Seven Virginia companies have sued Gov. Abigail Spanberger and other state and local officials, claiming that the businesses will be significantly harmed by a regulatory change that will end their ability to sell certain hemp products.
The change, set to take effect Aug. 15, will make it illegal for these businesses to sell hemp products containing more than 2 milligrams per package of tetrahydrocannabinol, or THC, the main intoxicating compound in cannabis.
Today, they can sell hemp products with more than 2 milligrams of THC per package as long as those products have at least 25 parts of cannabidiol, or CBD, a non-intoxicating component of cannabis, for each part of THC. A product’s total THC also must not exceed 0.3%.
A new federal lawsuit argues that the businesses, one of which is a Henry County store, will lose money on existing inventory and future business opportunities once the 25-to-1 rule goes away.
“They’re basically going to get stuck with a lot of product that suddenly went from being legal to being illegal,” said Chap Petersen, the attorney representing the plaintiffs. Petersen also is a former state lawmaker who represented Fairfax County as a Democrat in the Virginia General Assembly for 20 years.
Petersen said his clients want a temporary injunction to pause the change. He said it’s happening too quickly for businesses to adjust and they aren’t being compensated for the inventory that they will no longer be able to sell.
The rule establishing the 25-to-1 ratio of CBD to THC was enacted in 2023 after legislation passed in 2021 legalized possession of small amounts of marijuana but failed to establish a retail marketplace. As a state senator, Petersen was the only Democrat to vote against the final version of the 2021 bill.
The 25-to-1 rule was designed to keep CBD products such as candies, cookies, drinks and oils on store shelves while forbidding items with higher THC potency.
State budget negotiations finalized in mid-June of this year will allow a limited number of licensed retail businesses to sell marijuana in Virginia starting July 1 of next year. That budget deal included ending the 25-to-1 rule for hemp products as of Aug. 15.
The lawsuit argues that ending the 25-to-1 rule is part of a “severe regulatory crackdown on hemp” that accompanies the legalization of marijuana sales.
“In effect, it removed Hemp from the same retail marketplace now occupied exclusively by recreational marijuana,” the lawsuit states.
Petersen said he hopes that eventually either a judge will rule that the regulatory change is unconstitutional — based on the U.S. Constitution’s Fifth Amendment, which says that government can’t take private property without due process — or the Virginia General Assembly will address the matter when it convenes in January.
“I don’t think most delegates or senators intended to put this industry out of business,” Petersen said.
Jack Bledsoe, spokesperson for Spanberger, said in a statement to Cardinal News that “untested and highly-intoxicating products have flooded Virginia with little oversight, inadequate protections for kids and teenagers, and few tools for law enforcement to address the illicit market — all because of a loophole in state law that bad faith actors have exploited and pushed the limit of its intended use.”
“The adult-use cannabis market created in the bipartisan state budget closes that loophole and puts Virginia on a path to operating under a safe, legal, and well-regulated marketplace,” Bledsoe said.
“Governor Spanberger remains committed to setting up this retail marketplace in a way that strengthens protections for all consumers, targets the illicit market, and creates a more competitive market for small businesses and producers.”
Virginia Attorney General Jay Jones, also named as a defendant in the lawsuit, did not respond to a request for comment.
The Virginia Cannabis Control Authority, which regulates marijuana and begins regulating hemp products this month, said it can’t comment on pending litigation.
As of Tuesday afternoon, either none of the defendants had filed responses to the lawsuit or their responses were not yet available in online federal court records.
Lawsuit describes impact on Virginia companies
The lawsuit, filed Friday in the U.S. District Court for the Western District of Virginia, describes the impacts that it says the new rule will have on the seven plaintiff businesses.
Simply Hemp, which opened in 2020 in Henry County and sees 7,400 customers each year, stands to lose out on nearly half of its $500,000 anticipated annual revenue because of the “near total wipeout of their hemp inventory,” according to the lawsuit.
“With such a massive decrease in their total anticipated revenue, they will likely not be able to keep up with their regular payments. They might be forced to close their retail location completely,” the lawsuit states.
As of July 30, the store had $12,000 in inventory on hand, and 95% of that will not be compliant with the new rule. Simply Hemp would need to spend $10,000 to restock its shelves with compliant products, according to the suit.
“For a small business, this is an incredible number to achieve when they are unable to sell current inventory in order to raise the funds,” the lawsuit states.
Another business, Fauquier County-based NOVA Hemp, has about $736,000 in inventory, about 85% of which will be rendered “commercially worthless” by the change, according to the lawsuit.
NOVA Hemp also is losing $250,000 in sales opportunities because the rule change removes its ability to partner with other companies to sell its hemp-derived beverages, according to the suit.
Travis Lane founded NOVA Hemp in 2019. He said in a statement included in the lawsuit that it was July 6 when he first heard of the new rule set for Aug. 15, which did not give him sufficient time to redo his products and renegotiate contracts.
Besides Simply Hemp and NOVA Hemp, plaintiffs in the suit are Powhatan County-based Cypress Hemp, Manassas-based District Hemp, Caroline County-based Redfern Hemp, Chesterfield County-based Kultivate Wellness and Rockingham County-based Pure Shenandoah.
Besides Spanberger, Jones and the state cannabis authority, defendants are Charles Green, commissioner of the Virginia Department of Agriculture and Consumer Services; Jamie Patten, head of the cannabis authority; and multiple counties’ commonwealth’s attorneys.
