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

“As of July 1, 2024, the plaintiffs will be placed in regulatory limbo.”

Author: Clark Kauffman, Iowa Capital Dispatch

A second group of companies is suing Iowa over a new hemp law that limits the level of THC in consumer products.

The eight companies say the regulations they must follow if they want to operate under a new state law restricting the sale of cannabis products likely 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 month, Climbing Kites, a Polk County beverage maker, and Field Day Brewing Co., maker of the Day Dreamer line of cannabis-infused sparkling water in Johnson County, sued the state over the same law and sought an injunction blocking its enforcement.

In this case, the state opposed issuing an injunction, arguing that it would be premature given the lack of any 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 will still be irreparably harmed because none of their business partners will buy their product, given the current risk of incarceration.

On Friday, U.S. District Judge Stephanie M. Rose denied Climbing Kites and Field Day’s request for a preliminary injunction. Rose noted that she has “serious concerns” that the law is so vague that it is unconstitutional because it limits the amount of THC in a single serving without defining a serving. “It is unclear how this provision would be enforced,” Rose said.

However, she added that the plaintiff’s main objection to the act is that it is preempted by federal law – a position that, she said, is not supported by the evidence.

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 (R) 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.”

The regulations limit the concentration of THC in a container and in a single serving of cannabis products. The companies say the regulations effectively shut down the cannabinoid business in Iowa (by prohibiting) the use of synthetic tetrahydrocannabinol in any consumer cannabis product.”

The new law, they say, makes no exceptions for existing hemp-derived products, which have been legal for sale in Iowa since 2020. On July 1, they say, these products will immediately be deemed controlled substances, and any individuals or businesses found in possession of them “will be subject to immediate criminal and civil prosecution.”

Two bills passed this year require the Iowa Department of Health and Human Services (DHHS) and the Iowa Department of Agriculture and Land Management (IDALS) to promulgate regulations for implementation and enforcement. 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.

“Plaintiffs will be stuck in regulatory limbo as of July 1, 2024,” the lawsuit argues. “The critical phrases are not defined, no specifications are provided on how to comply with the regulations, and regulations to provide such definitions or instructions will not be promulgated for at least two weeks after the law 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’s passage of the 2018 Farm Bill, which legalized hemp and hemp products. After the Farm Bill passed, 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 to regulate consumer cannabis products, paving the way for a new industry to launch in Iowa. However, House File 2605 narrows the definition of a legal, consumer cannabis product, specifying that the maximum THC concentration must be less than or equal to three-tenths of one percent by dry weight or 4 milligrams per serving or 10 milligrams per container — whichever is lower.

—
Marijuana Moment is tracking more than 1,500 marijuana, psychedelic, and drug policy bills in state legislatures and Congress this year. Patreon supporters who pledge at least $25 per month get access to our interactive maps, charts, and hearing calendar so you don’t miss any developments.

Learn more about our marijuana receipt tracking system and become a Patreon supporter to gain access.
—

The plaintiffs argue that the new law’s stated purpose — to protect young people from accessing the products — could be easily defeated. They note that while the new law makes many of their products illegal, the same products could be legally sold by simply repackaging them into smaller portions, thereby reducing the total number of milligrams of THC per package.

In addition, the lawsuit claims, the new law does not impose any purchasing restrictions, meaning consumers can buy eight smaller bottles of the product instead of one larger one.

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 lost revenue will total $50,000 per month.

The companies argue that the new state law preempts the federal Farm Bill and that the state violates their due process rights. They are asking the court to immediately halt enforcement of the new law and to issue an injunction and prohibition against enforcement.

The state has not yet responded to the lawsuit.

This article was first published in the Iowa Capital Dispatch.

South Dakota law banning intoxicating cannabis products goes into effect after judge refuses to block it

Photo courtesy of Kimzy Nanney.