Sales in state under scrutiny as counties mull AG opinion
County prosecutors around Indiana face a decision on how to respond to an opinion from Attorney General Todd Rokita regarding hemp-extract products.
Rokita's issued an official opinion earlier this year declaring certain hemp products, such as Delta 8, controlled drugs under existing state statute — despite a state law that specifically excluded certain hemp products from narcotics scheduling.
Prosecutors have taken a range of different approaches to the issue. Vanderburgh County Prosecutor Diana Moers distributing a letter warning owners of smoke shops, gas stations and specialty hemp stores they may face narcotics dealing charges if they sold Delta 8-THC and certain other substances. Dubois County Prosecutor Beth Shroeder reportedly issued a similar warning in her county. St. Joseph County Prosecutor Ken Cotter says he is still reviewing Rokita's opinion. Monroe County Chief Deputy Prosecutor Jeff Kehr said the Monroe County Prosecutor's Office is not aware of any Indiana case law that decided this exact issue.
"There are currently no investigative referrals to our office on this issue and we have not contacted any local businesses," Kehr wrote in an email statement.
Delta 8-THC skyrocketed in popularity nationally after the 2018 Farm Bill legalized broad swaths of the hemp market. The compound is similar to the psychoactive drug in marijuana, Delta 9-THC, though researchers consider Delta 8 to be less potent.
Rokita's opinion came after Indiana State Police Superintendent Doug Carter asked for clarification of state law. The Indiana Prosecuting Attorneys Council then drafted a formal letter for all county prosecutors to distribute, Moers told the Courier & Press. Pursuing this was not, she said, "an independent decision" by her.
Business owners 'blindsided'
For Kelly Lubinski, owner of H*Alt store in South Bend where CBD and Delta 8-THC products are sold, she believes the 2018 Farm Bill law allows the sale of the delta-8 products and she has not heard of any effort to prohibit their sale in the county.
"We do sell Delta-8 products," Lubinski said, "but I have found that most of our customers come to buy products that don't have any THC."
Mike Renschler, who owns Cloud City Vapor in Evansville, had an unexpected visit from an Evansville Police K-9 last week. The officer provided Mike with Moers' letter and a copy of Rokita's opinion classifying Delta 8-THC products as controlled substances.
Renschler was stunned — and so were his customers. He had just received a shipment of Delta 8 products worth thousands of dollars. He pulled all of the products from his shelves out of fear that he could face prosecution.
“Whether you're talking my cost or retail value, both are astonishing figures,” Renschler said, referring to the financial losses he could face if Delta 8 remains illegal to sell. “Without any warning? It's a huge kick.”
Other Evansville businesses recounted a similar story. At least one business owner said tens of thousands of dollars worth of inventory were affected by the change.
Ashley Bennett, co-owner of the Evansville-based Remedy Center, said their branch in Jasper was hit with a search warrant back in June, a month before receiving the letter in Vanderburgh County. They've since removed all smokable hemp from their shelves, but they've obtained a lawyer with cannabis-industry experience to see how far they actually have to go.
Indiana's hemp industry fights back
"We've communicated with all the other local smoke shops, and we're trying to come together as a unit to fight this," Bennett said.
They're not the only ones. Indiana is home to some of the largest hemp extract producers and manufacturers in the world, and industry groups are already seeking an injunction in federal court that could temporarily or permanently block Rokita's classification of Delta 8-THC and other products as scheduled drugs.
Indianpolis-based 3Chi LLC, a Delta 8-THC manufacturer, and Midwest Hemp Council Inc., a non-profit industry trade group, argued in a complaint that federal law supersedes state law - and Rokita's opinion - when it comes to hemp products.
They also argue that existing Indiana law provides a sound legal framework to manufacture, sell and possess Delta 8. Regardless, 3Chi has already moved its banking out of state to avoid potential legal liability.
Rokita's official opinion quickly drew the ire of Indiana's multi-million dollar hemp industry, which has blossomed since 2018, when Gov. Eric Holcomb signed Senate-Enrolled Act 52 into law.
The act exempted “low-THC hemp extract” from Indiana's definitions for “marijuana,” “hashish,” “controlled substance,” and “controlled substance analog," among other terms.
Under the law, low-THC hemp extracts are classified as substances that derive from, or contain any part of, hemp plants and which also do not contain more than 0.3% of Delta 9-THC, which remains illegal both federally and in Indiana.
Attorneys representing 3Chi and the Midwest Hemp Council, citing SEA 52 and the 2018 Farm Bill, argued in a complaint that Rokita had overstepped his authority. Existing state law exempts Delta 8 from narcotics scheduling, they wrote.
“After five years of well-established law, AG Rokita's official opinion seeks to unilaterally declare popular low-THC hemp extracts Schedule 1 controlled substances, which deviates from established state and federal law; would lead to thousands of lost jobs around the state; and abruptly turns farmers, business owners and consumers into criminals overnight despite no change in state or federal law,” the complaint reads.
Rokita acknowledged in his opinion that Indiana law does exempt some low-THC hemp products from classification as controlled substances, but he argued that Delta 8-THC “does not appear to fall into any of these named exceptions.”
But 3Chi and the state's hemp industry as a whole argue that Rokita's opinion has multiple legal shortcomings. For example, existing federal law prohibits states from banning the interstate transport of hemp extract products that are regulated by the U.S. Department of Agriculture.
3Chi and others contend that if Indiana declares such products illegal, the state would effectively be regulating interstate commerce in violation of federal law.
According to court records, Rokita's office has agreed to formally respond to the complaint. Attorneys representing the 3Chi wrote that they were “likely to succeed” in their challenge to Rokita's opinion.
They have asked a federal judge to impose a preliminary injunction that would later be made permanent and have asked the court to declare “all low THC hemp extracts as agricultural products under state and federal law.”
It remains unclear what legal recourse affected businesses could take if
Rokita's official opinion is enjoined. The judge could rule as soon as Aug. 18.
Indiana is one of the few states that hasn't legalized cannabis
Compared to other states, this crackdown sends Indiana marching in the opposite direction.
Indiana is one of the few that hasn't legalized cannabis in some form, leaving millions of dollars in revenue on the table. In April alone, Illinois – which legalized recreational marijuana in 2019 – raked in almost $132 million in adult-use sales. About $32 million of that came from out-of-state residents.
When the recreational dispensary Terrabis opened this June in Grayville, Illinois about 45 minutes away from Evansville, customers lined around the building for hours on end.
That zeal extended to the Delta 8 shops in Evansville. And that's part of the reason for the crackdown, Moers said.
More and more signs were "popping up around the community" advertising Delta 8, even after Rokita issued his opinion in January.
But the opinion itself didn't change anything. The products being pulled from the shelves, she said, have always been illegal in Indiana.
"The OAG opinion offers clarification," she said. "The statutes make it illegal."
It will likely be up to a federal judge to decide whether that is really the case, given the fact Indiana law explicitly permits the sale of at least some hemp extracts.
Renschler hopes he can keep his Evansville storefront open —and he hopes otherwise law-abiding consumers avoid potential legal penalties.
"They were astounded that they're actually going to focus on this," Renschler said, referring to customers. "People get so used to things, and then all of a sudden it's swept out from under them; they're going to look for a way to find it elsewhere."
Tribune staff writer Greg Swiercz and the Bloomington Herald-Times contributed to this report.