On October 12, hemp producers and retailers notched an early win in litigation challenging the legality of Maryland’s cannabis licensing program as it applies to hemp. By way of background, the Maryland General Assembly recently passed the Cannabis Reform Act (CRA), after voters gave their stamp of approval to recreational cannabis in the state via a 2022 referendum. Rather than create a separate licensing system for hemp products, the CRA requires anyone selling a “product intended for human consumption or inhalation that contains more than 0.5 milligrams of tetrahydrocannabinol per serving or 2.5 milligrams of tetrahydrocannabinol per package” to be licensed as a cannabis business. “Tetrahydrocannabinol” (THC) is defined to include delta-8, delta-9, and delta-10 THC. This lack of distinction between hemp- and marijuana-derived products results in the inclusion of existing producers and retailers of hemp-derived THC products into the new cannabis program.

In granting the plaintiffs’ request for a preliminary injunction, the court found that the hemp industry plaintiffs’ rights to “life, liberty, and property” were at stake, and that they were likely to prevail for three key reasons:

First, the court found that Maryland’s licensing program is preempted by federal law because the state has not submitted the CRA to the U.S. Department of Agriculture (USDA). Although federal law, as amended after the 2018 Farm Bill, allows states to create their own hemp licensing and regulatory systems, the state must first submit the plan to the USDA for approval, 7 USC § 1639p(a)(1). Maryland has had a USDA-approved hemp plan that licenses hemp cultivators since 2020, but the court took issue with the fact that Maryland did not submit the CRA for approval by USDA. Thus, the court held, “licensing [of plaintiff producers] remains with USDA.”

Second, the court found that the CRA’s cannabis licensing program created an impermissible monopoly under the Maryland Declaration of Rights by “unfairly exclud[ing] many from their right to continue, or enter, a profession of their choosing, all to the detriment of the public.” Here, the court observed that the program would initially permit only existing medical cannabis licensees, including certain social equity applicants, to participate in the commerce of THC products. Existing hemp producers and retailers are given no reprieve by the licensing program, the court found, because “[t]he geographic restrictions imposed under the new social equity requirements bar most Marylanders from applying for a license.” In all, the court observed that this program conferred “a significant benefit on those few who obtain a license while barring many, such as [the hemp producer] Plaintiffs, from engaging in their chosen field of occupation”— a field, the court notes, that is legal under federal law.

Read more at regulatoryoversight.com