Seven Virginia hemp businesses have filed a federal lawsuit arguing that while the state has the authority to regulate hemp products, it cannot destroy the value of existing businesses and lawfully acquired inventory without providing just compensation.
The complaint, filed Friday in the U.S. District Court for the Western District of Virginia, challenges Virginia’s new hemp law, which takes effect Aug. 15, as an unconstitutional taking under the Takings Clause of the U.S. Constitution’s Fifth Amendment. It also alleges violations of the Due Process Clause of the Fourteenth Amendment and similar protections under the Virginia Constitution.
Unlike an earlier lawsuit that challenged Virginia’s authority to regulate hemp, this complaint accepts that the state has the power to regulate the industry. Instead, it argues lawmakers changed the rules after businesses made significant investments in inventory, equipment, leases and other commitments under the previous regulatory framework, rendering those investments largely worthless without adequate time to adjust or just compensation.
The lawsuit asks a federal judge to issue a preliminary injunction blocking enforcement of the law while the constitutional challenge proceeds. The plaintiffs are represented by former Virginia State Sen. Chap Petersen.
Named as defendants are Gov. Abigail Spanberger, Attorney General Jay Jones, the Virginia Cannabis Control Authority, Virginia Department of Agriculture and Consumer Services Commissioner Charles Green, Acting Virginia Cannabis Control Authority Executive Director Jamie Patten, and several Commonwealth’s Attorneys responsible for enforcing the law in the jurisdictions where the plaintiffs operate.
At the center of the lawsuit is Virginia’s new hemp law, which takes effect Aug. 15 and eliminates the state’s 25:1 CBD-to-THC exception. Under the previous law, hemp products containing more than two milligrams of THC per package remained legal if they contained at least 25 parts CBD for every one part THC. Beginning Aug. 15, that exception disappears, and hemp products sold in Virginia will generally be limited to no more than two milligrams of total THC per package.
The plaintiffs argue they spent years building businesses around Virginia’s previous regulatory framework and made substantial investments after lawmakers adopted the 25:1 standard in 2023. The lawsuit contends the new restrictions effectively render much of their existing inventory unsellable while leaving little time to transition to new products.
Rather than seeking an exemption from the new law, the complaint documents each company’s inventory, debt, payroll, leases, equipment purchases and other financial commitments in an effort to show those investments were made while operating under Virginia’s previous legal framework. The plaintiffs argue they were given too little time to unwind those commitments before the new restrictions take effect.
The complaint paints a stark picture of what the businesses say is at stake if the law takes effect. Collectively, the plaintiffs claim millions of dollars in inventory, equipment, business investments and future revenue could be lost.
Northern Virginia Hemp & Agriculture, or NOVA Hemp, one of the lead plaintiffs, argues the new law effectively destroys the business it has spent more than seven years building. The company says it has $735,501 in inventory that will largely become unsellable under the new restrictions, while roughly 85% of its product line will be banned beginning Aug. 15.
The lawsuit says NOVA Hemp employs workers with a monthly payroll of about $35,000, carries more than $150,000 in liabilities and recently invested $120,000 in a beverage canning and pasteurizing system that may no longer be commercially viable. The company estimates more than $300,000 in leasehold improvements and manufacturing equipment could be lost as a result of the new law.
The complaint also alleges NOVA Hemp lost a planned statewide beverage distribution partnership with Total Wine and a white-label beverage project with Redfern Hemp after the legislation passed, resulting in an estimated $250,000 in lost sales opportunities. Before the law’s passage, the company says it generated roughly $150,000 in monthly gross sales and had an estimated business value exceeding $3.5 million. The lawsuit warns the company may be forced to eliminate jobs, scale back operations and close both its retail location and manufacturing facility if the law takes effect as scheduled.
Closer to Richmond, Kultivate Wellness in Chesterfield County says nearly 98% of its current inventory, valued at more than $103,000, will become noncompliant under the new law. The business estimates it would cost at least $100,000 to develop new compliant products and says it may be forced to lay off staff or close after operating a storefront since 1999.
District Hemp Botanicals, founded by Barbara Biddle, president of the Cannabis Small Business Association, says it has served more than 50,000 customers since opening in 2017. The complaint states the business has already laid off employees because of the impending restrictions and still has about $10,000 in inventory that will become unsellable after Aug. 15. District Hemp also owes more than $181,000 to creditors and projects more than $231,000 in losses and liabilities, not including additional damages or potential bankruptcy costs. The lawsuit says the company expects to cancel the lease on its Leesburg storefront as a result of the new law.
Cypress Hemp says approximately $1.44 million of its inventory would become noncompliant, affecting products that account for roughly 95% of its revenue. The company estimates more than $6.18 million in annual Virginia revenue is exposed by the new restrictions.
Redfern Hemp Co. says approximately $270,000 worth of inventory will become noncompliant and that uncertainty surrounding the new law has already led to canceled wholesale orders, costing the company more than $75,000 per month in lost business. Read our profile HERE)
Pure Shenandoah says more than $250,000 in inventory would become unsellable, projects more than $500,000 in immediate losses and estimates the law could cost the company more than $2 million in lost business opportunities this year.
The lawsuit differs from an earlier legal challenge brought by Northern Virginia Hemp, which argued Virginia’s hemp regulations conflicted with the federal 2018 Farm Bill. After the Fourth Circuit rejected that argument, the plaintiffs returned with a new constitutional claim focused on whether Virginia can eliminate the value of existing businesses and inventory without providing just compensation.
The plaintiffs are asking the court to temporarily block enforcement of the new restrictions while the lawsuit moves forward. Unless a judge grants that request, the law is still scheduled to take effect Aug. 15.
The governor’s office had not publicly responded to the lawsuit as of Saturday afternoon.
The lawsuit follows legislation approved during this year’s budget process that overhauled Virginia’s hemp regulations while also establishing a framework for a licensed adult-use cannabis retail market expected to launch July 1, 2027.
Supporters of the changes argued they were necessary to close what they viewed as a loophole allowing intoxicating hemp products to be sold outside Virginia’s regulated cannabis system. Hemp businesses contend the new restrictions effectively eliminate much of the existing industry nearly a year before that legal retail market is expected to open.
For a full breakdown of the new law and how it affects consumers and businesses, read our previous coverage: Virginia’s New Marijuana Law: Everything You Need to Know.
Editor’s note: This story will be updated if the governor’s office or attorney general responds to the lawsuit.
Read the full federal complaint here.
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