Eight more Iowa companies sue state over new cannabis law • Iowa Capital Dispatch

A second group of companies is suing Iowa over its implementation of a new cannabis law that limits THC levels in consumables.

Eight companies say the regulations they must follow if they want to operate under a new state law restricting the sale of cannabis products won’t be finalized until July 17 — more than two weeks after the law itself takes effect.

The effect, they say, is to criminalize their products and leave them in a state of “regulatory limbo” by the state.

The lawsuit is the second of its kind filed against the state. Last week, Climbing Kites, a Polk County beverage maker, and Field Day Brewing Co., the Johnson County maker of the Day Dreamer line of hemp-infused sparkling water, sued the state over the same law and sought an injunction blocking its enforcement.

In that case, the state opposed the injunction, arguing it would be premature in the absence of final regulations. In response, Climbing Kites and Field Day said this week that even if the state decides to waive enforcement on July 1, the companies would still suffer irreparable harm because none of their business partners would buy their product, given the current risk of imprisonment.

Even though the new law will come into effect in just three days, the court has not yet ruled on the injunction in the Climbing Kites/Field Day case.

The eight other companies currently suing the state are also Iowa-based. 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 nationwide franchise with a store in West Des Moines; 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 the U.S. District Court for the Southern District of Iowa, challenges the constitutionality of House Appropriations Acts 2605 and 2641, which were passed this year by state lawmakers seeking to tighten regulation of hemp and hemp products in Iowa.

Companies: We will lose hundreds of thousands of dollars

When Gov. Kim Reynolds signed the bill into law on May 17, she said she had unspecified “concerns” about the measure but ultimately decided to “protect minors from dangerous and intoxicating products.”

Regulations limit the concentration of THC per container and per serving of hemp-based consumer products. The companies argue that the legislation amounts to “a de facto shutdown of cannabinoid activity in Iowa (by prohibiting) the use of synthetic tetrahydrocannabinol in any consumer hemp product.”

The new law, they say, provides no exemptions for existing hemp-derived products, which have been legal to sell in Iowa since 2020. On July 1, they say, these products will immediately be deemed controlled substances, and any person or company in their possession “will be subject to immediate criminal and civil prosecution.”

Two bills passed this year require the Iowa Department of Health and Human Services and the Iowa Department of Agriculture and Land Stewardship to promulgate implementation and enforcement regulations. DHHS said the proposed regulations it has developed are still in draft form and are not expected to be finalized before July 17. IDALS, the plaintiffs say, has not yet proposed any regulations.

“As of July 1, 2024, plaintiffs will be stuck in regulatory limbo,” the lawsuit argues. “The critical phrases are not defined, there is no specification for how the regulations are to be applied, and regulations to implement such definitions or instructions will not be published until at least two weeks after the Act takes effect.”

Among the specific issues that have not been resolved in the absence of final regulations is the new law’s requirement that every package of a hemp-based cannabis product contain a warning informing consumers of the risks associated with using the product. The law does not include warning language, and DHHS has not yet determined the legally required language.

The dispute stems from Congress’ passage of the 2018 Farm Bill, which legalized hemp and hemp products. Following the approval of the Farm Bill, 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 regulating consumable hemp products was approved, paving the way for a new industry to launch in Iowa. However, House File 2605 narrows the definition of a legal, consumable hemp product, specifying that the maximum THC concentration must 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.

The plaintiffs argue that the new law’s stated purpose – to protect young people from access to the products – can be easily disproven. They note that while the new law makes many of their products illegal, the same products could be sold legally by simply repackaging them into smaller serving sizes, thereby reducing the total number of milligrams of THC in the package.

Additionally, the lawsuit claims, the new law places no restrictions on purchases, meaning consumers can purchase eight smaller bottles of the product instead of 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 AJ’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 forecasting a loss of close to $200,000 in revenue, while Campbell estimates the lost revenue will total $50,000 per month.

The companies argue that the federal farm bill preempts the new state law and that the state is violating their due process rights. They ask the court to immediately suspend the implementation of the new law and to issue a restraining order and an enforcement order.

The state has not yet responded to the lawsuit.