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Familiar cycle continued apace last wk as another hemp industry member filed a fed lawsuit to block enforcement of new state law attempting to rein in the market. This time it's Tennessee and it comes with a particularly relevant angle for alc bev bizzes. Lawmakers there stood up a system that mirrors alcohol's 3-tier regs more closely than most other states, recall. Such requirements, including ensuring wholesalers have in-state premises, "may receive a constitutional pass" by the 21st Amendment, a co called Cornbread Hemp wrote in its complaint filed in a fed district ct in TN last wk. But without such an overarching law granting states broader purview to regulate hemp, the state's new regulatory system "unconstitutionally discriminates against and unduly burdens interstate commerce," in Cornbread's view. While the Kentucky-based Cornbread frequently carves alcohol out of its claims, it doesn't have many kind words for any 3-tier system, especially as applied to the fast-growing hemp biz. As far as it's concerned, "Tennessee now seeks to force this burgeoning industry into an antiquated, anticompetitive, and irrational regulatory framework that was originally designed for the alcohol industry after Prohibition." And the state's doing so "with no evidence of consumer dissatisfaction or public health concerns," the co claims.That's not how lawmakers from various states have explained their interest in erecting more robust regulatory systems for intoxicating hemp products like those marketed by Cornbread. Legislators frequently cite consumer complaints and health concerns as key reasons for stepping into the fray. Certain corners of the hemp industry also actively lobby for regulation. And on the bev side, some players famously court alc bev distribs as not just biz partners but legislative partners as well, garnering both respectability and clout in state houses where wholesalers built plenty of both over decades. In TN, that turned into a 3-tier structure that isn't even as strict as it is for alc bevs, since players can hold licenses across tiers, as Cornbread acknowledges.Seeks Relief Under 14th Amendment, Commerce Clause & 1st Amendment Other aspects of the law get under Cornbread's craw, however. They include the requirement that a wholesaler has an in-state presence and that retail sales happen "face-to-face," blocking both self-distribution and direct shipments to consumers. Cornbread already generates 3% of its annual revs of about $33 mil from direct sales to 11K TN consumers, it claims. The "arbitrary, irrational and protectionist scheme" violates the 14th Amendment protection of due process, the co claims, finding that it "serves only the illegitimate purpose of economic protectionism."If that fails, co also makes claims akin to those seen in alc bevs, often made by out-of-state retailers or small producers seeking 3-tier exceptions: it discriminates against out-of-state bizzes and unduly burdens interstate commerce, Cornbread believes. And again, such laws may be justified for alcohol, but "in the context of hemp-derived products, such a system bears no rational relationship to protecting public health and safety," according to Cornbread.The co makes 1st Amendment claims as well. TN's new law, which doesn't take effect until Jan 1, by the way, also bars "health-related claims." If enforced, it "will stifle Cornbread Hemp's truthful and protected speech," co wrote last wk. Taking aim at a couple different prongs of free speech case law, co argues the new regulation "is not narrowly tailored to advance a compelling government interest," on one hand, and also that the state lacks a "substantial interest" in barring accurate, non-misleading speech in a way that is "more extensive&hellip;than necessary." Co markets gummies and bevs as sleep aids, for instance, using both its own and consumer-generated commentary, arguing that "there is credible evidence that links hemp-derived products&hellip;to positive health benefits."Preemption? Really? Much like other hemp biz suits looking to strike down state laws, Cornbread argues that the 2018 Farm Bill allows states to regulate "production" but "expressly preempts" them from restricting interstate shipments. But we've been down this road before, recall, and that road goes thru a state without stopping. Plenty of districts cts have heard this claim, agreed with it and granted injunctions. But multiple appeals cts have overturned those rulings, finding that the preemption clause at play here seeks to prevent laws that prohibit a shipment of hemp from traveling thru a state on its way to another. A number of appeals cts explicitly agree that states are free to regulate the market for hemp-derived products with greater restrictions than the Farm Bill calls for on health & safety grounds, even in the absence of a 21st Amendment. Will these claims follow a similar route as earlier suits? Stay tuned. Here, Cornbread is a politically plugged-in operator and it's represented by the Pacific Legal Foundation, no slouch when it comes to liberty-seeking lawsuits.

KY-Based Producer Takes Aim at TN's New 3-Tier Hemp Regs in Fed Ct Using Usual Claims

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