As Iowa Hemp lawsuits continue, business dries up for retailers
Tightened Hemp Laws Devastate CBD Businesses and Spur Legal Battles in Iowa.
Lacie Navin has seen business drop dramatically at her CBD and hemp shops since July 1, when a new state law tightly restricting the products went into effect.
Navin runs Your CBD Store shops in the Des Moines metro, a chain that offers products that promise to aid in sleep, mental clarity and pain relief. But the shelves are now barer as Navin has had to comply with House File 2605, which regulates consumable hemp products.
“It’s completely devastating for the entire industry. Upwards of 70 percent of our products are off the shelf,” Navin said in an interview. “Most of those being non-intoxicating products, just because no one making legislation understands how these formulations work.”
Navin said her business model and customer base are different from stores that offer brightly colored THC-infused candy and gummies that are intended to get the user high. Those products often were cited by lawmakers when they passed the hemp restriction law during this year’s legislative session.
Navin did sell high-THC products at her store, saying some customers used them to treat conditions like arthritis. But other products, including full-spectrum CBD topical creams and tinctures, contain only a relatively small amount of THC and are not generally intoxicating. Because of the new law’s packaging standards, though, they are now illegal to sell in the state.
Products that contain only CBD, or THC in low enough amounts to comply with the state's law, are still legal for sale.
Navin closed a location in Waukee since the new law took effect. With the vast majority of her products now off the market, Navin said she isn’t sure if she’ll be able to keep her remaining stores.
“I think when this started, the thing everyone kept saying was, ‘Oh, CBD stores will be safe, this is just for really high THC,’” Navin said. “And that’s not true at all.”
Navin is one of a handful of hemp shop owners and manufacturers suing the state over the law, which limits the potency of THC in consumable hemp, the main compound in cannabis that causes the high. The lawsuit also challenges a second law — HF 2641 — which created new rules around growing hemp.
Under the law, products must contain fewer than 4 milligrams of THC per serving and 10 milligrams per container. It also requires that consumable hemp products have a warning label and be packaged according to state rules. The law also bans selling to minors.
A federal judge will hear arguments Thursday over that lawsuit, as well as a second lawsuit filed by Climbing Kites and Field Day Brewing, two THC-infused beverage manufacturers. The judge rejected an initial lawsuit from Climbing Kites and Field Day, but the companies submitted an amended suit with a new claim.
What are the companies seeking?
The two lawsuits argue an array of challenges. They claim the law is preempted by the federal farm bill; is unconstitutionally vague; and violates interstate commerce protections and protections against taking private property. The companies are asking for a preliminary injunction to block enforcement while the lawsuit plays out.
The state denies all the claims in the lawsuit, arguing it has authority to regulate hemp in its borders and a duty to protect Iowans from a potentially dangerous substance. In court filings, Iowa Attorney General Brenna Bird’s office called the lack of regulation of hemp a “public health crisis.”
In 2022, 6,799 Iowans visited an emergency room because of substances that contained some type of THC, the state said. It also said calls to Iowa Poison Control Center regarding children exposed to THC rose by 1,050 percent between 2019 and 2023.
“There is a strong public interest in protecting Iowans, especially Iowa’s youth, from these increased risks,” the state said in its response. “Iowa thus has valid reasons for regulating drugs and psychoactive substances as a proper exercise of its police power.”
Law sought to regulate hemp industry
Hemp — defined as cannabis containing less than 0.3 percent THC by weight — was legalized in the 2018 federal farm bill, and later legalized under state law in 2019. Foods and beverages can contain high amounts of hemp-derived THC and stay under the federal limits.
State lawmakers during this year’s session said they did not intend to legalize intoxicating products when they passed the 2019 law, and said the industry lacked critical safety regulations.
“We were not approving THC to be used in intoxicating products, or we would have had age restrictions,” said House Judiciary Committee Chair Steve Holt, R-Denison, during debate this year.
Gov. Kim Reynolds said in May she had heard concerns from groups on both sides of the issues, and she had some concerns about the legislation, too, but she ultimately signed it into law.
“Ultimately, I am signing it into law to protect minors from dangerous and intoxicating products," Reynolds said. "At the same time, we’ve taken steps to ensure that children who are resistant to medications and suffer from seizures and other medical conditions continue to have access to consumable hemp alternatives for relief.”
How will the law be enforced?
Both lawsuits argue, on different grounds, that the law is too vague to be properly followed or enforced. The claims center on parts of the law that were left up to a rule-making process by the Iowa Department of Health and Human Services, which still is ongoing. The department has issued guidance for hemp retailers, but will not finalize its administrative rules until July 17 at the earliest.
The amended lawsuit from the beverage manufacturers argues that, in the absence of clear rules, the definition of a “serving” is unclear.
The companies originally had believed they could alter the serving size of their 12-ounce cans to contain more than one serving, allowing them to offer up to 10 milligrams per can. But in proposed draft rules and a guidance document, the state health department has said that a 12-ounce can will be considered one “serving."
Judge Stephanie Rose of the Southern District of Iowa, who will hear the arguments, wrote in a previous court ruling she has serious concerns about the definition of serving in the law, saying it's "unclear how this provision would be enforced."
When asked to clarify how the law is being enforced, Health and Human Services spokesperson Alex Murphy said the department will not comment on pending litigation.
The other companies brought two more claims of vagueness, which will be considered Thursday. They relate to the requirement to affix a warning label to consumable hemp products and a prohibition on “synthetic consumable hemp products.”
The state has denied the vagueness challenges and said the terms written in the law have easily understandable meanings.
“There is no reason to believe that by instituting a per-serving limit on THC, Iowa meant to adopt some alternate measurement for the serving size of a carbonated beverage — a measurement that is nowhere defined or utilized in Iowa law,” the state argues.
Still, manufacturers and retailers say they have not received clear communication from the department regarding what interpretation of the law is effective now, before rules have been finalized.
A lawyer for Climbing Kites wrote in a brief Monday that the company has "no idea which of its products is illegal."
