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Friends – that sound that you didn’t hear is the industry’s reaction to the tenth (a minyan!) time cannabis banking legislation has been offered up by Congress. What’s different this time? Well, for one, we’re back to calling it the SAFE Banking Act, after it had been previously renamed the SAFER Banking Act. How prosaic.
Other than “Regulation” no longer being part of the title though, not much else has changed. The proposed language still doesn’t address institutional investors, stock exchanges, or non-bank financial institutions, which really would make this law much more worthwhile to the industry. Between all of the attention right now on rescheduling, the serial failure of Congress to actually get cannabis banking done, and the sober realization that SAFE Banking really wouldn’t move the needle that much for the industry (most operators have some sort of banking, albeit expensive), meh. Folg mich a gahng. (“It’s hardly worth the trouble.”)
But, as much as we here at Cannabis Musings love talking about SAFE Banking, we love talking about interstate commerce and the dormant commerce clause even more, and recently, the State of Ohio has obliged. As was reported last week, a Federal court issued an order temporarily restraining enforcement of the state’s new hemp law on the grounds that it probably violates the Commerce Clause and its sleepier counterpart.
As a reminder, the dormant commerce clause is a court-based rule, based in the U.S. Constitution’s Commerce Clause, that states can’t impose an undue influence on interstate commerce, usually done by favoring in-state goods over out-of-state goods through taxes, regulations, and outright bans. As the court’s opinion explains, that’s exactly what Ohio’s law did:
“Plaintiffs are likely to succeed on the merits of their claim that [the law] violates the dormant Commerce Clause by prohibiting out-of-state companies from offering their products for sale unless they source and distribute those products solely in Ohio.”
Weirdly, the State of Ohio tried to justify its law by saying that it “prohibits both in-state and out-of-state companies from selling hemp-derived products with a THC concentration of greater than 0.3%.” Sure. The court gave this argument the weight that it deserved, which is none:
“while it is true that [the law] applies the same definition of hemp and attendant restrictions to both in-state and out-of-state companies, … only companies that source, manufacture, and distribute their hemp-derived products within Ohio may obtain a license permitting them to do so. The State of Ohio cannot circumvent the unconstitutional character of these restrictions simply by limiting the number of in-state companies that may obtain a license.”
In other words, it doesn’t matter that Ohio’s law treats one class of products (i.e., those above the THC threshold) similarly no matter the geographic source – that’s all well and good. What matters is that Ohio discriminates against the products that it’s allowing to be sold. The court here came to the right conclusion, and now Ohio has to go back to the drawing board to fix a problem that could have been avoided very easily. This was a good win for the hemp industry, which hasn’t had much luck suing states over their hemp laws.
However, the court elided over an interesting issue. The opinion explains that the state also argued that there are “several substantial public health concerns in justifying the regulations of the hemp industry.” The court summarily rejects this, acknowledging the “strong interest in maintaining consumer safety in this product market,” but finding nonetheless that “enforcement of a likely unconstitutional statute does not serve the public interest.”
This isn’t totally correct, or at least it ignores that the dormant commerce clause does have some exceptions for health and safety concerns. Where the law is discriminatory against out-of-state parties, the bar is really high (known as ‘strict scrutiny’) for health and safety to justify the protectionist law. It’s not at all surprising the court wouldn’t have found that here, where Ohio’s law didn’t make any effort to ‘narrowly tailor’ the law to address concerns, but it raises the question of whether such a law could be lawfully limited by Ohio to target certain kinds of hemp products (e.g., ‘gas station weed’), impose testing/quality requirements, and the like. Now, all of this may be academic if November’s hempocalypse isn’t forestalled, but if Armageddon is somehow avoided, states are going to need to think more about whether and how they can thread the needle, as a precursor to the inevitable arrival of interstate commerce for non-hemp cannabis.
Be seeing you.
© 2026 Marc Hauser. None of the foregoing is legal, investment, or any other sort of advice, and it may not be relied upon in any manner, shape, or form. The foregoing represents my own views and not those of Jardín, B&Y Ventures, or anyone else who employs/hires me.
Watch me schmooze almost every Friday at Noon ET on This Week in Cannabis LIVE with Jeremy Berke and Jay Rosenthal of Cultivated Media and AnnaRae Grabstein and Ben Larson of the High Spirits Podcast. Access the livestream and recordings here.
And with that Interstate Commerce only permissible if Congress chooses to Tax and Regulate Medical, Adult Use, & Hemp (when they actually define the difference) won’t The Dormant Commerce Clause require States to treat In State & Out of State Producers the same?