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Texas Lawsuit Challenges State’s New Ban On Smokable Hemp

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Four Texas companies are suing to overturn the state’s new ban on the manufacture and sale of smokable hemp products, which they warn will shut Texas companies out of a multibillion-dollar industry and lead to inaccurately labeled products on store shelves.

In a lawsuit filed in Travis County District Court on Wednesday, the companies are asking a judge to declare the ban unconstitutional and allow hemp products intended for smoking or vaping to be produced and sold legally across the state.

“At a time when the Texas economy is reeling from the fiscal impact of COVID-19, it is unfortunate that the State chose to foreclose such a large economic opportunity for our state and instead chose to force long-standing Texas businesses and jobs across the border to neighboring states, such as Oklahoma,” said attorney Chelsie Spencer, counsel for lead plaintiff Crown Distributing LLC.

“Crown Distributing, which manufactures the popular Wild Hemp brand of smokable products, stands to lose $59.6 million in revenue over the next five years if the bans are upheld,” Spencer told Marijuana Moment in an email. “The state of Texas stands to lose $2.9 million in sales tax revenue alone.”

hemp sales in texas

Image from lawsuit

Texas legalized hemp in 2019, in large part to capture a piece of an industry that is booming following the federal legalization of the crop through the 2018 Farm Bill. Hemp, a category of cannabis that contains less than 0.3 percent THC, has a variety of uses: Its seeds are a nutritious food source, its fibrous stalks can be made into textiles or building materials and its flowers can produce a variety of cannabinoids, most notably cannabidiol (CBD).

Texas’s hemp law as passed by the legislature specifically prohibited the manufacture of hemp products intended for smoking or vaping, though it left open the door for selling products made out of state. But a year later, regulators at the Texas Department of State Health Services (DSHS) issued rules extending that ban to forbid the retail sale of any smokable hemp products. That restriction took effect on Sunday.

Plaintiffs in the lawsuit argue that both those provisions should be overturned. The state legislature’s ban on processing and manufacturing smokable products violated the state constitution’s protection of economic freedom, they say, while DSHS lacked the authority to extend lawmakers’ ban to include retail sales.

“DSHS characterizes banning distribution and retail as ‘a logical extension’ of banning manufacturing,” the lawsuit says. “But even if this were true (it is not), agencies have no authority to enact rules that they deem to be a ‘logical extension’ of law.”

Cannabis advocates in the state agree, calling the change a regulatory overreach.

“Hemp regulators are over-stepping their authority and encroaching on the economic liberty of Texas business owners,” Heather Fazio, director of Texans for Responsible Marijuana Policy, told Marijuana Moment. “It’s absurd to forbid the in-state sale of products that are completely legal in Texas and across the country. Consumers can simply make their purchases online and have it shipped, legally. Cutting local entrepreneurs out of this thriving market is bad for business and bad for Texas.”

Joining in the lawsuit are America Juice Co. LLC, a Crown affiliate that also manufacturers smokable products; Custom Botanical Dispensary LLC, an Austin-based retailer that sells smokable hemp products; and 1937 Apothecary, also based in Austin, which makes and sells consumable hemp products including tea, smokables and gummies.

“If allowed to move forward, these bans on smokable hemp products will shutter businesses across the state, resulting in a loss of jobs and tax revenue,” the companies said in their complaint. “They impede the economic liberty of Texas businesses, pose an existential threat to Texas hemp manufacturers, farmers, and retailers, and are sure to stifle growth of a budding Texas industry.”

As for the ban on producing and manufacturing smokable hemp products, the companies say it violates the state constitution’s protections against arbitrary economic restrictions.

“There is no plausible law enforcement benefit from banning the Texas manufacture and processing of smokable hemp products,” the lawsuit argues. “Imposing an arbitrary constraint here is particularly perverse because the law does not ban the use or consumption of smokable hemp products. As such, Texas consumers will simply buy smokable products made out-of-state.”

“Stated differently,” it continues, “if Texas had banned the processing and manufacture of cheese in Texas, Texans wouldn’t stop eating cheese.”

Banning in-state sales are also problematic from a practical standpoint, the lawsuit argues. Because smokable hemp flower is indistinguishable from hemp flower intended to be used for other purposes, the companies argue, marketers will be encouraged to mislabel products in efforts to skirt the ban.

“The retail ban—especially in view of DSHS’s public comments—has no more logic to it than the ban on processing and manufacturing smokables,” the lawsuit says. “Texans can still purchase and use smokable hemp products manufactured out-of-state. Texans can also purchase hemp that is not labeled or marketed ‘for smoking’—for example, hemp marketed as ‘tea’—and they can use that hemp to make their own smokables or with the vaporizing devices shown above. If anything, the Rule and DSHS commentary encourages Texas farmers and retailers to mislabel hemp flower so that consumers will still be able to purchase hemp flower grown in Texas.”

While Texas’s legalization of hemp last year was met with considerable fanfare, its rollout has been bumpy. In addition to industry frustration over bans on smokables, legalization has also sparked unintentional disruptions in marijuana enforcement across the state.

Because hemp—whether as flower or vape liquid—is virtually indistinguishable from marijuana without testing, law enforcement agencies across the state say they’re now unable to bring sound criminal cases without analyzing seized cannabis for THC. Facing backlogs and high costs of private labs, prosecutors have dropped hundreds of low-level cases. The situation has led to a patchwork of marijuana enforcement policies across the state and uncertainty for consumers, who still risk arrest for hemp products that are perfectly legal.

In February, state officials announced a crucial caveat to a long-awaited test to help determine whether samples were hemp or marijuana: State labs wouldn’t perform testing in misdemeanor cases. The Texas Department of Public Safety “will not have the capacity to accept those,” a letter from Director Steve McCraw said.

In the meantime, Texas hemp companies that once saw the state as a business-friendly environment are considering whether to set up shop elsewhere. The new lawsuit says that Crown is already weighing a move to Oklahoma, citing concerns of more than $50 million in lost revenue during the next five years and as many as 60 lost jobs.

It’s not just about profits, the companies insist. “To the extent the Legislative Ban purports to address law enforcement concerns or health related concerns,” they argue, “it does nothing.

“The Legislative Ban cannot rationally be understood to reduce the prevalence of smokable hemp in Texas. On the contrary, it works against promoting safe and effective products for consumers,” the lawsuit says. “Rather than keeping the manufacture and processing of smokable hemp products in-state, the products will be manufactured and processed out-of-state and shipped into Texas outside its full regulatory reach for consumer safety. The state of Texas will have little to no regulatory oversight over these products.”

Read the full lawsuit challenging Texas’s ban on smokable hemp below:

Texas Smokable Hemp Lawsuit by Marijuana Moment on Scribd

Texas Marijuana Prosecutions Have Dropped By More Than Half Following Hemp’s Legalization

Marijuana Moment is made possible with support from readers. If you rely on our cannabis advocacy journalism to stay informed, please consider a monthly Patreon pledge.

Ben Adlin is a Seattle-based writer and editor. He has covered cannabis as a journalist since 2011, most recently as a senior news editor for Leafly.

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Legal Marijuana States See Reduced Workers’ Compensation Claims, New Study Finds

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Legalizing marijuana for adult use is associated with an increase in workforce productivity and decrease in workplace injuries, according to a new study partly funded by the federal government.

In a working paper published by the National Bureau of Economic Research, researchers looked at the impact of recreational cannabis legalization on workers’ compensation claims among older adults. They found declines in such filings “both in terms of the propensity to receive benefits and benefit amount” in states that have enacted the policy change.

Further, they identified “complementary declines in non-traumatic workplace injury rates and the incidence of work-limiting disabilities” in legal states.

These findings run counter to arguments commonly made by prohibitionists, who have claimed that legalizing marijuana would lead to lower productivity and more occupational hazards and associated costs to businesses. In fact, the study indicates that regulating cannabis sales for adults is a workplace benefit by enabling older employees (40-62 years old) to access an alternative treatment option.

“We offer evidence that the primary driver of these reductions [in workers’ compensation] is an improvement in work capacity, likely due to access to an additional form of pain management therapy,” the study, which received funding from the National Institute on Drug Abuse, states.

The implementation of adult-use legalization seems to “improve access to an additional channel for managing pain and other health conditions, suggesting potential benefits on populations at risk of workplace injuries,” it continues.

The study is based on an analysis of data on workers’ compensation benefit receipt and workers’ compensation income from
2010 to 2018 as reported in the Annual Social and Economic Supplement of the Current Population Survey.

“Our results show a decline in workers’ compensation benefit propensity of 0.18 percentage points, which corresponds to a 20 percent reduction in any workers’ compensation income, after states legalize marijuana for recreational use. Similarly, we find that annual income received from workers’ compensation declines by $21.98 (or 20.5%) post-[recreational marijuana legalization]. These results are not driven by pre-existing trends, and falsification exercises suggest that observing estimates of this magnitude is statistically rare.”

Researchers said that they’ve found evidence that cannabis use increases post-legalization among the age cohort they studied, but no such spike in misuse. Further, they found a decline in post-legalization prescriptions for medications used to treat chronic pain, indicating that some people are using marijuana as a substitute for traditional painkillers.

“We hypothesize that access to marijuana through [recreational marijuana laws] increases its medical use and, in turn, allows better management of symptoms that impede work capacity—e.g., chronic pain, insomnia, mental health problems, nausea, and so forth,” the study says. “Chronic pain management is likely to be particularly important in our context as this is the health condition most commonly reported among medical marijuana users.”

Beyond decreasing workers’ compensation claims and costs, legalization also is a boon to the economy by adding jobs in legal states.

The cannabis industry added more than 77,000 jobs over the past year—a 32 percent increase that makes the sector the fastest in job creation compared to any other American industry, according to a report released by the cannabis company Leafly last week.

Starting A Business? Study Finds Marijuana May Help—And Hinder

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Marijuana Industry Sees Record Jobs Gains In 2020 Despite Pandemic, New Report Shows

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The marijuana industry added more than 77,000 jobs over the past year—a 32 percent increase that makes the sector the fastest in job creation compared to any other American industry, according to a new report from the cannabis company Leafly.

In total, there are now approximately 321,000 full-time jobs in the marijuana sector across 37 states that have legalized the plant in some form. The data bolsters one of the common, bipartisan arguments in favor of reform: legalizing and regulating cannabis is an economic plus.

Via Leafly.

But Leafly’s report—which is based on an independent analysis by journalists, data experts and labor economists at Whitney Economics—is all the more striking considering that it shows significant job growth amid the coronavirus pandemic. At a time when unemployment rates have risen and businesses have been shuttered across the U.S., the marijuana industry has proven resilient.

“We’re proud of the cannabis industry as a bright spot for so many after a difficult 2020 for everyone,” Leafly CEO Yoko Miyashita said in a press release. “The essential cannabis industry is our nation’s unseen and unrecognized economic engine, creating good, full-time jobs that have helped to keep people and local economies afloat.”

“It’s time that our federal policies reflect this reality, and we legalize cannabis while ensuring equity and participation for those disproportionately affected by the War on Drugs, so everyone can benefit from this rapidly growing industry,” she said.

In the past four years, the number of full-time jobs in the marijuana industry has jumped by about 161 percent. While California’s cannabis market has the lion’s share of jobs in the sector (about 58,000), that spike is also largely attributable the state-level legalization movement, which has opened up industries from Massachusetts to Illinois in that time.

Illinois, which has consistently seen record-breaking marijuana sales since retail sales launched last year, added more than 8,000 full-time cannabis sector jobs alone.

There are now more cannabis workers in the U.S. than dentists (127,200), EMTs (260,600) or electrical engineers (314,400), the report found.

Via Leafly.

In one of the more notable findings, while marijuana sales increased demonstrably—increasing 71 percent from 2019 to 2020—the pandemic did take a hit on staffing.

“The pandemic ultimately drove increased sales industry-wide. But social distancing, occupancy limits, and shelter-in-place orders limited the ability of staff members to occupy a public retail space and work closely together,” the report says.

“In some cases, a reverse dynamic came into play,” it continues. “Some booming businesses reported staffing shortages as employees themselves fought off the virus, quarantined due to contact tracing, showed signs of possible infection, or were forced to stay at home due to underlying medical conditions.”

Even as the industry has seen significant gains in consumer purchases, however, Leafly identified a major area of concern among advocates: racial and gender disparities have persisted in the marijuana market.

While there’s limited data at the state level on these demographic trends, an independent database maintained by Cannaclusive found that while black Americans represent about 13 percent of the national population, fewer than two percent of the population own existing cannabis companies.

“The cannabis industry must show true commitment to equity as it expands, so the wealth generated by this new opportunity will uplift minority communities,” the report says. “If it cannot, we will continue to see these communities struggle in the shadow of white supremacy without a fair shot.”

New York Governor To Send Amended Marijuana Legalization Plan To Lawmakers Amid Criticism

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Starting A Business? Study Finds Marijuana May Help—And Hinder

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A new study out of Washington State University suggests cannabis may inspire entrepreneurs to come up with big, bold business ideas—but could also lead them down a rabbit hole of wishful thinking.

Researchers found that entrepreneurs who were frequent marijuana consumers came up with business pitches that were more original but less feasible, according to a panel of experts who scored the ideas.

“Beyond their innate creative aptitude, entrepreneurs may attempt to enhance their creativity,” says the study, which will appear in the March 2021 issue of the Journal of Business Venturing. “Despite generating more original ideas, we found that cannabis users’ ideas were less feasible.”

Also important variables, the study found, were an entrepreneur’s passion, which may heighten creativity at the expense of feasibility, as well as their past entrepreneurial experience, which tended to increase idea feasibility but rein in creativity.

The findings “provide insight into the creative benefits and detriments associated with being a cannabis user,” the study says, “suggesting that cannabis users—especially those who are passionate about exploring new venture ideas or those with relatively little entrepreneurial experience—may benefit from non-users’ insights to develop the feasibility of their ideas.”

To test the effects of marijuana on business-idea generation, researchers had 254 entrepreneurs come up with “as many new venture ideas as possible” based on virtual reality—a prompt provided by researchers. Participants had three minutes to generate ideas, then selected the idea they believed to be their best. Two “expert raters” then evaluated the chosen pitches for originality and feasibility.

Reachers say their findings support one of the study’s core hypotheses: that there are differences between how cannabis users and non-users arrive at business ideas. “Cannabis users are more impulsive, disinhibited, and better at identifying relationships among seemingly disparate concepts,” the study proposes. “However, these differences and cannabis users’ diminished executive functioning likely detracts from idea feasibility.”

Notably, the researchers did not ask participants to consume marijuana in the study setting itself. Rather, to compare cannabis-users to non-users, researchers split participants into two groups: those who had used marijuana less than five times in their lives and never in the past month (non-users) and those who’d consumed more than five times in their life and at least twice in the past month (users).

“Unlike alcohol, where health organizations have established standards for heavy drinking,” the study notes, “scholars have yet to reach a consensus on what constitutes a cannabis user versus a non-user.”

Because the study was merely observational, it also cannot determine whether marijuana use was in fact the cause of the differences between the two groups’ ideas. It may be that some other trait or traits explain both a person’s idea generation and their decision to consume cannabis.

The study’s cannabis user group comprised 120 people, or 47.2 percent of all participants. Researchers attempted to control for certain other factors, such as gender, age, education and technological familiarity.

While the findings suggest that, overall, cannabis can both inspire originality and limit feasibility, the outcomes were influenced strongly by what researchers described as “entrepreneurial passion for inventing” as well as their “entrepreneurial experience.”

“Cannabis users’ diminished idea feasibility compared to non-users was significant in those with low entrepreneurial experience,” the study’s authors wrote, “but not in those with high entrepreneurial experience.”

Similarly, “cannabis users’ lower idea feasibility was signifiant at high entrepreneurial passion for inventing but not low entrepreneurial passion for inventing,” the study found.

“Entrepreneurial passion for inventing appears to play a role in channeling cannabis users toward idea originality but away from idea feasibility,” it says. “Conversely, entrepreneurial experience appears to attenuate the positive relationship of being a cannabis user with idea originality and its negative relationship with idea feasibility.”

As the study itself acknowledges, many successful business leaders and visionaries have credited the inspirational powers of cannabis. Apple luminary Steve Jobs, for example, “noted that his use of cannabis helped him feel ‘relaxed and creative.’” (Biographer Walter Isaacson also quoted Jobs as saying another drug, LSD, was “one of the most important things in my life. … It reinforced my sense of what was important—creating great things instead of making money.”)

On the other hand, researchers argue that cannabis use can be a double-edged sword. “Regular cannabis use is associated with numerous detrimental effects, such as the potential for dependence and addiction, risk of motor vehicle accidents, mental and respiratory health problems, as well as memory and other cognitive impairments.”

Benjamin Warnick, assistant professor at Washington State University’s Carson School of Business and lead author of the study, said in a press release that the research is “the first study we know of that looks at how any kind of drug use influences new business ideation,” adding that “there is still much to explore.”

“Clearly there are pros and cons to using cannabis that deserve to be investigated further,” Warnick said. “As the wave of cannabis legalization continues across the country, we need to shed light on the actual effects of cannabis not only in entrepreneurship but in other areas of business as well.”

Best Music Playlists For Psychedelic Therapy Are Explored In New Johns Hopkins Study

Photo courtesy of the Drug Policy Alliance, Sonya Yruel

Marijuana Moment is made possible with support from readers. If you rely on our cannabis advocacy journalism to stay informed, please consider a monthly Patreon pledge.
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