“The legislature’s passage of HB 1125 clearly falls within the scope of police powers traditionally reserved for the states.”

By John Hult, South Dakota Searchlight

A new law banning the production and sale of high-inducing cannabis products derived from hemp will take effect on Monday after a judge rejected a blockade.

Hemp Quarters 605, a Pierre-based store that sells the products, filed suit earlier this month in U.S. District Court in South Dakota. The company claims the new law's provisions are unconstitutional and conflict with federal law.

The Federal Agriculture Act of 2018 legalized the production and sale of industrial hemp and hemp products as long as they contain less than 0.3 percent of the intoxicating substance delta-9-tetrahydrocannabinol (known as THC) by dry weight.

House Bill 1125, signed into law by Gov. Kristi Noem (R) in March, targets five types of chemicals found in small amounts in hemp plants. The chemicals can be synthesized and added in quantities large enough to allow hemp products to mimic the intoxicating effects of the delta-9 THC found in marijuana.

Marijuana remains illegal at the federal level, although it is legal as medical marijuana in some states and in South Dakota.

Violation of the new law will be punishable as a Class 2 misdemeanor, the state's most punishable offense. Like most laws passed by the legislature, it will take effect on July 1.

Products such as gummies, vape pens and smokable hemp containing the chemicals affected by the new law are widely available throughout South Dakota, sold at gas stations, grocery and liquor stores and specialty tobacco shops such as Hemp Quarters 605.

The company had asked U.S. District Judge Eric Schulte to issue a temporary restraining order to prevent the law from being implemented while the case is being heard in court.

At a hearing on the injunction Thursday in Pierre, representatives of Hemp Quarters 605 testified that hemp-based products accounted for more than two-thirds of their retail business.

They argue that the state is violating the Commerce Clause of the U.S. Constitution by hindering the sale of federally legal products across state lines. An injunction is appropriate, they said, because if the law goes into effect, they would suffer irreparable harm – namely, the potential closure of their business.

To obtain a preliminary injunction, plaintiffs must first prove they are likely to “prevail on the merits,” according to an opinion Judge Schulte electronically filed Saturday. If the plaintiff – in this case, the cannabis store – can achieve that goal, a judge must find that the plaintiff would suffer irreparable harm without a preliminary injunction. The judge must also consider the broader impact of a preliminary injunction on other “interested parties” – in this case, the state and those affected by the new law.

The denial of a preliminary injunction is neither a resolution of the litigation nor a guarantee of victory for the state, which is represented in this case by the office of Attorney General Marty Jackley (R).

Judge Schulte wrote that Hemp Quarters' arguments were not sufficient to warrant a preliminary injunction, even if the law could potentially cause irreparable harm to the company.

The 2018 Farm Bill did not explicitly prohibit states from passing laws regulating the hemp trade. In fact, Schulte said, it did just the opposite, allowing states to pass “tighter” regulations on hemp.

“The legislature's passage of HB 1125 clearly falls within the scope of police powers traditionally reserved for the states, as it is intended to promote the health and welfare of the citizens of South Dakota,” Schulte wrote.

Schulte cited a case challenging a Virginia state law regulating hemp in which the judge reached a similar conclusion.

On the Commerce Clause issue, Hemp Quarters had argued that a Minnesota truck driver transporting federally legal hemp through South Dakota could face criminal prosecution.

Schulte disagreed. He wrote that the law was not applicable in such a scenario because it did not criminalize the possession of hemp products. It only prohibited their production or distribution.

The opinion also noted that the Hughes County district attorney has said he has no plans to immediately prosecute the owners of Hemp Quarters. The attorney general's office has made no such commitment, Schulte wrote, but the state's attorneys pointed out that “the South Dakota Attorney General's Office does not typically prosecute offenses such as those contained in HB 1125.”

This story was first published by South Dakota Searchlight.

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