bill another year. Approximately two weeks later, the appellate court made its decision.
The court said SB 903 “fits comfortably in the regulatory role left by Congress” because the regulation of psychoactive chemical content “relates directly to the health and safety of its citizens.”
“By establishing a system by which states can set up detailed plans if they desire ‘primary regulatory authority over the production of hemp,’ Congress left plenty of room for state regulation,” the court said. “Congress was clear. Despite the 2018 Farm Bill, the states retain a significant role in the regulation of hemp.”
The court also noted that the state law only imposes fines on retailers selling HDC products in violation of the law. Growers, handlers and federally licensed hemp producers face no criminal penalty for possessing legal hemp under the federal standard.
“By shielding federally licensed producers of industrial hemp from prosecution, this provision likewise shields from prosecution the transportation of federally compliant hemp products through the state,” the court said.
It vacated portions of the district court order that denied relief on the merits with respect to the sales restriction provision and remanded the case back to the U.S. District Court for the Eastern District of Virginia to dismiss the relevant claims without prejudice and for further proceedings.
Virginia hemp law enforced
Without an injunction in place, the Virginia Department of Agriculture and Consumer Affairs (VDACA) has been enforcing the law. Since July 2023, the department has inspected more than 900 stores selling edible HDC products, and more than 80% were issued civil penalties due to non-compliance with the laws and regulations, said department spokesman Mike Wallace in an email.
Civil penalties range from $500 to $10,000 per violation. The VDACA doesn’t confiscate products but will refer violations to law enforcement.
HDC products not only must be less than 0.3% total THC, but they may not have more than 2 milligrams of total THC per package, unless the product’s CBD to THC ratio is at least 25 parts CBD for every one part THC.
Manufacturers are required to register compliant HDC products. The VDACA has a seven-page list, updated Nov. 22, 2024, of approved products from brands including Tillman’s Tranquils, Butter, Magnolia, Happy Llama, TruHarvest, Mountain High Seltzer and more.
Beginning Jan. 1 of this year, HDC retailers need to be registered. The registration period opened Nov. 15. Applicants must pay a $1,000 annual fee for each location selling the hemp products. Stores found to be in violation would face a civil penalty starting at $2,000.
Wallace said 231 hemp product retail facility registrations have been issued as of Jan. 27.
Legal challenges continue to play out in other courts
Meanwhile, similar legal challenges continue to sit in the Eighth Circuit Court of Appeals in Arkansas and the 10th Circuit in Wyoming.
In Arkansas, the lower court did allow an injunction in BioGen et. al. v. Sarah Huckabee Sanders et al., which the state appealed. In Green Room v. Wyoming, the district court denied a temporary restraining order and dismissed the case with prejudice, which hemp companies appealed.
The attorney general offices of both states sent letters to the appellate courts informing them of the Fourth Circuit’s decision.
“Although the Appellees in the case before this Court argue that the district court’s order denying the temporary restraining order is moot, this [Fourth Circuit] case may be helpful in the event this Court determines the merits of whether the district court abused its discretion in denying the temporary restraining order,” Wyoming Deputy Attorney General Jenny L. Craig wrote on Jan. 13.
“Rejecting the same arguments for preemption Bio Gen makes here, the Fourth Circuit explained that ‘the 2018 Farm Bill expressly sanctions state regulation’ by authorizing state regulation of hemp production that is ‘more stringent than federal law.’ Though it acknowledged that that [sic] savings clause only speaks to hemp production, it reasoned that ‘silence cannot constitute’ preemption,” Arkansas Senior Assistant Solicitor General Asher Steinberg wrote on Jan. 8.
“And it rejected the claim, advanced by BioGen here, that ‘[s]tates are not permitted… to define what constitutes hemp,’” Steinberg said.
