Skip to main content

Author: Lisa Pittman

2023: Year in Texas Cannabis Legal Developments and National Hemp Litigation Trends

Written by Lisa Pittman on . Posted in Legislative.

2023 saw a number of consequential legal developments for the cannabis industry despite the failure of any law, pro or con, related to cannabis to pass during the Legislative Session, due to Leadership’s showdown over competing property tax proposals, despite the postponement of the new Farm Bill until next year, and despite the FDA’s punt on CBD.  Most of the legal action this year occurred in the court system across the country, where the terrain of what part of the plant is legal in what state continuing to shift on a daily basis.  Here is the latest as of December 2023 by topic:

Smokable Hemp

 

Though the smokable hemp case was decided last year, its chilling effects were felt in 2023.  The Crown Distributing case challenged statutory language in the Texas Hemp Act that addressed manufacture and sale, where the manufacture of hemp for smoking was specifically forbidden.  The chief impediment to the passage of Texas’ 2019 hemp law was the skepticism that cannabis would only be used for industrial and therapeutic CBD purposes; therefore, they did not want it to be smoked.  They thought if they kept you from making it, then you couldn’t sell it, not thinking about the internet and interstate commerce.  State Department of Health Services (DSHS) subsequently issued a rule that also explicitly forbade the sale of smokable hemp.  Because the retail ban was not as specific in the statute, the court held DSHS did not have the authority to also ban the sale of smokable hemp.  But the manufacture ban was clear and so we are stuck with that.  Because the mere application of labels to a consumable product is “manufacturing,” this one element of the operation now has to be outsourced to another state, at significant economic disadvantage to Texans.  In 2023, DSHS posted a notice on its website about the case and that the manufacture ban would be enforced, and formally adopted a rule banning the manufacture of hemp for smoking.  DSHS also commenced inspections and has been citing local companies making their own pre-rolls.  To remedy this absurdity, this Session, Rep. Briscoe Cain filed HB 4918 to eliminate the manufacture ban in the statute.  Other Congressmen who in sessions past were vehemently against smoking were less preoccupied with the issue in 2023.  This bill died with all the others.  The next opportunity to modify the smokable hemp law will be in the 2025 Legislative Session.

 

Delta 8/THC Isomers/Intoxicating Cannabinoids

 

 Intoxicating cannabinoids have been a controversial thorn in the Legislature’s side, as each session brings fresh drama between dueling prohibitionist hemp bills that threaten to wipe out the entire industry through vague and expansive language.  At the same time, positive hemp bills are being introduced, which made for a rich session of intense lobbying, only for it to all collapse under the property tax showdown.  Particularly worrisome was Sen. Perry’s SB 264 that prohibited the manufacture, sale, or purchase of a consumable hemp product that contains synthetically derived THCs, without defining what was meant by synthetically derived.  The bill also forbade the sale or distribution of cannabinoids unless they were GRAS by the FDA, an impossibility, and created concerning beyond the law penalties.  This bill did not pass.  Recently, Rep. Stephanie Klick, the author of the Compassionate Use Program (CUP), wrote in the Fort Worth newspaper about the scourge of delta 8 and other THC isomer products and the necessity of preventing children from accessing these products.  Rep. Klick is influential on these topics and was supportive of SB 264.  The next time to address these issues legislatively will be in 2025.

 

In September 2023, the Third Court of Appeals heard procedural arguments in the lawsuit pending against DSHS over the manner in which its Health & Human Services Commissioner changed the definition of THCs in the Texas Controlled Substances Act (CSA) in January 2021.  It is the Commissioner’s mandated duty to establish and modify the CSA schedules, and she does so periodically, through a required notice and comment process.  The new THC definition makes all THCs illegal, with the exception of delta 9 from hemp under .3%, effectively making delta 8 and any other THC isomer an illegal controlled substances.  DSHS testified in the 2021 Legislative Session at a hearing on a bill to outlaw delta 8 that it considered delta 8 to be illegal already anyway due to this definition.  After a lawsuit was subsequently filed against DSHS by hemp companies, a temporary injunction was issued to suspend the effectiveness of the definition change until a later legal resolution.  The court delayed an uncommonly long time in hearing arguments in this case, likely waiting out the Legislative Session so a ruling would not be rendered moot.  The only effect of the September court ruling is that the injunction will continue to stay in place allowing business to continue as usual until a trial is held in the lawsuit which will finally determine the matter of whether the definition change was effective or not.  This should occur in 2024.

Law enforcement intervention of hemp stores selling various types of intoxicating hemp products, including THCa flower, hit a fever pitch in 2023, along with DSHS inspections and enforcement.  THCa brings its own legal conundrums and growers and sellers are subject to two distinct bodies of law that are not congruent with one another:  civil/regulatory/administrative versus criminal law and the CSA.  The Texas Crime Lab decarboxylates products, instantly converting THCa flower into marijuana, and tests other products under differing standards from hemp labs, resulting in stiff felony charges for products carrying a “compliant” hemp Certificate of Analysis.  None of these criminal cases has made it through the system, so 2024 will likely bring a reckoning on the exploitation of perceived loopholes in the hemp laws.  Note that the 2018 Farm Bill made falsification of a COA a felony – and we are seeing lots of modified COAs.

 

Hemp Laws and Lawsuits in Other States

 

States across the country are enacting legislation to severely curtail or completely eliminate hemp derived THCs and intoxicants, motivated by a mixture of governments seeking to ban intoxicating cannabinoids and marijuana industry players who have to spend considerably more on their regulated products than hemp companies do.  Procedurally, as in Texas, in most of these cases, the current postures of the lawsuits are that an injunction is in place allowing the manufacture/sale of the to-be-banned cannabinoids until trials on the merits can be conducted to resolve the legal disputes. In March, DEA declared THC-O to be a controlled substance.  In May, the DEA announced that a rule regarding synthetic cannabinoids would be forthcoming, but we have not seen it yet, and an official stated Delta 8 was considered illegal even when extracted from legal CBD.

 

So, we continue to piece together the agency crumbs and litigation across the country to determine what is likely legal or not.  2023’s notable laws and litigation included the following:

 

Kentucky, Florida, and Tennessee each enacted flaws to regulate hemp products to prevent the sale of products to those under 21 and to prohibit the sale and marketing of hemp products that appeal to children.   Florida’s Department of Agriculture also inspected thousands of hemp companies and targeted 107,000 products marketed toward children.   Florida has just been sued by a hemp company challenging the new regulations.  As a result of a similar sequence of events in Kentucky last year, in 2023, Kentucky introduced regulations aimed at preventing sales to minors.  This has just gone through the notice and comment process, and will be one to watch in 2024.   Tennessee added age requirements and a special tax for hemp products.

 

In Alaska, a law was recently enacted banning any amount of THC in a hemp derived product, reserving the sale of those exclusively for marijuana licensees.  A lawsuit was just filed by the Alaska Industrial Hemp Association and will be one to watch in 2024.

 

Minnesota birthed a burgeoning hemp product market when it made rules allowing for higher concentrations of THC in hemp products last year.  But this year, Minnesota legalized cannabis for adult use, and it appears that hemp product makers will be held to registration and other requirements just as marijuana licensees, and synthetics and smokables will be banned.  Note that you must now register with the State if you are selling hemp products into Minnesota.  Another market to watch in 2024.

In New York, an injunction was just issued to prevent enforcement of emergency regulations that put extreme potency limits on the processing and retail sale of hemp products.

 

In Arkansas, an injunction was just issued to prevent the enforcement of a newly enacted law that criminalized all hemp synthetics and psychoactive substances.

 

In Maryland, an injunction was issued to prevent enforcement of a law that prohibited the sale of any intoxicating cannabinoids from hemp, reserving those products for marijuana licensees, which resulted in the closing of many stores.

 

In Virginia, an injunction was not issued to prevent enforcement of a law that banned delta 8 and enacted extreme potency limits on hemp products.

 

In Georgia, law enforcement was ordered to return seized hemp products after a court disagreed that the products were controlled substances.  Separately, the DEA just stated that Georgia’s plan to use pharmacies for medical marijuana distribution violates the CSA.

 

New Hampshire, Vermont, Connecticut, and North Dakota banned the sale of all the THC isomers.  At the beginning of the year, Louisiana issued regulations that made 100’s of hemp products illegal.  Lawsuits resulted in a walking back.  Note that you must have your product approved by the State to sell in Louisiana.

As for “Delta 9” products, a number of states have enacted regulations and restrictions on the potency of hemp products, such as Colorado, Connecticut, Louisiana, Oregon, among other states mentioned in this article.

 

Selling and distributing hemp requires you to be familiar with all of these states’ legal ping pong matches, as the status of whether a product is legal or illegal can change overnight.  Not every state is mentioned in this article, which is meant for general informational purposes only, and not legal advice.

FDA Quits CBD Regulation

 

Things aren’t clear at the top, either.  On the day the 2018 Farm Bill was signed, FDA issued a statement that CBD may not be placed in food or beverage in interstate commerce nor marketed as a dietary supplement because CBD was already an FDA approved drug for epilepsy.  Subsequently, FDA held a number of public hearings and took reams of public comment on regulation.  Its Commissioner frequently spoke pro-actively about regulating CBD.  Then, in 2021, everything changed.  No regulatory activity at all has occurred since with CBD.

 

Nevertheless, FDA had no hesitation in throwing down plenty of roadblocks in 2023.  FDA (and sometimes FTC) sent hundreds of warning letters to CBD companies for making impermissible medical claims, and in 2023, FDA denied several investigational new drug applications, even though they contained the medical studies that FDA claimed it needed.

 

Further, at the end of 2023, the FDA punted everything altogether, issuing a statement saying Congress needed to develop a special regulatory pathway for CBD, leaving hemp companies in a precarious legal limbo situation, trying to operate responsibly in an environment that refuses to specify any uniform standards.  The lack of legal clarity prevents CBD companies from fully accessing business services and capital they need to grow.

 

 The Texas Compassionate Use Program

 2023 was the biggest year that wasn’t for the CUP since 2017.  Rep. Klick introduced HB 1805, which would have added chronic pain as a condition, would have created a 10 mg dose, and would have had a mechanism to add conditions between sessions.  This bill had broad bi-partisan support, positive hearings, and positive progress.  It really was going to make it, but for the property tax showdown.  So, we ended up with no improvements to the CUP, but that wasn’t all that happened.  In 2022, the Department of Public Safety (DPS), which oversees the CUP, began preparing for the inevitable expansion of the Program, and in January 2023, DPS opened CUP applications for the first time since 2017.  Currently, there are only three licensees to serve the whole state, all 3 of which are around Austin, and only 2 of which are operational.  DPS recognized that patients are not being effectively served across the state through essentially only one provider, so steps are being taken to expand the manner in which patient access is provided.  DPS is conducting studies to determine how many licenses should be issued, where, when, and to whom.  But, due to the lack of a change in the law, all the hype that saw 245 companies submit applications for a license, resulted in no judging yet of the applications that were due in April.  2024 should be active on the application and rulemaking front for the CUP, and 2025 will see a renewed effort to grant Texas a viable bona fide medical program.  I am hopeful that changes in federal laws and leadership will provide political cover for Texas to finally relent and let us use cannabis therapeutically at least.  Anyone that wants us to have an actual cannabis industry must begin lobbying your representatives and senators during 2024 – once they are in session, they will not be able to take your donations, so now is the time to make your voice and your interests heard.

Historic strides were also made in decriminalization and penalty reduction bills pertaining to marijuana possession this Session, but as all the bills, they died with the property tax showdown.

 

Federal Rescheduling?

A potentially significant move was made this year when the President asked Health and Human Services (HHS) and the DEA to re-evaluate and reschedule marijuana.  Because marijuana is federally illegal for all purposes as a schedule one controlled substance, businesses cannot deduct expenses or use banks, among hundreds of other issues caused by the conflict between state and federal law.  In December 2023, HHS released hundreds of pages of documents related to its recommendations to DEA for the rescheduling of marijuana to Schedule 3.   HHS’ review focused on currently accepted scientific medical uses for marijuana, as well as its abuse potential. Those redacted records are posted on the On Drugs blog by Matt Zorn and Shane Pennington.  Both pro and anti marijuana politicians have urged DEA acceptance/rejection of the recommendation. Schedule 3 would  alleviate the business issues, but will create completely unknown new ones, considering the oversight the FDA has over the dispensing of drugs on the schedules.  The hope is that the many federal agencies involved in the determination will come to an actionable consensus before the next presidential election, which would set the tone for a new era of legal cannabis in 2025, coinciding with, and potentially having positive effect on our own legislative session that year.

Rescheduling would also aid in ushering in comprehensive legalization laws to address the conflicts between the states.  The legalization bill prepared by Nancy Mace is the most business friendly and sensible effort, and it also addresses CBD regulation.  Several more states legalized in 2023 for a total of 24 adult use states, with more than 50% of the population now living in a legal state, and, a record of 70% of people supporting legalization according to Gallup, up from 12% in 1969.   2024 should be a yuge year for cannabis nationwide, unless it isn’t….

 

Contact me if you have any questions about the status of the ever-evolving laws here in Texas and beyond at [email protected].

Did the DEA’s new rule confirm hemp-derived Delta-8 THC is illegal?

Written by Lisa Pittman on . Posted in Texas Legal & Regulatory News.


By: Andrea Steel and Lisa Pittman


On August 21, 2020, the Drug Enforcement Administration (the “DEA”) published a rule regarding the scheduling of hemp and marijuana, effective immediately (the “Rule”). The cannabis community swiftly reacted with an interpretation that this Rule outlawed Delta-8 THC, the hemp industry’s new favorite cannabinoid. The impact is that if Delta-8 THC is, in fact, a Schedule I controlled substance, the threat of felonious criminal prosecution would thwart the commercial viability of this cannabinoid. We dug into the Rule and other materials, and we disagree with the “now illegal” conclusion. Instead, we theorize that so long as the Delta-8 is derived from cannabis that meets the definition of hemp, it does not appear to be illegal under the federal CSA and we don’t believe the DEA Rule alters this.

What Does the DEA Rule Say?


The DEA repeatedly stresses throughout the publication that the Rule’s purpose is to simply codify what was already changed via the 2018 Farm Bill: “This interim final rule merely conforms DEA’s regulations to the statutory amendments to the CSA that have already taken effect, and it does not add additional requirements to the regulations.”
The Rule states there are only four conforming changes:

The definition of “Tetrahydrocannabinols” on Schedule I of the official “Schedule of Controlled Substances” (21 CFR 1308) is modified to carve out “any material, compound, mixture, or preparation that falls within the definition of hemp” (as defined in the 2018 Farm Bill). What does this mean?


Regardless of what any product label may say (i.e., “hemp” or otherwise), if a product has more than 0.3% Delta-9 THC, it is a controlled substance. Regardless of being hemp-derived, if the derivative, extract or product has more than 0.3% Delta-9 THC, it is a controlled substance. None of these changes, alters or affects the FDA’s jurisdiction over products containing cannabis and cannabis-derived compounds. Naturally occurring THCs in cannabis are not controlled substances so long as they are at or under the 0.3% Delta-9 THC threshold. Any of those that are above the 0.3% Delta-9 THC threshold are controlled substances. Synthetically derived THCs are all controlled substances, regardless of THC content.

Essentially removes Epidiolex (and any generics the FDA may subsequently approve) from control in schedule V (21 CFR 1308). Also removes the requirement for import and export permits for Epidiolex (and any future generics). The definition of “Marihuana Extract” on Schedule I is modified to be limited to extracts “containing greater than 0.3 percent delta-9-tetrahydrocannabinol on a dry weight basis.” What does this mean?


Regardless of whether the extract comes from hemp or marijuana, if it exceeds the 0.3% threshold, it is illegal. It is important to point out that this definition, even before the Rule, includes the following exception: “other than the separated resin (whether crude or purified) obtained from the plant.”

The Rule reiterates these changes were already mandated under the 2018 Farm Bill: “DEA’s regulatory authority over any plant with less than 0.3% THC content on a dry weight basis, and any of the plant’s derivatives under the 0.3% THC content limit, is removed as a result.”

What is Delta-8 THC and is it legal?


Our clients frequently ask us about the legality of Delta-8 THC and our view has been that the cannabinoid, if derived from hemp and the end product remains at or below Delta-9 THC, then the substance is likely legal, but to keep in mind that Delta-8 (when not derived from hemp) is on the controlled substances schedule and the government probably did not intend to create a pathway to legally get high from THC, so be prepared for the law to change at any moment. Delta-8 THC is one of hundreds of cannabinoids that are found in the cannabis plant. Delta-9 THC is the most widely known cannabinoid and causes a psychotropic reaction felt as an intoxicating “high.” Delta-8 THC, on the other hand, is nowhere near as well known and has been gaining in popularity over the last year, largely due to its alleged ability to have a substantially different and significantly less intoxicating but still mind-altering effect. There is also research dating back to 1975 regarding its potential for treating cancer and other studies exist showing various potential health benefits (see here, here and here).


As mentioned, the DEA does include Delta-8 THC on its list of controlled substances (updated August 2020) under “tetrahydrocannabinols,” but the 2018 Farm Bill expressly carved out “tetrahydrocannabinols in hemp” (See Section 12619(b) of the 2018 Farm Bill the very last provision of the entire bill). This carve out indicates any type of THC from a cannabis plant with Delta-9 THC at or below 0.3% is legal (at the federal level). It is important to note there may be states with more restrictive laws that do criminalize Delta-8 THC, even when derived from hemp. There may also be states where marijuana-derived Delta-8 THC is legal (but illegal at the federal level).

We don’t believe the USDA intended to create a mechanism for people to legally get high, but the focus on hemp has been the Delta-9 THC concentration, because of its known psychotropic effects. Delta-8 THC may have gone under the radar, but perhaps not. The DEA doesn’t schedule every substance that produces mind-altering effects, such as kratom.


Is hemp-derived Delta-8 THC synthetically derived?
The DEA Rule published on Friday repeatedly states that it is merely conforming other statutes to comply with the 2018 Farm Bill so the laws are consistent. The language in the Rule causing uproar is this:


“The [2018 Farm Bill] does not impact the control status of synthetically derived tetrahydrocannabinols (for Controlled Substance Code Number 7370) because the statutory definition of “hemp” is limited to materials that are derived from the plant Cannabis sativa L. For synthetically derived tetrahydrocannabinols, the concentration of Δ9-THC is not a determining factor in whether the material is a controlled substance. All synthetically derived tetrahydrocannabinols remain schedule I controlled substances.” (emphasis added).


Where people are getting caught up is the term “synthetically derived.” Delta-8 is a phytocannabinoid naturally existing in the cannabis plant – it is organically derived. Its natural occurrence is too low to be extracted outright, but – and we do not claim to be chemists – it is our understanding there is an isomerization process that can take place to convert CBD to Delta- 8 THC. Isomerization is the transformation of one isomer into another, isomers being molecules with the same molecular formula, but having a different arrangement of the atoms in space. We don’t believe that isomerization converts a phytocannabinoid into a synthetic one in the manner “synthetic” is used by the DEA. The 2018 Farm Bill definition of hemp includes all “isomers” of hemp. Therefore, any isomer of a hemp plant is also hemp and, pursuant to the 2018 Farm Bill, does not fall under the Controlled Substances Act (the “CSA”).


We believe the reference to “synthetically derived” is referring to a man-made chemical, not a process by which someone at a lab isomerizes one organic molecule to another (i.e., CBD to Delta-8 THC). If the concept that any material formed from any sort of human controlled chemical action taking place means that material is “synthetically derived,” then that would mean all of the hemp-derived products that go through processing are synthetic, and that is simply not the case. This article does a good job explaining the differences between synthetically derived cannabinoids, biosynthesis, and plant-based extraction. The first two take place without the plant at all. It does not seem feasible to conclude that isomerization of a hemp-cannabinoid equates to material becoming “synthetically derived.”

Synthetic cannabinoids (“SCs”) that the DEA targets are products like Spice and K2 (recall several years ago when the market was proliferated with “fake weed”), which are synthesized in labs to mimic the biological effects of THC. This DEA Fact Sheet on K2/Spice says SCs “are not organic, but are chemical compounds created in a laboratory.” SCs are part of the designer drug market and are typically liquid agents applied on plant material to look like marijuana. They were initially developed by researchers decades ago to study effects on the endocannabinoid system (in the absence of being able to study real cannabis as it has been illegal), but began to enter the consumer market in the U.S. around 2008. The DEA has identified the chemical makeup of various SCs and added them to the list of controlled substances to try to thwart the illicit market, but some actors continue to modify chemical structures to create new unscheduled
SCs as a loophole to the CSA. A history of SCs is laid out in a recent DEA temporary scheduling order. Understanding the background of SCs is important because of how the legislature intended the term as it used in the CSA and how the DEA has historically treated these inorganic, lab-created chemicals that attempt to mimic THC and skirt the CSA. We have also looked up several federal cases that discuss SCs and the bulk of those relate to products like Spice and K2, as mentioned above. We found no federal case law on Delta-8 THC.


What does the 2018 Farm Bill say?

In order to understand what the DEA is doing in this Rule, we need to first understand why they are doing it. That reasoning is found in the 2018 Farm Bill which, in part, defined “hemp” and carved it out of the definition of marijuana in the CSA. The 2018 Farm Bill defined hemp as follows: “the plant Cannabis sativa L. and any part of that plant, including the seeds thereof and all derivatives, extracts, cannabinoids, isomers, acids, salts, and salts of isomers, whether growing or not, with a delta-9 tetrahydrocannabinol concentration of not more than 0.3 percent on a dry weight basis.”


As mentioned above, the very last section of 2018 Farm Bill amends the CSA and expressly removes tetrahydrocannabinols in hemp” from the list of controlled substances. The 2018 Farm Bill included hemp-derived Delta-8 THC in the definition of hemp as part of the hemp plant and it removed hemp-derived Delta-8 THC from the list of controlled substances as a tetrahydrocannabinol in hemp.


The DEA Rule now follows suit in that it modifies the listing of “tetrahydrocannabinols” on the Schedule of Controlled Substances by adding the following stipulation: “Tetrahydrocannabinols does not include any material, compound, mixture, or preparation that falls within the definition of hemp set forth in [the 2018 Farm Bill].”


This reiterates the notion that so long as the 0.3% Delta-9 THC threshold is met, then the material is hemp. It follows that any derivative THC within such material (so long as the Delta-9 THC concentration is at or below the 0.3% on a dry weight basis) is also hemp and therefore not a controlled substance. The Rule, in modifying this definition brings the Schedule of Controlled Substances in line with what the 2018 Farm Bill mandated.

Final Thoughts:

Delta-8 THC is THC – it is not a lab-created substance with a chemical structurally altered to
mimic its own biological effects. Delta-8 THC is organically derived and is the substance it is intended to be. Delta-8 THC has a substantially different effect on the body than Delta-9 THC that has value in and of itself that has shown promise on many medical fronts. Nonetheless, consumers should be aware of any product being consumed, especially those that are not clearly regulated. There are many ways to process cannabis extracts, some of which use solvents that are dangerous if consumed, so it is crucial for end-products to be tested by a reliable third-party for harmful ingredients, including residual solvents, and have accurate certificates of analysis available.


In Hemp Indus. Ass’n v. DEA (357 F.3d 1012, 2004 U.S. App. LEXIS 1846), a well-known case from 2004 regarding DEA’s treatment of THC in hemp, the court concluded the DEA could not regulate unscheduled drugs without following proper procedures to do so (a great summary of that case can be found here). The DEA Rule from Friday repeatedly states it is not changing any laws, so even if it wants to come down on hemp-derived Delta-8 THC and re-schedule it, this Rule is not the appropriate avenue to do so.


It is for these reasons we do not believe the DEA Rule altered the legality of hemp-derived Delta-8 THC. However, that doesn’t mean the DEA isn’t trying wrangle it back in or isn’t looking for someone to make an example out of. Being the example, even if the end result is a win, would likely be a lengthy, expensive and potentially traumatizing experience. Proceed accordingly.


Despite the immediate effectiveness of the Rule, comments are being accepted through October 20, 2020. Providing comments during a government rule-making process is a great opportunity to make your voice heard and effect change, and the only way you would have standing to make a legal challenge to the Rule later. If you think the DEA should clarify its position on Delta-8 THC or the “work in progress hemp extract” issues that need to be addressed (another area of significant concern laid out in this article by attorney Rod Kight), make sure to send in comments. Details on how to do so can be found in the Rule, and our attorneys can assist your business with crafting them.


THE INFORMATION IN THIS ARTICLE IS NOT INTENDED TO BE LEGAL ADVICE, SHOULD NOT BE TAKEN AS LEGAL ADVICE AND SHOULD NOT BE RELIED UPON IN PLACE OF CONSULTING WITH A QUALIFIED ATTORNEY PRIOR TO TAKING ANY ACTION. NO ATTORNEY-CLIENT RELATIONSHIP IS CREATED BY ANY READING, USE OR REPUBLICATION OF THIS ARTICLE. THE THEORIES PUT FORTH HEREIN ARE STRICTLY NOVEL IN NATURE AND HAVE NOT BEEN TESTED IN A COURT OF LAW.

Hemp Industry Files Lawsuits Against DEA Over Release of Rule Regarding Hemp

Written by Lisa Pittman on . Posted in Texas Legal & Regulatory News.

On August 21, 2020, the Drug Enforcement Administration (DEA) published an interim final rule (IFR) pertaining to hemp that acknowledged the changes to the definition of marijuana caused by the 2018 Farm Bill that was effective on January 1, 2019. 

Under the 2014 Farm Bill, hemp was still considered marijuana under the Controlled Substances Act (CSA), and hemp was only allowed to be grown in limited circumstances in states with an industrial or pilot program—but the hemp was not supposed to leave those states’ borders—because it was still marijuana.  Hemp CBD did cross state lines though, flying across state borders on Amazon and everywhere else.

The exponentially growing hemp CBD industry grabbed the attention of Sen. Mitch McConnell, who propelled the passage of the Hemp Farming Act inside of the 2018 Farm Bill.  Among other things, the 2018 Farm Bill made hemp a federally legal agricultural commodity, allowed its interstate commerce, and directed the United States Department of Agriculture (USDA) to oversee how each of the states regulate hemp within their borders in conformity with the 2018 Farm Bill. 

The 2018 Farm Bill excepted hemp from the definition of marijuana and created a definition of hemp that is cannabis less than .3% delta-9 THC on a dry weight basis, including all of its derivatives, extracts, and isomers and so on.  Thus, the DEA reiterated in the IFR what has always been true, that cannabis exceeding 0.3% delta-9 THC is marijuana, a schedule I controlled substance.  Therefore, cannabis derivatives or extracts, regardless of source, are also marijuana if they are over 0.3% THC.  Although the IFR was not stating anything new about the CSA or the definition of marijuana, the IFR immediately set off concerns for the chilling consequences it could have on the hemp and CBD industry.

As many processors and extractors in the industry know, hemp extract that is not in its final form almost invariably exceeds 0.3% delta-9 THC concentration at some point during the extraction process before that percentage is brought back into legal compliance for the final product.  The reminder of where this activity falls for CSA purposes has alarmed those whose businesses center on extraction and processing—no one wants to be prosecuted for the manufacture or distribution of a Schedule I substance.  

Hemp Industry Files Lawsuits Against DEA Over Release of Rule Regarding Hemp

The DEA explains its reasoning as follows:
The definition of hemp does not automatically exempt any product derived from a hemp plant, regardless of the D9-THC content of the derivative. In order to meet the definition of ‘hemp,’ and thus qualify for the exemption from schedule I, the derivative must not exceed the 0.3% D9-THC limit. The definition of ‘marihuana’ continues to state that ‘all parts of the plant Cannabis sativa L.,’ and ‘every compound, manufacture, salt, derivative, mixture, or preparation of such plant,’ are schedule I controlled substances unless they meet the definition of ‘hemp’ (by falling below the 0.3% D9-THC limit on a dry weight basis) or are from exempt parts of the plant (such as mature stalks or nongerminating seeds). See 21 U.S.C. 802(16) (emphasis added). As a result, a cannabis derivative, extract, or product that exceeds the 0.3% D9-THC limit is a schedule I controlled substance, even if the plant from which it was derived contained 0.3% or less D9-THC on a dry weight basis. 

In relevant part, the Farm Bill’s definition of legal hemp extract includes “the plant Cannabis sativa L. and any part of that plant, including … extracts …, whether growing or not, with a delta-9 tetrahydrocannabinol concentration of not more than 0.3% on a dry weight basis.”  Based on a clear reading of the Farm Bill, however, it is doubtful Congress intended to make illegal any CBD products derived from legal hemp and containing less than 0.3% delta-9 THC concentration in final form.  

Congress may not have been aware of the temporary increase in delta-9 THC during processing—after all, the focus was to simply get hemp separated from marijuana and made federally legal first.  Since the IFR groups all extracts over .3% delta-9 THC as marijuana, regardless of source, it could be argued the DEA’s interpretation of the interplay between the definition of hemp extract in the 2018 Farm Bill and marijuana extract in the CSA appears inconsistent with the express intent of Congress to exempt hemp and hemp-derived products – including extracts – that contain less than 0.3% delta-9 THC concentration on a dry weight basis, from the CSA.  

However, the 2018 Hemp Farming Act made no express protections for hemp extract in process until it reaches final form for human consumption, putting processors in a bind to decide whether to risk it and carry on, or, to close up shop and forget the whole thing.   To assuage this doubt, two lawsuits were recently filed against the DEA, contending that the DEA overstepped its authority in the IFR in several respects.  The hemp industry took the IFR as a direct warning from the DEA that attacks were on the way to put hemp processors out of business, despite the fact that the hemp industry is governed by the USDA, which delegates the regulation of the programs to the states, and despite the lack of any prior DEA enforcement on hemp, even during the 2014 Farm Bill time period while all of hemp was still marijuana under the CSA, some in the hemp industry thought they should make some noise about the IFR.

Hemp Industry Files Lawsuits Against DEA Over Release of Rule Regarding Hemp

The lawsuits allege the DEA is unlawfully attempting to criminalize hemp production and to regulate hemp products, and the second lawsuit seeks an injunction preventing the DEA from enforcing its laws against hemp producers.  The Hemp Industries Association, a leading trade organization with a history of suing the DEA, and a South Carolina-based hemp company, RE Botanicals, filed a petition for review of the DEA’s August 21 Rule in the U.S. Court of Appeals for the D.C. Circuit, asking the Court to intervene and block implementation of the IFR.  The same plaintiffs filed a stronger lawsuit weeks later, a declaratory action to clarify the scope of the 2018 Farm Bill in the U.S. Court of Appeals for the D.C. Circuit.

The complaint for declaratory and injunctive relief alleges the DEA is unlawfully attempting to regulate certain products derived from lawful hemp by misinterpreting 2018 Farm Bill by classifying hemp in progress and waste hemp material, two necessary and inevitable byproducts of hemp processing (the elements that rise above .3% THC), as Schedule I controlled substances. The hemp industry plaintiffs argue that Congress deliberately removed all commercial hemp activity from the DEA’s jurisdiction when it legalized hemp production, including hemp processing, via the 2018 Farm Bill.

The second lawsuit alleges the DEA’s interpretation of the 2018 Farm Bill “has serious, immediate, and irreparable consequences.” Further, “[A]ll hemp processors and manufacturers who work with and/or store hemp in process and/or waste must now choose between ceasing to process, manufacture and/or store hemp; obtaining a Schedule I license from DEA; or risking criminal prosecution under the [Controlled Substances Act]. Given the centrality of hemp processing to the hemp industry’s supply chain, forcing processors to choose between the foregoing options would effectively destroy the entire hemp industry.” The hemp industry plaintiffs asked the court for a judicial determination that (1) the definitions of hemp and THC in hemp in the 2018 Farm Bill includes hemp in progress and waste, and that such materials are therefore not controlled substances; and (2) the DEA lacks any independent authority to regulate any aspect of hemp production, including hemp in progress and waste. 

The hemp industry plaintiffs are also seeking an injunction (1) preventing the DEA from enforcing the CSA as to hemp in progress and waste, and from classifying such materials as Schedule I substances, and (2) preventing the DEA from promulgating any rules relating to the production of hemp.It is unclear why the DEA would be involved in promulgating any rules relating to the production of hemp—that is the USDA’s purview.  The DEA is not involved in policing the hemp agricultural commodity program, and the few ways in which it is implicated in the USDA’s interim rule is being walked back.  Hemp is an incredibly low priority for the DEA, considering the mass influx of deadly drugs, violence, and cartel activity the DEA is charged with pursuing—and as to marijuana—the DEA only pursues large scale illegal trafficking and cartel activity.  The DEA was recently quoted as saying COVID caused an interruption in the illicit drug supply chain such that pent up demand is engulfing the floodwaters that have since been re-opened, and people are dying at alarming rates.  The DEA is focused on these activities.

Hemp Industry Files Lawsuits Against DEA Over Release of Rule Regarding Hemp

The hemp programs are policed locally by the states. The idea that the DEA is going to come busting down the door of an unsuspecting compliant hemp processor, who must register and report to one or more agencies in his state, over a few hundredths of a percentage of THC, is nothing short of ridiculous.  However, it is understandable that businesses want to eliminate all risks possible, and the temporary veering into Schedule I territory can cause problems for insurance companies, banks, and conservative investors.  But, until Congress changes the definitions of hemp and marijuana to create a special allowance for hemp extract in progress, cannabis extracts over .3% THC simply are marijuana under the CSA, both before and after the publication of the IFR.Another issue from the IFR is the mention of synthetic cannabinoids being Schedule I substances, which they are.  Think spice, K2, those types of lab-manufactured drugs intended to mimic marijuana—these definitions of “synthetics” have been defined by case law and are listed on the CSA.  But, the hemp sector is concerned that the use of the word “synthetics” could portend an outlaw of “delta-8 THC,” another hemp derived cannabinoid present in trace amounts in the cannabis plant, but that typically requires synthetic processes to convert it to a consumable form. If the hemp industry’s concerns here were founded, then all CBD products would be synthetic because they all need a synthetic process for human consumption.  

Again, like with hemp extract in process, it is highly unlikely that Congress imagined delta-8 THC when getting the Hemp Farming Act passed, so, it is unlikely the IFR is any kind of signal that suddenly the DEA is onto this and going to chase down hemp peddlers, again, over a very minute variation in THC type/amount.  Synthetic cannabinoids are already on the CSA as controlled substances, so again, the IFR was stating nothing new.  And because delta-8 THC is not a synthetic cannabinoid as that term is used, it has not been suddenly made illegal by the IFR.  Note, however, that marijuana-derived delta-8 THC is on the CSA, and, some states have individually outlawed hemp delta-8 THC.  No other activity has occurred since these lawsuits were initially filed.  While I believe the lawsuits were premature,  filed before the conclusion of a comment period opened by the DEA on the matter, we will see if the lawsuits have any effect of causing the DEA to issue any clarifications on these issues. The best-case scenario would be for later iterations of the Hemp Farming Act to address and improve these concerns for the hemp program overall for all participants.  

There is little doubt many submitted comments about hemp in progress to the USDA in its extensive public commenting process which could lead to some protections with conditions there.  The real news will be what the USDA unveils after its consideration of all the comments.

Lisa L. Pittman, Esq., Coats Rose, P.C.

Interview: Sid Miller

Written by Lisa Pittman on . Posted in Agriculture.

Interview of Texas Agriculture Commissioner Sid Miller

By Lisa L. Pittman, Texas Hemp Advisory Council Member

THR: What impact does the first Texas hemp harvest have on future grow operations in the Lone Star State?

SM:  Well, where we start is not necessarily where we are going to finish.  We’ve got a lot of producers signed up, but it’s a lot slower start than we anticipated—one, there was a drop in price, which held a lot of the farmers back, then of course, the day we launched, on March 16th, is about simultaneously when COVID-19 took place; I think a lot of people were a little trepidatious about that, but we do have a lot of farmers signed up—Samplers, all the different licenses, we’ve got good action, whether it be lot permits or producers or processers, we are doing pretty good.

THR:  How has the processing of those licenses and permits gone so far?

SM: The Legislature gave us a 60 day turnaround time to process the applications.  I think we averaged about 10 days. Most of them went off without a hitch. There were just a few, a handful that didn’t quite fit our template for the application, like having 12 or 15 owners that wouldn’t fit on the application, so we had to hand-walk some of those through, a few other things, but for the most part I was very pleased with how smooth it went off.

THR: Especially with your employees working from home, right?

SM: Yeah, we changed and working from home, of course, we had zero staff and zero money to get the program up and running, which was a huge challenge. The Legislature didn’t give us any appropriations or any FTEs to start the program. Now we have some funds coming in from the sale of licenses, which we can use to back up our personnel and get some of that allotted time paid, but starting with nothing and doing everything is tough, but we managed.

THR: I bet, about what percentage would you say has been recovered or recouped so far?

SM: Well, probably zero. The Legislature allows us to raise $750,000, which we may do, but the Legislature gets the first quarter million—they get the first $250,000 and keep it.  So, we are still working for free.  What I am having to do is borrow from other programs and use personnel in hopes that we can pay that back once we get enough of the licenses sold, which we are getting pretty close to.

THR: Where do you see the opportunity for Texas growers headed compared to other states that started earlier?

SM: Well, we are behind a little bit.  We are starting about four years late—a lot of the other states are operating on the 2014 Farm Bill—they don’t have to go through all the hoops and the sampling is different and a little less stringent and a little less oversight.  Everyone has to be on the same page—the 2018 Farm Bill comes at the end of October. We are sort of blazing a trail.  I think we are one of the first, if not the first, to actually implement the hemp program under the 2018 Farm Bill.  We didn’t have any problem getting our plan and our Rules approved.  They flew right through, so we are pretty proud of that, we are rocking and rolling and it’s running pretty smooth actually.

THR: Well, maybe in the long run we will be setup for success then under the 2018 Rules. 

SM: I think so. We are going to be far ahead of the other states that haven’t switched to 2018.  They will still have to rewrite their Rules and adapt and change, and all that.  We don’t have to do that. We are up and running, so I feel good about that.

THR: Is there anything Texas can do to improve its laws to economically benefit retailers and growers during the next Session?

SM: You know, I’m not a big government guy, but right now, we’ve got zero field personnel and zero samplers. Since we don’t have any funding, I think the Legislature should address that.  If we don’t do any inspections, if we get a complaint, I guess we will have to send someone out. I don’t have any personnel to do that, so the Legislature could probably improve the lack of oversight.  We could probably do a better job if the Legislature would see fit to make those allocations.

THR:  Do you have any comment on the ban on the manufacture and sale of smokable hemp?

SM:You know, I disagree with that. It’s a huge market.  Banning Texas producers from selling and processing smokable hemp does nothing to curtail the sale of smokable hemp. Other states are going to be selling it and our people are going to be buying smokable hemp from out of state suppliers, so it really doesn’t slow it down any at all.  It just puts our growers and processors at a disadvantage.

THR: Has the TDA noticed a decline in AG Markets/Commodities since COVID-19 started affecting our economy?

SM: We had some backlog in the meat industry where the virus broke out in the packing plants, and it shut down production which backed up a lot of the animals in the feedlots, and the poultry, the pork, but beef was the one that suffered the most.  We have just about worked through all of that now—we are back up to 95 to 99% capacity, but we still have a lot of cattle that are backed up to feedlots that we’ve got to process.  It’s still a depressed market there.

I sent a letter to President Trump and William Barr at the DOJ demanding a full investigation.  Consumers are paying record high prices for beef and the farmers are receiving low record prices on their end.  A farmer was losing $500.00 on a steer, and a packer was making $2500-$3000 on that same steer.  They are looking into that. There is going to be a full investigation, which doesn’t affect the hemp business other than a lot of people that are growing hemp are also in the livestock business.

THR: How have President Trump’s recent direct payments to farmers impacted Texas so far, and how much has been sent?

SM: Well, we don’t have those numbers because it’s still ongoing.  There’s still money left.  They just recently extended the date on the application; I think until August 31st.  So there will still be more funds going out.  We don’t have a total on that.  But it certainly helps.  Farmers, you know, we really don’t want a handout. What we’d rather have are good markets and a free market system, but we are appreciative of that because we don’t want to go out of business and lose the family farm.

THR: Right.  Have any official testing results been submitted yet on hemp crops and, if so, have any tested “hot”?

SM: Well, we’ve got a few samples, we’ve had 20 requests for sample manifests, and I think a dozen for transfer to actually move it off the farm [as of July 7, 2020].  I don’t believe any of those were “hot,” which is great news, but it’s still early—we have so far 921 producers, which is good.  We only have 405 lot permits, so apparently these producers haven’t registered all their fields yet, planting is still going on, not all the fields are planted.  But we will get there.  We should have at least, if every farmer only has one field, we should have over 900 lot permits and many of them will have two, so we could have 1,500 to 10,000 lot permits, and we don’t right now—it’s a moving target—the permits are still coming in every day. I don’t have the acreage added up on that, but we will get that in the near future.  We will have an acreage count.

THR: How much longer do the farmers have this summer to plant?  When will be the next opportunity?

SM:We’ve got probably more acres in greenhouse operations than we do field operations, so those plant year-round—planting never stops—there’s not a season when you control the climate and the environment.  This is a 90-day crop—a 60-day crop if you are just doing fiber.  So we could still have the farmers planting, especially if they use transplants, or seedlings, which a lot of them do, actually planting up through the end of July, first of August… they’d still have time to make a crop.

THR: What can industry stakeholders do to better help the industry?

SM: Well, we just need to keep educating the public.  You mentioned the smokable hemp, there’s really not any harm in that, but what people thought was “dope” or “weed” or the equivalent to, which it’s not, it doesn’t have the THC in it, so I think a public education program, we’ve still got some work to do there, but there’s been so many people helped by the CBD and CBG that the word is getting out that this is a very positive crop, it’s not a bunch of pot smokers bending the rules to grow marijuana, but it’s a legitimate crop that has many legitimate purposes, besides the oil, which is great, but the fiber has a lot of applications, too.

THR: Of those legitimate products, which products do you see Texas becoming a leader in? Is it fiber, or what about some other sustainable products as well?

SM: I think we’ll be all of the above…Texas is such a big state, a diverse state, we’ve got such a good growing climate, we’ve got a variety of soils, got a lot of good farmers here, basically have plenty of farmland, we’ve got a lot of greenhouses here, so I would say in five years, we’ll be if not the leader, one of the leaders, in the CBD CBG production and the fiber production.

THR: What needs to happen for the industrial supply chain to be built out in Texas?

SM:     Well, we need more processors, we need buyers for that. The farmers, if you tell them they can grow a crop profitably, they will grow the world level with it—they will produce so much of it you can’t use it all, and that’s usually what drives the commodity prices down, so we need more processors for the fiber at this point.

THR: What can we do at the State to attract those businesses to come to Texas and invest and build those facilities and manufacturing plants?

SM: Basically, there’s not a lot left to do—we are already doing everything right already, that’s why so many other types of businesses now, including the hemp processors and distributors, will be coming to Texas.  We have a very favorable business climate—no state income tax, low and predictable regulation, we are not a litigious state, we don’t just let the lawyers run crazy suing everybody, we’ve got a good labor force, everything you need for a successful business—that’s why so many people have moved here.

THR: What are some companion industries in Texas that people can apply their skills and resources toward hemp such as construction, technology, refining, medical?

SM: Well, that’s yet to be seen. We don’t really know what those industries are going to be or how they are going to take off. It depends upon the people conducting in those industries. It might be fiber for concrete, it may be fiber for cloth or material or paper or construction materials.  At this point, we don’t know what we don’t know.  But when we get up and running, we’ll find out.

THR: The hemp industry was soaring when the Farm Bill was signed, and Texas subsequently legalized hemp.  Since then, wholesale prices have plummeted, and many are still trying to sell their 2019 crop.  Now, 2020 crops from more states are coming online.  Apart from having a buyer before you plant a seed, what advice do you have for people getting into this industry?

SM: Well, the first thing I would recommend to somebody that’s wanting to get into this industry, is go to the Texas Department of Agriculture’s website (texasagriculture.gov), I’ve got two very informative videos there—one is about getting into the hemp business, what you need to know, how you need to do it, what are the pitfalls, what are you up against.  And then there’s a second video with a little more intel that we require farmers and processors to watch before they get a license.  So at least watch the first one, if you’re thinking about getting into hemp, and then if you still want to get into hemp, watch the second one.  If you still don’t have your questions answered, I have about 13 pages posted of frequently asked questions about the hemp industry and I think we have just about covered everything.  All that information is available at your fingertips, 24 hours a day, seven days a week, 365 days a year.

Lisa Pittman for THR: Very good, thank you, Commissioner.  Do you have any other last words?

SM: This is going to be a good industry.  It’s been interesting to set up a new industry that we are on the ground floor of in Texas, and we’re helping to shape and mold that, and we just try to get as much input as we can—that’s why I have my own personal (it’s not state-mandated) Hemp Advisory Council, which I’m thankful that you serve on that, and you’ve been in on those meetings and I appreciate the direction and the input from all of the members of that which represents a big cross-section of the industry—whether it be grower, processor, or a testing lab, or transportation or law enforcement, we have someone from just about all of those areas that the hemp industry touches on that Council—we’ve got every aspect of the industry represented, so that’s been very helpful.

THR: Well I sure have appreciated serving on it, and I look forward to our next meeting.

New Laws in Texas for Hemp

Written by Lisa Pittman on . Posted in News, Texas Legal & Regulatory News.

Despite its stance on marijuana, Texas is not lagging behind on the hemp bandwagon.  Hemp is rising even faster from the shadows of prohibition than marijuana. Products containing hemp extracts high in CBD, such as oils, topicals, and infused products, gained such mainstream popularity and acceptance under the 2014 Farm Bill, that on January 1, 2019, hemp became federally legal and removed from the definition of “marijuana” under the U.S. Controlled Substances Act (CSA). Under the 2018 Farm Bill, signed December 20, 2018 by President Trump, if Texas had not passed a hemp law during the 2019 Legislative Session, it would have been subject to the U.S. Department of Agriculture’s (USDA) default rules for growing hemp as a federally legal agricultural commodity.  

On June 10, 2019, Gov. Abbot signed HB 1325, legalizing hemp in Texas, and directing the Texas Department of Agriculture (TDA) to devise rules from planting to harvest, and the Department of State Health Services (DSHS) to devise rules from testing to end consumable hemp product.  The rules address licensing qualifications and procedures, testing and inspection requirements, reporting and record keeping requirements, distribution, manufacturing, and plans for disposal of “hot” crops (cannabis plants with >.3% THC), among other issues.  The TDA rules provide slightly more leeway in that if your crop tests at .3% THC within the measure of uncertainty given by the laboratory, then the crop is OK to be harvested and shipped off the licensed property with a transport manifest.  A transport manifest is also required to send in a sample for testing.

For a quick introduction to hemp, it is a type of cannabis plant comprised of many cannabinoid compounds, including CBD, CBG, CBN, and THC—the only compound that creates a “high.” In contrast to marijuana, which is tightly regulated from a law enforcement perspective because of its status on Schedule 1 of the CSA, hemp naturally contains low THC.  By law, for cannabis to be considered hemp, the THC concentration must be ≤0.3% THC. Until recently, hemp has not been subject to much regulation – though regulation is coming from multiple agencies including the USDA and the Food and Drug Administration (FDA). The FDA retains regulatory authority over CBD, the compound of the cannabis plant that is now considered a drug rather than a dietary supplement because of FDA’s approval of a CBD formulation to treat epilepsy.  It is still unknown when the FDA will develop rules to regulated hemp CBD products or whether they will be placed in a dietary supplement category.  The FDA has already held public hearings, taken public comment on the regulation of hemp CBD, and issued a status report on their information gathering in their process of creating regulations.

The USDA released its “Interim Final Rule” (IFR) for farming hemp under the 2018 Farm Bill on October 31, 2019, with a lengthy notice and comment period. The USDA must approve each state’s plan, so even states that have already been producing hemp under the 2014 Farm Bill will have to adjust their programs to conform with the new USDA rules to receive a state plan approval by October 31, 2020.  The USDA received over 4,600 comments that it must consider before adopting its “Final Rule” to govern hemp production.  Some areas of extreme concern, including the requirements that testing laboratories be registered with the U.S. Drug Enforcement Agency (DEA) and that a reverse distributor licensed by DEA must destroy hot crops according to DEA guidelines, are not going to be enforced through October 31, 2021 or publication of the Final Rule, whichever comes first. 

By way of background, under the 2014 Agricultural Improvement Act (the 2014 Farm Bill), hemp was still considered to be marijuana, and was only permitted to be grown in two limited situations: in conjunction with a state’s industrial hemp program or under a contract with a university’s research pilot program.  In neither of these instances were hemp or extracts made from hemp allowed to leave those states’ lines. But they did, even on Amazon, and the word got out about CBD’s ability to relieve inflammation, pain, anxiousness, sleeplessness, and other common ailments, without the side effects of synthetic drugs and opiates, or the high of marijuana.  The main states to take advantage of the 2014 Farm Bill were Kentucky, Colorado, Oregon, and Montana. After the 2018 Farm Bill, most states are activating hemp programs—and some did not wait on the USDA.

Our founding fathers grew hemp, and growing hemp was a requirement of some early Colonists.  Before 1937, industrial hemp was legal and used for clothing, paper, rope, and fuel. But in 1937, Congress passed the Marihuana Tax Act, which made all species of the Cannabis sativa L. plant illegal, including hemp. While the purported purpose was to eliminate the use of cannabis as a drug, some theorists posit that the real intent of the Act was to eliminate the competition hemp posed to paper and steel manufacturers by referring to cannabis as “marijuana” in media as a scare tactic in relation to its use as a drug. But, the U.S. needed strong hemp fiber during World War II and it was briefly re-legalized.  Since then, the U.S. has been importing hemp to use as fiber for the seats of BMW automobiles manufactured in Alabama, for example. Hemp powders and other goods have been imported for years, found mostly in health stores such as Whole Foods.  But now hemp CBD has become mainstream, sold in most national retail chains, even located in the “impulse buy” areas near cash registers.

However, there is a lot of confusion about hemp and the nuanced new law.  For example, state law enforcement often intervenes and is frequently unclear about the legality of the substance they may discover in a vehicle or a store shelf.  The Department of Public Safety (DPS) raided People’s Pharmacy for it in 2017, and other seizures and arrests have been made. The latest issue surrounds hemp leaves that can be smoked, and there have been many seizures from smoke shops on the allegation that the leaves are marijuana. They look and smell the same, and neither drug dogs nor the state crime lab can tell them apart.  It was disappointing that the USDA did not propose a uniform travel manifest or QR code requirement for law enforcement (and consumers) to readily identify whether a substance is hemp or marijuana. But, Texas and most states require a Certificate of Analysis (COA) demonstrating the THC concentration, the cannabinoid profile, the presence of pesticides, the presence of heavy metals, and any harmful pathogens.  This COA may be carried with the product (raw or finished) and located via a website or QR Code on a product’s label.  Raw hemp for distribution must be accompanied by a TDA transport manifest. 

A controversial topic is the smoking of hemp.  The original hemp act authored by Rep. Tracy King contained no overly zealous regulations or prohibitions—it was merely intended to promote the growth of hemp free from undue government interference.  However, in my work during the 2019 Legislative Session to help get the hemp bill passed, the overarching concern to every legislator I talked to was that the hemp bill was just a subterfuge for marijuana—something our State’s leadership is still staunchly opposed to.  Thus, the Senate version of the hemp bill was rewritten to involve the DPS, created crimes for certain activities, banned the manufacture of hemp for smoking, and made a definition for smoking. A promise was made on the Senate floor during the debate on this bill that hemp would not be smoked, to assuage the marijuana fears. Thus, the DSHS is now in a position of having to effectuate the intent of the hemp statute by creating a rule that effectively bans the smoking of hemp, which they have done in proposed rules published May 8, 2019, by prohibiting the manufacture, processing, distribution, and retail sale of smokable hemp.  Smokable hemp can still be bought online or purchased from other states, and we still do not know what the final rule will be or how strictly this rule will be enforced, so the best bet to solve this issue is to work to change this aspect of the law in the 2021 Legislative Session. 

From an agricultural, industrial, and medicinal standpoint, the hemp business—largely unbeleaguered by the crushing compliance and taxing obligations of marijuana businesses—is on an exponential rise in the United States and internationally.  A word of caution, the rise has been volatile.  But as a state that leads in agriculture, technology, refining, and medicine, Texas is poised to become the new leader in hemp production, whether for medicinal or industrial purposes.  This is an incredibly exciting time to participate in the change of major laws in the dawn of a new industry.

Lisa L. Pittman is Co-Chair of Cannabis Business Law Group at Coats Rose, P.C., & Member of Texas Department of Agriculture Industrial Hemp Advisory Council