Farm Bill Preemption: Challenging State Import Restrictions on Federally Legal Hemp

Matter Overview

A hemp cultivation and processing company based in one state sought to distribute its hemp biomass and derivative products to customers in a neighboring state. That neighboring state had enacted a statute requiring all hemp sold within its borders to have been grown under a state-licensed cultivation program — effectively barring out-of-state hemp from its market. The client had existing purchase orders from in-state buyers that the restriction would void. The dispute raised a direct conflict between the state restriction and Section 10114 of the 2018 Farm Bill, which explicitly prohibits states from interfering with the interstate transportation or shipment of hemp lawfully produced under a state or tribal plan.

Work Performed

Hoban filed a declaratory judgment action in federal district court on behalf of the hemp company, seeking a declaration that the state in-state sourcing requirement was preempted by 7 U.S.C. § 1639p(b)(3)(B) (the Farm Bill's prohibition on state interference with hemp interstate commerce). We also moved for a preliminary injunction to allow the client to fulfill its pending purchase orders while the litigation proceeded.

The federal preemption argument drew on the Supremacy Clause, the Farm Bill's explicit non-interference language, and USDA's implementing rules for state hemp plans — which contain no provision authorizing states to restrict out-of-state hemp commerce. We supported the argument with an economic harm declaration documenting the specific purchase orders at risk and the client's reliance damages.

The state's opposition argued that the in-state sourcing requirement was a market participation condition rather than a regulation of transportation — a distinction the Eighth and Tenth Circuit Courts had addressed in different contexts. Hoban's reply brief distinguished those authorities on grounds that the state's restriction here was expressly directed at the geographic origin of the hemp, not merely at product standards.

Outcome

The district court granted a preliminary injunction, holding that the Farm Bill's interstate commerce provision likely preempted the state sourcing requirement. The state chose not to appeal the preliminary injunction and subsequently amended its statute to remove the in-state sourcing mandate.

Lessons Learned

The 2018 Farm Bill's preemption provision is a powerful but underutilized tool against state restrictions on hemp commerce. States frequently enact hemp restrictions without analyzing preemption exposure — and subsequently retreat when that exposure is litigated. The key framing is that the restriction must be characterized as reaching the geographic origin of the product (preempted) rather than establishing product standards (potentially permissible).

Engage Hoban Law Group

Hoban Law Group litigates Farm Bill preemption and challenges state restrictions on hemp commerce. [Schedule a consultation](/consultation?source=matter&matter_slug=hemp-farm-bill-state-preemption-challenge-2025&matter_type=hemp-thc-compliance).