A federal district judge in Washington, D.C., has dismissed the hemp industry’s lawsuit alleging DEA restrictions overstep the agency’s authority.

The Hemp Industries Association filed a complaint last year saying the U.S. Drug Enforcement Administration’s rules would “effectively destroy the burgeoning hemp industry” by criminalizing crop extracts that exceed 0.3% THC, the psychoactive compound in marijuana.

Under the DEA’s interim final rule for hemp, hemp extracts that exceed the 0.3% THC threshold are regulated as marijuana, which remains illegal under the federal law.

The hemp industry argues this threatens every stage of production because hemp’s extracts temporarily become more concentrated in THC during processing.

Products sold for cannabidiol — or CBD, a substance thought to have healthful properties — are diluted below the 0.3% THC threshold before becoming available to consumers, the industry argued.

The DEA’s regulations would expose hemp companies to prosecution simply for engaging in “essential hemp processing and manufacturing operations,” threatening the entire industry, the plaintiff said.

“If allowed to stand, DEA’s intrusion will undermine a lynchpin of the new hemp economy that has created tens of thousands of new jobs and provided a lucrative new crop for America’s struggling farmers,” according to the complaint.

The hemp industry argued the crop and its extracts are shielded from Controlled Substances Act enforcement by the 2018 Farm Bill, which nationally legalized hemp in 2018, so the DEA lacks authority for its regulations.

U.S. District Judge James Boasberg ruled the case should be heard in the U.S. Court of Appeals for the D.C. Circuit, not in his U.S. District Court.

“Interesting as this question may be, the Court ultimately concludes that it is powerless to entertain the merits of Plaintiffs’ entreaty,” the judge said.

The Hemp Industries Association has filed a parallel legal action in the federal appeals court, but it’s been on hold while the lawsuit before Boasberg remained active.

Regulatory uncertainty at the federal level has been blamed for discouraging major consumer brands from investing in CBD products, limiting the hemp industry’s growth.

Prices for raw hemp have fallen due to overproduction, prompting farmers in early-adopting states such as Oregon to scale back their their acreage of the crop.