Judge denies injunction in South Dakota hemp ban case

A federal judge over the weekend denied a request to block South Dakota’s new law banning certain hemp-derived products, allowing the measure to take effect Monday.

U.S. District Judge Eric C. Schulte ruled Saturday that Hemp Quarters 605, a Pierre-based retailer, failed to show it would likely succeed in challenging the law’s constitutionality, the South Dakota Searchlight reported.

House Bill 1125, signed by Gov. Kristi Noem in March, amends existing definitions of hemp and industrial hemp products. It defines a “chemically derived cannabinoid” as a substance created by chemically altering compounds from the cannabis plant.

Key provisions of the law include prohibiting the chemical modification or conversion of industrial hemp into delta-8 THC, delta-9 THC, delta-10 THC, or similar compounds. It also bans the sale or distribution of industrial hemp products containing chemically derived cannabinoids. Violations are classified as Class 2 misdemeanors.

Hemp Quarters 605 has argued the law conflicts with the 2018 federal Farm Bill, which legalized hemp production. The retailer claimed it could lose up to 70% of its business under the new restrictions.

The company’s owner, Brandi Barth, also testified about investing $50,000 to renovate its rented building.

Judge Schulte still rejected key arguments from Hemp Quarters 605, finding the law doesn’t improperly interfere with interstate commerce and that South Dakota acted within its police powers to protect public health.

“This Court believes it is unlikely Plaintiff will succeed on the merits of a regulatory taking claim,” Schulte wrote in his 19-page opinion obtained by Green Market Report.

He added, “While this may seem unfair to Plaintiff, as inventory that is legal today will not be legal on July 1, 2024, ‘the (takings) inquiry remains focused on the character of the government action, not the culpability or innocence of the property holder.’”

The judge also noted that during the hearing, counsel for the state acknowledged that the company was placed in an “extremely difficult position” given the passage of HB 1125 and the change in the law.

“Precedent makes it clear, though, that this Court’s inquiry should not be on the innocence of Plaintiff when making a determination on a regulatory taking claim,” Schulte wrote.

The Hughes County State’s Attorney has agreed not to prosecute the company while the lawsuit continues, but the state Attorney General’s office made no such commitment, court documents show.

The ruling allows South Dakota to join other states cracking down on intoxicating hemp-derived products. Some such as Florida and Massachusetts decided this year to table the question for now. Supporters argue the law is necessary to close a loophole created by the Farm Bill, while critics contend it goes beyond federal regulations and could harm South Dakota’s emerging hemp industry.

Hemp Quarters 605 is allowed to proceed with its lawsuit, but Saturday’s decision suggests an uphill battle.

gov.uscourts.sdd.80560.31.0