Kentucky-based Cornbread CBD is suing Tennessee’s Alcoholic Beverage Commission in federal court over new regulations that will block mail-order sales to customers in the state. The legal action is the latest attempt to push back on state hemp regulations.
Specifically, the company is challenging the new state rule that requires hemp operators to function within a three-tiered system of licensing, where producers, wholesalers and retailers all have separate licenses, and producers are the only businesses allowed to function outside of the state. This would also eliminate direct-to-customer sales from out-of-state companies.
“Tennessee’s three-tier distribution system for hemp-derived products unlawfully favors in-state retailers by forcing out-of-state retailers, such as Cornbread Hemp, to either establish a physical in-state presence or withdraw its products from the Tennessee market,” said the 15-page complaint filed in the Middle U.S. District Court of Tennessee on Sept. 17.
Most of Cornbread’s business in Tennessee, and across the country, is conducted through direct-to-customer mail order sales. Under the new regulations, they would have to convert to retail sales through a third-party or open their own storefronts.
Until recently, mail order sales made up almost the entirety of Cornbread’s retail business, according to co-founder Jim Higdon. The company recently launched a line of THC beverages that are sold in retail stores, but direct-to-consumer sales still account for about three quarters of their business.
Over the last year, the company made over $1 million in revenue from about 11,000 customers across Tennessee.
“Tennessee now seeks to force this burgeoning industry into an antiquated, anticompetitive, and irrational regulatory framework that was originally designed for the alcohol industry after Prohibition,” said the complaint.
The complaint also notes that the company uses BlueCheck software to verify the identity and age of customers. Potential access for minors was a stated reason for the ban on mail order sales.
New hemp law takes effect in January
Gov. Bill Lee signed HB 1376 into law on May 21, 2025. The bill, which goes into effect Jan. 1, 2026, gives the Alcoholic Beverage Commission oversight of the hemp industry. It also sets dosage limits for edibles and beverages, bans THCa flower, and limits the sale of these products to liquor stores or other age-gated businesses.
Anyone shipping intoxicating hemp products through the mail will be subjected to a $1,000 civil penalty for the first offense, $5,000 for the second, and $10,000 for any subsequent violations.
The new regulations also include packaging and labeling requirements. Cornbread argued these rules unfairly inhibit free speech.
“Furthermore, the law will stifle Cornbread Hemp’s truthful and protected speech by prohibiting it from making any health-related claims about its products regardless of their veracity or scientific support,” said the complaint.
Cornbread argues that the regulations violate the due process clause of the 14th Amendment, the commerce clause and the First Amendment. The company asked the court for a preliminary injunction blocking the new rules from going into effect.
The state’s Alcoholic Beverage Commission, whose members were the named defendants in the case, declined to comment on the lawsuit.
Other court rulings on interstate hemp commerce
In a similar case in New Jersey last year, Loki Brands LLC, et al. v. Matthew Platkin, et al., U.S. District Court Judge Zahid N. Quraishi found that the Garden State’s regulations barring out-of-state cultivators and manufacturers violated the dormant commerce clause.
It was a rare court win for hemp companies fighting against regulatory crackdowns, such as recent attempts to ban intoxicating hemp in Texas and California.
Hemp companies recently dropped a similar suit in Arkansas. Bio Gen LLC and others gave up the fight after the Eight Circuit Court of Appeals overturned a two-year old injunction the company previously won in federal court.
The Eighth Circuit found that the 2018 Farm Bill, which legalized intoxicating hemp as long as the product contains less than 0.3% THC by weight, did not preempt state regulations that would limit access to hemp.
The Fourth Circuit Court of Appeals also ruled in January that state hemp laws fit comfortably with the 2018 Farm Act.
“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.
