At a 50 Shades of Green on the corner of 39th and Dodge Streets, a sign reading “cannabis dispensary” and a marijuana leaf towers over Omaha’s main street. That’s one of at least a dozen dedicated dispensaries in Omaha, not including smoke shops and gas stations that sell similar products.

Nebraska has struggled to regulate the evolving industry of hemp-derived cannabinoids since the passage of the 2018 federal farm bill and subsequent state legislation in 2019. The bill made the farming and sale of hemp — a type of cannabis plant — legal so long as the concentration of Delta-9 THC, the psychoactive compound most frequently associated with the high created by marijuana, is less than 0.3% by dry weight.

That law has created what Nebraska Attorney General Mike Hilgers calls a “perceived loophole” for retailers to sell psychoactive THC products derived from hemp — such as Delta-8 THC, a similar but milder cousin to Delta-9, and more recently, edible and drinkable products containing hemp-derived Delta-9 THC.

Though cannabinoids like Delta-8 and Delta-9 are present in the hemp plant, they naturally occur in very low quantities. Delta-8, Delta-9 and other cannabinoids can be extracted from the hemp plant through chemical processes. Hilgers calls the resulting products “synthetic cannabinoids,” and contends the Nebraska Legislature never intended to, and did not, make them legal.

Store owners, however, say their products — including those containing significant amounts of THC derived from hemp, which produce an effect similar or identical to marijuana-derived THC offerings available in recreationally legal states — adhere to state and federal laws.

“I’m confident that what we sell is legal,” Chris Potratz, the owner of Greenlight Natural dispensary in Omaha’s Benson neighborhood, said. “Otherwise, I wouldn’t have been in business for five years, right on the corner of a main street in Omaha. Nothing we’re doing is under the table.”

In his ongoing quest to “clean up” and crack down on Nebraska’s THC industry, Hilgers has filed a series of consumer protection lawsuits against smoke shops and dispensaries across the state selling products containing THC from hemp. The suits were brought under Nebraska’s Consumer Protection Act and allege the products are deceptively labeled and marketed toward children.

To date, six of the 11 businesses named in Hilgers’ lawsuits have accepted highly restrictive settlement agreements that require them to stop selling all hemp-derived THC products or risk tens of thousands of dollars in penalties. At least two of the businesses shut down entirely in response to the lawsuits.

Since Nebraska legalized hemp farming in 2019, businesses selling products containing Delta-8 and other hemp-derived psychoactive cannabinoids have operated in a legal gray area.

Nebraska law, like federal law, defines hemp as any part of the cannabis sativa plant — including all “derivatives, extracts, cannabinoids, isomers, acids, salts, and salts of isomers” — with a concentration of Delta-9 THC of 0.3% or less by dry weight.

But Delta-9 is just one of hundreds of cannabinoids present in the cannabis plant. Other cannabinoids like Delta-8, Delta-10 and THC-A are found in very small quantities in hemp plants, and can be manipulated through chemical processes to increase potency and produce psychoactive qualities.

Despite the booming and open market for these hemp-derived cannabinoids, Hilgers says the Legislature never intended to make them legal. Hilgers says “synthetic cannabinoids,” which he defines in court documents as “any cannabinoids produced, transformed, manufactured, or modified by means of chemical synthesis or other chemical manipulation,” are currently illegal. He has particularly highlighted Delta-8 THC products in his crackdown.

“Proponents of Delta-8 believe, wrongly, that in an effort to legalize non-intoxicating hemp, that Congress or the Nebraska Legislature also legalized synthetic cannabinoids,” Suzanne Gage, a spokesperson for the Attorney General’s Office, said. “They did not. These substances are illegal under both Nebraska and federal law.”

Attorneys for the sued businesses — and business owners not yet impacted by the attorney general’s crackdown — dispute Hilgers’ claim that these cannabinoids are illegal under current law. They note that law makes no mention of Delta-8, nor does it draw a distinction between natural and synthetic cannabinoids.

Last legislative session, State Sen. Teresa Ibach of Sumner introduced Legislative Bill 999, which would have made all synthetic cannabinoids, including Delta-8, explicitly illegal. The bill did not progress past the Judiciary Committee.

In a 2021 World-Herald report about the proliferation of Delta-8 products specifically, an Omaha police spokesperson said the sale of Delta-8 was legal. Asked again in 2024, the spokesperson deferred the question to Douglas County Attorney Don Kleine.

Kleine said it is the position of the Douglas County Attorney’s Office that Delta-8 and other hemp-derived cannabinoids are illegal under both state and federal law, and said his office will “act accordingly.”

Douglas County has not prosecuted any cases related to Delta-8 distribution, Kleine said.

The first two shops to settle the lawsuits were Ms. Vape in Crete and High Flow Cannabis in Grand Island. In June, they agreed to stop selling any hemp-derived THC products, with monetary penalties for violations of the settlement agreement.

The two businesses settled not because they agreed their products were illegal or dangerous, according to Randy Paragas, an attorney who represented both High Flow and Ms. Vape. Instead, the small-business owners couldn’t justify the cost of a prolonged legal battle with the state.

“We’re not happy about it at all,” Paragas said of the settlements. “These are small businesses. They don’t have the resources to take on the state of Nebraska, which has unlimited resources, in a giant lawsuit. It’s just a shame that Nebraska’s law is in such flux, and is so broad and non-specific that it’s hard for the small-business owners to tell what’s legal and what’s not legal.”

On July 11, the Attorney General’s Office announced four more businesses had accepted settlement agreements: Greenhouse Grandma in Chadron; First Stop Vape Shop in Ogallala; A Botanical Dream in North Platte; and Zy Glam in Scottsbluff.

For the remaining businesses — including all locations of the Cannabis Factory, 50 Shades of Green, Midwest Smoke Shop and Chasing Clouds, and a standalone location of Kynd Co. in Norfolk — the path forward is unclear. Most of the nonsettled cases remain in the beginning stages of litigation. After being sued, two of the shops, including High Flow Cannabis, shut down completely.

Jason Grams, an attorney who represents Kynd Co. and Chasing Clouds, filed motions earlier this year to dismiss the cases against his clients on various grounds — including that the attorney general’s authority under the Nebraska Consumer Protection Act is superseded by other sources of regulation, like the U.S. Food and Drug Administration or the Nebraska Pure Food Act.

Grams also disputed Hilgers’ assertions that hemp-derived THC products are illegal.

“Not once in these pleadings does the Attorney General ever state what he publicly claims — that (the) products are illegal,” Grams wrote in his brief in support of dismissing the cases. “Nor can he. It is the law that … hemp products are legal. They are legal under federal law. They are legal under the laws of this state. And nothing the Attorney General claims — whether in the media or in this court — changes that fact.”

Attorneys in Madison and Platte Counties will hear arguments about Grams’ motions to dismiss in August. Grams declined to comment for this story, citing pending litigation.

The lingering questions about legality have not stopped the products from spreading across the state. Advertisements bearing green marijuana leaves and claims of “real THC” are common at dozens of dispensaries and smoke shops around Omaha.

Without legislative intervention at the federal or state level, that isn’t likely to change. Even if all the sued businesses accept settlements with the state, the industry at large will remain loosely regulated unless and until the law is revised to clarify the legality of Delta-8 and other hemp-derived cannabinoids.

Responding to concerns that the lawsuits target individual businesses without addressing the root of the issue — the unregulated market — Gage said targeting “some of the biggest players in the retail market” is just the first step.

“Our investigations are ongoing across the state and will go beyond the first two rounds of defendants,” she said. “The industry was not created overnight, and it will take time to clean it up.”

In a press release announcing the first two settlements, Hilgers urged the remaining businesses to accept a settlement agreement, saying the “door will soon close on obtaining settlements that waive penalties.”

“We currently are preparing and will file additional lawsuits,” Gage said. “Any company that continues to offer, market, or sell these illegal products in Nebraska risks litigation.”

For business owners like Potratz of Greenlight Natural, the threat of litigation looms — but Potratz doesn’t think most Nebraskans will agree with the attorney general’s crackdown on hemp-derived THC products.

“It seems like what (the attorney general) is going for is to get us to shut down,” Potratz said. “But I think the sentiments of average Nebraskans are not so on board with that. My customers range from MAGA-hat wearing people to Bernie Sanders supporters — there’s no common thread. Almost everybody supports cannabis being available. It’s a very small minority out there who thinks that this is somehow a problem in the year 2024.”