On September 13, 2019, a federal district court in the Southern District of Indiana issued an Order regarding Indiana’s treatment of “smokeable hemp” that could have far-reaching consequences for the hemp industry. C.Y. Wholesale Inc. et al. v. Holcomb et al., 1:19-cv-02659 (S.D. In., Sep. 13, 2019). The court issued a preliminary injunction against the state of Indiana that prohibits the enforcement of certain provisions of a new Indiana law that regulated criminalized the manufacture, finance, delivery, or possession of “smokeable hemp.” Id.
On May 2, 2019, Indiana Governor Eric Holcomb signed Senate Enrolled Act No. 516 (the “Act”) into law. Among other things, the Act made it a Class A misdemeanor to manufacture, deliver, finance the manufacture or delivery of, or possess “smokeable hemp.” Ind. Code § 35-48-4-10.1. The Act defined “smokeable hemp” as “a product containing not more than three-tenths percent (0.3%) delta-9-tetrahydrocannabinol (THC), including precursors and derivatives of THC, in a form that allows THC to be introduced into the human body by inhalation of smoke.” Ind. Code § 35-48-1-26.6.
The Act’s prohibition on “smokeable hemp” is not unique. For instance, Kentucky’s industrial hemp regulations list products that are not to be sold to the public, and those products include “Hemp cigarettes” and “Hemp Cigars.” 302 Ky. Admin. Regs. 50:070. And the North Carolina legislature is considering a bill that would similarly ban “smokeable hemp.” Such bans are viewed as assisting local law enforcement in the performance of their duties. As federally lawful hemp and federally unlawful marijuana have the same appearance and a virtually identical smell, police officers throughout the country often have trouble distinguishing between the two. A ban on “smokeable hemp” would help officers and citizens avoid the waste of time and resources that could be caused by confusing unlawful marijuana and lawful hemp.
However, on June 28, 2019, a few days before the Act became effective, a group of Indiana businesses that sell hemp products at wholesale or retail filed a motion for a preliminary injunction to prohibit enforcement of the smokeable hemp ban. The plaintiffs argued Indiana’s smokeable hemp ban was unconstitutional because it was preempted by the 2018 Farm Bill and because it violated the Commerce Clause of the Constitution. The Court agreed.
First, the court held that Indiana’s “smokeable hemp” ban was impermissible because it was not limited in scope to intrastate activities, and as such interfered with interstate commerce. The 2018 Farm Bill explicitly provides “No State or Indian Tribe shall prohibit the transportation or shipment of hemp or hemp products produced in accordance with,” federal or state law. 2018 Farm Bill § 10114. By criminalizing the delivery and possession of “smokeable hemp,” the Act precludes transportation of hemp or hemp products through Indiana “and thus impede[s] the interstate commerce of hemp in contravention of the 2018 Farm Bill’s express prohibition on state laws that do so.” C.Y. Wholesale Inc. et al., 1:19-cv-02659 at 8. For instance, the court explained, “a driver traveling along I-74 from Ohio to Illinois who passes through Indiana with smokeable hemp in the vehicle, including hemp bud or hemp flower, would be in ‘possession’ of smokeable hemp and thus subject to arrest and criminal penalties under SEA 516.” Id.
Second, the court held Plaintiffs had shown a likelihood of success on the merits of their conflict preemption claim. “[T]he plain language of the 2018 Farm Bill, as well as statements from its legislative sponsors, reflect Congress’s intent to de-stigmatize and legalize all low-THC hemp, including its derivatives and extracts, and to treat hemp as a regulated agricultural commodity in the United States.” Id. at 10. However, Indiana’s smokeable hemp ban would “criminalize the manufacture, finance, delivery, and possession of hemp bud and hemp flower—hemp derivatives of the kind specifically legalized under the 2018 Farm Bill—[which] frustrates these congressional purposes and objectives.” Id. at 11.
Although the dispute has not been finally resolved, in granting the plaintiffs’ motion for a preliminary injunction, the court has given a strong indication of its view on the matter. If the court ultimately finds Indiana’s law unconstitutional, it is likely to impact other federal court analysis of similar state laws across the country. Duane Morris will continue to monitor this case and will provide additional updates as necessary.