Eight More Iowa Companies Sue State Over Hemp-Derived Cannabinoids Law

“The plaintiffs will be stuck in a regulatory limbo as of July 1, 2024.”

By Clark Kauffman, Iowa Capital Dispatch

A second group of companies is suing the State of Iowa over its implementation of a new hemp law that restricts the levels of THC in consumables.

The eight companies allege the regulations they must adhere to if they’re to be in compliance with a new state law restricting hemp-related consumables are not expected to be finalized July 17 at the soonest—more than two weeks after the law itself takes effect.

The result, they say, is the criminalization of their products and the state leaving them in a state of “regulatory limbo.”

The lawsuit is the second of its kind to be filed against the state. Last month, Climbing Kites, a Polk County beverage manufacturer, and Field Day Brewing Co., the Johnson County producer of the Day Dreamer line of cannabis sparkling water, sued the state over the same law and asked for an injunction blocking its enforcement.

In that case, the state has resisted the issuance of an injunction, arguing it would be premature given the lack of any finalized regulations. In response, Climbing Kites and Field Day said this week that even if the state opts to forgo enforcement on July 1, the companies will still be irreparably harmed because none of their business partners will purchase their product given the current risk of imprisonment.

On Friday, U.S. District Court Chief Judge Stephanie M. Rose denied the motion by Climbing Kites and Field Day for a preliminary injunction. In doing so, Rose noted she has “serious concerns” the law is so vague as to be unconstitutional since it limits the amount of THC in a single serving without defining a serving. “It is unclear how this provision would be enforced,” Rose stated.

However, she added, the plaintiffs’ primary challenge to the law is that it’s preempted by federal law—a position, she said, that’s not supported by the evidence.

The eight other companies that are now suing the state are also Iowa-based businesses, and they include HW Premium CBD of Urbandale; American Shaman, which has retail locations in Altoona, West Des Moines and Indianola; Greene Goods Market and Greenhouses of Jefferson; Your CBD Store, which is a national franchise with a West Des Moines store; Beyond CBD of Des Moines; Campbell’s Nutrition Centers of Des Moines; Sky High of Cedar Falls; and Icanna of Iowa.

Their lawsuit, filed this week in U.S. District Court for the Southern District of Iowa, challenges the constitutionality of House File 2605 and House File 2641, both of which were passed this year by state lawmakers seeking to increase Iowa’s regulation of hemp and hemp products.

Companies: We’ll lose hundreds of thousands of dollars

When Gov. Kim Reynolds (R) signed the legislation into law on May 17, she said she had unspecified “concerns” with the measure but ultimately chose “to protect minors from dangerous and intoxicating products.”

The legislation limits the THC concentration within a container, and within one serving, of hemp-related consumables. The companies argue the legislation amounts to a “de facto shutdown of the Iowa cannabinoid business (by prohibiting) the use of synthetic tetrahydrocannabinol in any consumable hemp product.”

The new law, they say, provides no allowance for existing hemp-derived products that have been legal to sell in Iowa since 2020. On July 1, they say, the products will be immediately deemed controlled substances and any individuals or businesses in possession of them “will be at immediate risk of criminal and civil enforcement.”

The two bills passed this year require the Iowa Department of Health and Human Services (DHHS) and Iowa Department of Agriculture and Land Stewardship (IDALS) to promulgate regulations for implementation and enforcement. DHHS has stated that the proposed regulations it has devised are still in draft form and are not expected to be finalized before July 17. IDALS, the plaintiffs claim, has yet to propose any regulations.

“The plaintiffs will be stuck in a regulatory limbo as of July 1, 2024,” the lawsuit argues. “Critical phrases are not defined, specifications for how to comply with provisions are not provided, and the regulations intended to provide such definitions or instructions will not be promulgated until at least two weeks after the law goes into effect.”

Among the specific issues left undecided by the absence of finalized regulations is the new law’s requirement that each container of consumable hemp product include a warning notice advising consumers of the risks associated with the product’s use. The law doesn’t include the language of the warning, and DHHS has yet to specify the legally mandated wording.

The dispute has its origin in Congress’ passage of the 2018 Farm Bill, which legalized hemp and hemp-derived products. In the wake of the Farm Bill’s approval, the State of Iowa removed hemp and hemp products from its list of controlled substances and legalized the production and sale of hemp products in Iowa.

In 2020, additional state legislation was approved providing for the regulation of consumable hemp products, clearing the way for the launch of a new industry in Iowa. However, House File 2605 narrows the definition of a legal, consumable hemp product by specifying that the maximum THC concentration be less than, or equal to, three-tenths of 1 percent on a dry weight basis, or 4 milligrams per serving, or 10 milligrams per container—whichever is less.

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The plaintiffs argue the stated intent of the new law—protecting young people from accessing the products—can be easily defeated. They note that while the new law renders many of their products illegal, the same products could be legally sold by merely repackaging them into smaller-sized servings, thereby decreasing the total milligrams of THC per container.

In addition, the lawsuit claims, the new law has no limits on purchasing, which means consumers can purchase eight smaller bottles of product rather than one larger-sized bottle.

HW Premium CBD estimates it will lose $171,000 as a result of the new law, while American Shaman, also known as A.J.’s Health and Wellness, says it has “already had to close one store” and may soon be forced to close its remaining locations. Beyond CBD is projecting a loss of close to $200,000 in revenue, while Campbell estimates its lost revenue will total $50,000 per month.

The businesses argue the new state law is preempted by the federal Farm Bill, and that the state is violating their due process rights. They are asking the court to issue an immediate stay of enforcement of the new law, and to issue a restraining order and injunction barring enforcement.

The state has yet to file a response to the lawsuit.

This story was first published by Iowa Capital Dispatch.

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Photo courtesy of Kimzy Nanney.