Virginia’s restrictions on intoxicating hemp products don’t violate federal law, the U.S. Fourth Circuit Court of Appeals ruled Jan. 7.
Under Senate Bill 903, a Virginia law that became effective on July 1, 2023, hemp products and industrial hemp extracts can contain no more than 0.3% in total THC, which factors in THCA and any other form of THC, and limits products to no more than 2 milligrams of THC per package in a retail setting.
Furthermore, the law prohibits hemp processors from selling industrial hemp or a substance containing an industrial hemp extract to a person if the processor knows or has reason to know that the person will use the material in a manner that violates the THC limits.
Specifically, these restrictions collide with the 2018 Farm Bill, which defines hemp as having no more than 0.3% delta-9 THC on a dry-weight basis—omitting the total THC standard—and only relates to hemp that’s tested in the field within 30 days of a harvest rather than in finished products.
The Fourth Circuit Court of Appeals, which covers Maryland, North Carolina, South Carolina, Virginia and West Virginia, ruled that the 2018 Farm Bill does not preempt state law regarding restrictions on hemp or hemp products.
“Under federalism principles engineered into the Constitution, states retain the power to regulate ‘matters of health and safety,’” Judge A. Marvin Quattlebaum Jr. wrote in Tuesday’s decision.
“That power permits Virginia, as a separate sovereign, to enact legislation addressing psychoactive products affecting its citizens, including children,” he wrote. “While the Supremacy Clause limits what a state can do, the plaintiffs have not shown that federal law preempts Virginia’s total THC standard, either expressly or implicitly. Nor do they show that the total THC standard violates the Dormant Commerce Clause.”
A federal doctrine, the Dormant Commerce Clause aims to prevent states from passing laws inhibiting interstate commerce.
The appellate decision stems from three plaintiffs—North Virginia Hemp and Agriculture LLC (NOVA Hemp), Franny’s Farmacy and Virginia resident Rose Lane—suing the commonwealth in district court to seek injunctive relief shortly after S.B. 903 went into effect.
Franny’s Farmacy is a North Carolina corporation that produces and sells products with hemp-derived cannabinoids. The company’s subsidiary includes an operation in Warrenton, Va. The company argued S.B. 903 criminalized more than 100 of its hemp products sold in Virginia and claimed losses for the inability to ship its products to Virginia, according to the lawsuit.
Since S.B. 903 standards apply to all hemp, regardless of origin, the district court ruled that the standards do not appear to favor the commonwealth’s economic interests over other states.
Furthermore, the appellate court ruled that S.B. 903 does not impede the transportation of federally compliant hemp through the state of Virginia. The law states, “It is lawful for a grower, his agent, or a federally licensed hemp producer to grow, a handler or his agent to handle, or a processor or his agent to process industrial hemp in the commonwealth for any lawful purpose.”
The Fourth Circuit Court opined that this state law falls in line with the 2018 Farm Bill.
“The rule of construction says only that nothing in the [Farm Bill] itself prohibits the interstate commerce of hemp or hemp products,” Quattlebaum wrote. “That provision doesn’t say anything about what states may or may not do in regulating hemp. The only specific prohibition these statutory notes place on states is that they cannot prevent hemp or hemp products that comply with federal law from being transported through the states.”
The 2018 Farm Bill says nothing about the ability of states to regulate the sale of hemp products within their borders, the judge said.
Meanwhile, Virginia-based operator NOVA Hemp sells THCA flower and pre-rolls, delta-9 THC gummies, delta-8 THC vape cartridges and other products out of a retail setting in the state. The company claimed that S.B. 903 banned approximately 95% of the products it manufactured and sold before July 1, 2023, according to the lawsuit.
Certain costs of doing business associated with regulated marketplaces also did not apply before S.B. 903 was enacted.
To help ensure compliance with the law, S.B. 903 created a regulated hemp product retail facility registration that carries a $1,000 annual licensing fee. The legislation also created packaging, labeling and testing requirements for regulated hemp products.
In addition, the bill established a civil penalty of up to $10,000 per day for violating these new standards.
In the first 12 months following S.B. 903’s effective date, state officials conducted 424 inspections, citing 346 businesses for a total of 17,715 violations that resulted in nearly $10.8 million in preliminary civil penalty assessments, Michael Wallace, the communications director at the Virginia Department of Agriculture and Consumer Services, previously told Cannabis Business Times.
In addition to businesses, Virginia residents fear penalties, too.
Lane, the third plaintiff, is an elderly resident who used a variety of hemp products for relief from arthritis and other ailments. She claimed in the lawsuit that she could no longer buy those products and was concerned she could be prosecuted for possessing the now-banned items she still had.
The district court denied the plaintiffs’ motion in four parts, including their arguments related to the 2018 Farm Bill and the Dormant Commerce Clause. The district court also ruled the plaintiffs lacked evidence related to being licensed Virginia processors and to their claims of financial harm amounting to irreparable injury.
Regarding preemptions under federal law, the appellate court ruled this week that the 2018 Farm Bill expressly sanctions state regulation.
“The statute states that it does not preempt or limit a state from regulating the ‘production of hemp’ in ways that are more stringent than federal law,” Quattlebaum wrote. “In the face of this provision, the plaintiffs’ express preemption argument crumbles. True, that provision only mentions the production of hemp. It does not mention the sale of hemp or hemp products. But to state the obvious, silence cannot constitute express preemption.”
The judge also concluded that the 2018 Farm Bill not only opened the door for state regulation but left it wide open by establishing a system by which states could set up detailed plans with the U.S. Department of Agriculture if they desire “primary regulatory authority over the production of hemp.”
“In the years that followed the 2018 Farm Bill’s passage, Virginia lawmakers grew concerned about the availability of now unregulated hemp products that contained Delta-8 and other forms of THC,” Quattlebaum wrote. “Those products, alone or in combination with Delta-9 THC, can have psychoactive effects. The federal government expressed similar concerns. The Centers for Disease Control and the Food and Drug Administration warned that products labeled only with Delta-9 THC content understate the psychoactive potential of the now unregulated hemp products. They also reported an increased number of Delta-8 THC adverse events involving children. Virginia lawmakers received similar reports involving Virginia citizens, including children.”
Faced with what they viewed as a public health and safety threat, Virginia lawmakers passed S.B. 903. It was within their right to do so, according to the Fourth Circuit Court.
