Federal Court Upholds Virginia’s Total THC Hemp Regulations Over 2018 Farm Bill

The U.S. Fourth Circuit Court of Appeals ruled on January 7 that Virginia’s restrictions on hemp products with high THC levels do not conflict with federal law, solidifying the state’s authority to regulate hemp within its borders. This decision has far-reaching implications for the hemp industry and sets a precedent for state control over federally regulated markets.

What the Virginia Law Entails

Virginia’s Senate Bill 903, which went into effect on July 1, 2023, imposes stringent restrictions on hemp products sold in the state. These include:

• A cap of 0.3% total THC (which includes THCA and other THC forms) in products.
• A limit of no more than 2 milligrams of THC per package in retail settings.
• Provisions prohibiting hemp processors from selling industrial hemp or extracts if they suspect misuse exceeding THC limits.

These rules diverge from the federal 2018 Farm Bill, which defines hemp as containing no more than 0.3% delta-9 THC on a dry-weight basis and requires testing during cultivation, not for finished products.

Federalism and State Powers Take Center Stage

The court emphasized the constitutional principle of federalism in upholding Virginia’s law. Judge A. Marvin Quattlebaum Jr., writing for the appellate court, highlighted that states retain powers to regulate health and safety issues, which include psychoactive substances.

“Virginia, as a separate sovereign, can enact legislation addressing psychoactive products affecting its citizens, including children,” Quattlebaum wrote. He further clarified that the federal Supremacy Clause does not override Virginia’s total THC standard, nor does it violate the Dormant Commerce Clause, which prevents states from enacting laws that restrict interstate commerce.

The Legal Battle: Industry Pushback and State Defense

The appellate court’s decision came in response to a lawsuit filed by three plaintiffs:

1. North Virginia Hemp and Agriculture LLC (NOVA Hemp): The company alleged that S.B. 903 banned nearly 95% of its products, including THCA flower, delta-9 THC gummies, and delta-8 THC vape cartridges.
2. Franny’s Farmacy: This North Carolina-based company argued that Virginia’s law criminalized more than 100 of its products, leading to financial losses and inability to ship products into the state.
3. Virginia Resident Rose Lane: Her claims were tied to the broader impact of the law on consumer access.

The district court previously ruled in favor of Virginia, stating that S.B. 903 standards apply uniformly to all hemp, regardless of its origin, and do not favor in-state businesses over out-of-state competitors. The Fourth Circuit Court upheld this ruling, affirming that the law does not impede federally compliant hemp transportation through the state.

Compliance Costs and Business Adjustments

S.B. 903 has introduced additional compliance costs and regulatory hurdles for hemp businesses operating in Virginia. Key provisions include:

• Registration and Licensing: Retail facilities selling regulated hemp products must obtain a license with a $1,000 annual fee.
• Packaging, Labeling, and Testing: Strict guidelines ensure products meet the new THC limits.
• Civil Penalties: Violators of the new standards face fines of up to $10,000 per day.

For businesses like NOVA Hemp, adapting to these regulations has meant significant operational changes and financial burdens.

Federal and State Jurisdiction: A Fine Balance

The court’s ruling also clarified the limits of federal authority under the 2018 Farm Bill. While the Farm Bill prohibits states from blocking the transportation of compliant hemp products across state lines, it does not restrict states from regulating the sale of those products within their borders.

“The rule of construction says only that nothing in the [Farm Bill] itself prohibits the interstate commerce of hemp or hemp products,” Quattlebaum wrote. “It doesn’t address what states may or may not do regarding the regulation of hemp sales.”

This distinction underscores the evolving interplay between federal and state regulation in the hemp industry. States like Virginia are leveraging this autonomy to create more stringent controls over intoxicating hemp products, often citing public health concerns.

Industry Outlook and Broader Implications

Virginia’s total THC standard and its enforcement mechanisms signal a tightening regulatory environment for hemp-derived products, especially those with psychoactive effects. The decision by the Fourth Circuit Court may embolden other states to implement similar laws, potentially leading to a patchwork of regulations that businesses must navigate.

For hemp producers, this decision underscores the need to stay informed about varying state laws. Products compliant with federal standards may still face restrictions in individual states, challenging interstate commerce and operational consistency.