California Bill Targets Online Sales of Hemp Products

On February 14, 2025, California state senator, Scott Weiner, introduced SB 378, which according to a press release from his office is intended “to tackle online sales of sketchy hemp products.”

Last year, Gov. Newsom of California announced that new emergency regulations would prohibit the manufacture and retail sale of hemp food, food additives, beverages, and dietary supplements containing any detectable amount of THC. The emergency regulations broadly define “THC” to include a “list of intoxicating cannabinoids” including D8, D9, D10, THCA, and dozens of other cannabinoids.

While the emergency regulations had a devastating impact on brick-and-mortar hemp business operations in California, the new bill from State Sen. Weiner, SB 378, takes aim at online sales from out-of-state. The bill defines “online hemp marketplaces”[1] and requires such a marketplace to have a mechanism online that allows any individual to report to the marketplace the existence of an advertisement for an intoxicating hemp product, defined consistent with the above regulations. Penalties for compliance violations would include a civil penalty of not more than $10,000 for each violation, other damages for harms caused, and legal fees. Each day an online hemp marketplace is in violation would constitute a separate violation.

Requirements are also included for an “online cannabis marketplace,” such as whether it has a similar mechanism on its platform and that it addresses in its Terms of Service:

1. Whether it permits Californians to view the advertisements and business information of unlicensed sellers of cannabis or cannabis products; and
2. Whether it verifies that sellers of cannabis or cannabis products have a valid, unexpired license from the California Department of Cannabis Control (utilizing the license look-up function) before displaying, storing, or hosting the seller’s advertisements or business information in a manner that is viewable to Californians.

Any “online cannabis marketplace” that displays, stores, or hosts an advertisement from, or business information about, an unlicensed seller of cannabis or cannabis products could face civil penalties up to $250,000 plus legal fees. Further violations could result in suspension of license, receivership, a civil penalty up to $500,000, and two times legal fees.

This bill could be the end of online sales of hemp-derived THC products in California and it could make operations even more challenging for licensed cannabis companies.

Recently in New Jersey, a federal court found the attempts to outright ban out-of-state hemp products unconstitutional under the Dormant Commerce Clause, but other courts have assented to strict state regulation of these products. Some states, like Texas, require out of state business registration for those who are selling consumable hemp products online into the state, a pathway that seems to have survived legal challenges.

Importantly though, if passed, could this bill potentially violate the First Amendment rights of federally-legal hemp businesses and other online platforms for infringing on their right to commercial speech? Free speech in advertising is constitutionally protected, except to the extent that it is false, misleading, or if it advertises illegal products or services. Such an issue could be paramount to the future of the hemp industry.

SB 378 may be acted upon by the California Senate on or after March 16, 2025.

FN [1] “Online hemp marketplace” is defined in SB 378 as “internet website, online service, online application, or mobile application, or a portion thereof, including a social media platform, as defined in Section 1798.99.20, that does any of the following in California:

• Transmits or otherwise communicates between a third party and purchaser an offer for the sale of an industrial hemp product that is accepted by the purchaser.
• Processes, collects, or administers the payment for the sale of an industrial hemp product.
• Permits offers for the sale of an industrial hemp product.
• Connects a seller of an industrial hemp products and a consumer.

February 24, 2025

This article was written by Kight Law attorney Amber Lengacher. Kight Law represents hemp businesses in the US and throughout the world.