OAG Opinion at issue in court fight, Rokita appeals to Congress

The fight over whether Delta 8 THC is a legal product in Indiana is heating up in court and in Congress, largely because of Official Opinion 2023-1 issued by Attorney General Todd Rokita (R) on January 12, 2023.

In 3C, LLC d/b/a 3Chi v. Rokita, No. 1:23-cv-01115-JRS-MKK, Judge James R. Sweeney II of the U.S. District Court for the Southern District of Indiana declines on March 29 to issue a preliminary injunction in a challenge filed by various stakeholders in the hemp industry over the OAG Official Opinion to the Indiana State Police superintendent and head of the Indiana Prosecuting Attorneys Council – the only OAG opinion issued in all of 2023 – regarding whether certain variants of tetrahydrocannabinol (THC) are considered controlled substances.

Plaintiff 3Chi is a manufacturer and distributor of low THC hemp extract products; Midwest Hemp Council is a trade organization for farmers, manufacturers, retailers, and consumers of low THC hemp extract products; and Wall’s Organics is a hemp retailer located in Evansville. The trio sues under 42 U.S.C. § 1983, alleging that the Official Opinion has resulted in a deprivation of their rights due to its conflict with federal and state law.

Specifically, they allege that 3Chi and members of the Midwest Hemp Council have lost financial and banking services because the Official Opinion has placed the legal status of their products into doubt. 3Chi’s bank “notified the company to either stop selling the products or find a different financial institution,” ultimately forcing 3Chi to find another bank.

Meanwhile, two other plaintiffs were threatened with legal action: A member of Midwest Hemp Council received a letter from the Wayne County Prosecutor’s Office “threatening the store owner to stop selling [delta-8] products or face legal action” – a letter apparently derived from a model offered by the Indiana Prosecuting Attorneys Council; and Wall’s Organics was informed by the Evansville Police Department “that it had to remove all low THC hemp extract products from its shelves,” with the detective sergeant in charge of the investigation providing the owner with a copy of the AG Official Opinion.

Judge Sweeney, however, determines that the plaintiffs “have not established irreparable harm and therefore are not entitled to a preliminary injunction,” and he reserves ruling on jurisdictional issues for the resolution of pending motions to dismiss, and a motion for judgment on the pleadings.

Judge Sweeney observes that “Attorney General Rokita argues that Plaintiffs have not demonstrated irreparable harm because they found another banking institution,” described as “a partner in Indiana willing to explore” a relationship. “Although a potential new partnership with some basic services is not the same as an established full-service banking relationship, this is not the type of harm that is appropriately remedied by a preliminary injunction because the resulting loss in sales can be remedied with damages.”

Judge Sweeney further notes that “Plaintiffs have not directed the Court to any evidence showing the loss of goodwill or damage to reputation that they allege. Also, they have not shown that their competitors, subject to the same restrictions, would somehow fare better or capture any goodwill from Plaintiffs. In any event, without proof of any loss, this does not rise to the level of irreparable harm. Plaintiffs also argue that the threat of arrest and potential criminal sanctions create irreparable harm. In general, the threat of criminal sanctions translates to irreparable harm only in the First Amendment context.”

On the same day as Judge Sweeney issued his ruling, General Rokita joined a bipartisan coalition of attorneys general from 22 states and the District of Columbia in asking congressional leaders to address “the glaring vagueness created in the 2018 Farm Bill that has led to the proliferation of intoxicating hemp

products1 across the nation and challenges to the ability for states and localities to respond to the resulting health and safety crisis,” and officially outlaw Delta 8 THC and related hemp-based products in the new Farm Bill, removing any doubt about their purported legality.

The 2018 Farm Bill – approved by a Republican-controlled House and Senate, and signed by a Republican president – suggests otherwise, and the AGs tell congressional leaders that “Because of the ambiguity created by the 2018 Farm Bill, a massive gray market worth an estimated $28 billion has exploded, forcing cannabis-equivalent products into our economies regardless of states’ intentions to legalize cannabis use,” and are also “dangerously undermining regulations and consumer protections in states where adult-use legal cannabis programs are already in place,” the AGs add.

The AGs complain that “bad actors have exploited the 2018 Farm Bill’s definition of hemp, its protection of derivatives of that plant, and a wrongly perceived federal pre-emption against state-level regulation of these products.”

Earlier in the week, the Midwest Hemp Council sent a letter of its own to congressional leaders urging them to retain federal laws and regulations that would seemingly allow production and sale of Delta 8 THC. “Eighty percent of licensed acres for hemp production in 2022 and 2023 were dedicated to cannabinoid production to meet the increasing consumer demand for these hemp products,” writes Bose McKinney & Evans LLP attorney  Justin Swanson, president of the Midwest Hemp Council and counsel in the litigation challenging the June 2023 Rokita OAG opinion which held that state law bars products containing Delta 8 THC and related compounds that can be derived from the hemp plant, reasoning that such cannabinoids are “synthetic.”

The plaintiffs in the federal court action contend that OAG got it wrong, and that the base ingredient for the questioned process is CBD, which is an organic compound derived from hemp, and thus Delta 8 THC is not a synthetic compound. They assert that SEA 52-2018, affirms that Delta 8 THC products are legal for manufacture, sale, and possession in Indiana. “S.E.A. 52 encourages the manufacturing, distribution, retail sale and possession of low-THC hemp extracts that meet certain quality control standards by, in part, exempting ‘low-THC hemp extract’ from the definition of ‘marijuana,’ ‘hashish,’ ‘hashish oil,’ ‘controlled substance’ and ‘controlled substance analog,’ ” the plaintiffs tell Judge Sweeney.

The Hemp Council’s Swanson tells Houston Harwood of the Evansville Courier & Press for a detailed article about the fight “that some, but not all, local prosecutors distributed such letters. That in turn has led to a hodgepodge of Delta 8 THC enforcement across the state, he contends. ‘I think we maybe had 10 or 15 county prosecutor letters go out targeting small business owners,’ Swanson said. ‘It tended to be some of the more rural areas, though Evansville obviously is not.’ ”

Harwood adds, “If Rokita’s opinion is allowed to stand, and if Congress updates the Farm Bill to ban hemp-derived compounds that could be considered ‘intoxicating,’ some predict that Indiana’s burgeoning hemp industry could collapse, triggering a cascade of business closures as processors and retail shops struggle to survive in a constrained market.”