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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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Oregon Marijuana Sales Spike Could Continue As Consumers ‘Permanently Adjust Their Behavior’ Following COVID

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Record-setting Oregon marijuana sales continue to be a bright spot in the state’s coronavirus-slowed economy, state analysts reported this week, but a convergence of unknowns—including the end of federal coronavirus relief and a possible rise in cannabis prices due to devastating wildfires—could still mean a rocky road ahead for consumers.

“Marijuana sales continue to be strong,” Oregon’s Office of Economic Analysis wrote in a quarterly revenue forecast published on Wednesday. “Since the pandemic began, the increase in recreational sales have been more than 30 percent above forecast.”

The increase tracks with other more established cannabis markets, such as those in Colorado, Washington and Nevada, which have also seen “strong gains” since the pandemic, the office said. “There are a number of likely reasons for these higher level of sales and expectations are that some of these increases will be permanent.”

oregon marijuana tax revenue forecast

Oregon Office of Economic Analysis

Analysts also expressed a rosier outlook on the future of the state’s marijuana market than they did in last quarter’s report, which acknowledged a spike in sales since the pandemic began but concluded that business was eventually “expected to mellow” as incomes fell and bars reopened. Officials now forecast Oregon will see “somewhat more” in sales than previously projected.

The state has recently seen a string of record-setting months for cannabis sales. Over the summer, monthly cannabis sales had averaged more than $100 million, according to an Oregon Liquor Control Commission (OLCC) report.

OLCC

The projected uptick in sales will mean an extra $30 million in marijuana tax revenue for the state during its two-year budget period ending in 2021. Total adult-use cannabis taxes for that period are now forecast to end up at more than $276 million.

“Factors leading to increases in sales include higher incomes due to federal support, increased stressors in everyday life, reductions in other forms of entertainment or recreational opportunities, and simply more time on one’s hand be it due to a COVID-related layoff, or increased working from home,” the report said.

“A key question is now that the federal aid is gone and other entertainment options return in the months ahead, will some of this increase in sales in recent months subside?” the Office of Economic Analysis wrote in the new report. “In a recent meeting of our office’s marijuana forecast advisory group, the broad consensus was that yes, some of these sales will come off, but not entirely so. And the longer the pandemic lasts, the more likely customers will permanently adjust their behavior as they become accustomed to their new routines and buying patterns.”

For now, the bulk of the increases appear to be driven by existing consumers. While “indications are that the customer base is broadening some as the market grows due to more users trying an increasingly socially acceptable product and ongoing converts from the black market to the legal market,” the report said, the increase “is more likely to be due to larger or more frequent sales to existing consumers than due to more consumers alone.”

“One item to watch moving forward are prices,” analysts wrote. “In recent years the supply of marijuana has greatly outstripped the demand, leading to lower prices. This is great news for consumers. Given that marijuana is a normal good, lower prices have led to larger quantities sold. But now that demand has increased, while supply has held steady, and with the potential impact of the wildfires right as growers are prepping for harvest, this balance in the market may shift… As such, it may be that prices rise, or at least not decline like they have in recent years.”

oregon marijuana prices and sales

Oregon Office of Economic Analysis

As far as tax revenue goes, any price increase would likely lead to more money for the state, “as the decline in quantity sold is not large enough to outweigh the price impact,” the report said.

How cannabis revenue is spent would also be affected by a drug decriminalization ballot proposition, Measure 110, that voters will decide in November. While the initiative isn’t expected to change the amount of taxes collected, it would redirect marijuana tax funds to expand drug treatment programs. “Whether current programs receiving marijuana tax revenue would ultimately see budgetary impacts,” analysts said, “would remain up to the Legislature should voters approve the measure this fall.”

Measure 110, which broadly seeks to reframe problem drug use in medical rather than criminal terms, is one of two key drug-reform measures on Oregon’s ballot in less than six weeks. The other would legalize the therapeutic use of psilocybin, the main psychoactive ingredient in psychedelic mushrooms. That measure would be the first of its kind in the U.S., although Canada has recently granted some patients immunity from that country’s prohibition on psilocybin.

Oregon Marijuana Businesses Impacted By Wildfires Are Ineligible For Federal Relief, Agency Confirms

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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Texas Ban On Smokable Hemp Lifted Until 2021, Judge Rules

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A Texas ban on smokable hemp products hit another roadblock in court last week when a state judge barred officials from enforcing the prohibition until an industry challenge can be heard in court.

A group of four hemp producers sued the state last month over the ban, which began when lawmakers passed a hemp legalization bill last year that explicitly forbade the production of products intended for smoking or vaporization. State health authorities extended its reach earlier this year to prohibit the sale and distribution of such products made outside Texas, a move the hemp companies claim was an unconstitutional overreach of their authorities.

In a ruling issued Thursday, Travis County Judge Lora Livingston wrote that the hemp companies may have a point. Writing that the plaintiffs “have demonstrated a probable right to relief,” Livingston granted a temporary injunction that effectively voids the ban on production, distribution and sale of the products until the conclusion of a trial set to begin in February.

Livingston had previously issued a temporary restraining order in the case last month that had a similar but shorter effect, preventing the state from enforcing the ban for a matter of weeks. The new ruling freezes the ban for at least four months, and potentially longer.

Opponents of the ban said that while the issue is far from over, Livingston’s recent decisions are a sign the challenge could ultimately succeed.

“So far, the rulings relating to this lawsuit are very encouraging,” said Heather Fazio, director of Texans for Responsible Marijuana Policy, which opposes the ban and has organized hundreds of supporters to submit comments to regulators.

“Advocates in Texas have remained vigilant, with both legislative engagement and regulatory oversight,” Fazio said in an email to Marijuana Moment. “Now, Texas businesses are challenging our state’s poorly designed policies in the courts. And they’re winning!”

Plaintiffs are challenging both the legislature’s initial ban on production and processing of smokable hemp as well as the Department of State Health Services (DSHS) added ban on distribution and sale, which they claim violate the state constitution’s protections for economic freedom. They also maintain that DSHS lacked the authority to extend the production ban to retail sales.

The companies also point to logistical problems caused by the ban. Because smokable hemp flower is indistinguishable from hemp grown for other purposes, they argue, the ban will encourage bad actors to mislabel products in order to avoid the prohibition. That could put consumers at risk by exposing them to chemicals and other adulterants not intended for consumption.

Banning smokable hemp would also hurt the state economically, the producers claim, as Texas hemp companies wouldn’t be able to compete with out-of-state producers that can already make and sell anything from hemp joints to CBD vape cartridges.

“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,” the lawsuit says. “If Texas had banned the processing and manufacture of cheese in Texas, Texans wouldn’t stop eating cheese.”

Meanwhile, the state’s legalization of hemp for other purposes has caused headaches in the criminal justice community. Because hemp looks and smells similar to marijuana, law enforcement agencies have struggled to know whether individuals have a banned substance until they can chemically analyze a seized product. But state testing labs are overburdened, and in February the state Department of Public Safety said it would “not have the capacity” to perform testing in misdemeanor cases. Prosecutors as a result have dismissed hundreds of low-level cannabis cases.

Marijuana possession arrests fell almost 30 percent in Texas from 2018 to 2019, recently released state data shows, and that trend seems connected to hemp legalization.

Medical Marijuana Should Be Legal For Toothaches, Texas Agriculture Commissioner Says

Image by Lindsay Fox from Pixabay

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Federal Workplace Drug Testing Proposal Could Discriminate Against People Of Color

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A newly proposed federal rule would expand workplace drug testing programs by allowing certain employers to collect and analyze samples of workers’ hair, a move critics say would lead to disproportionate job-related punishments for people of color.

Federal agencies can already test workers’ urine and saliva, which provide evidence of more recent drug use, but “hair testing potentially offers several benefits when compared to urine, including directly observed collections, ease of transport and storage, increased specimen stability, and a longer window of drug detection,” the Substance Abuse and Mental Health Services Administration (SAMHSA) argued in a notice of proposed rulemaking published in the Federal Register on Thursday.

If adopted, the change would affect thousands of government employees as well as private workers in certain federally regulated industries such as those who work in transportation or at nuclear power plants.

Drug reform advocates are skeptical about the move.

“It’s shameful that these harmful federal drug testing guidelines are even being considered again,” Rep. Barbara Lee (D-CA), co-chair of the Congressional Cannabis Caucus, told Marijuana Moment. “Not only is hair follicle testing discriminatory against people of color due to its sensitivity to melanin and darker hair, it gives no indication of someone being impaired on the job. This just goes to show how far behind the federal government is on cannabis policy.”

Paul Armentano, deputy director for the advocacy group NORML, said it is “mind-boggling that, in 2020, SAMHSA is considering expanding federal drug testing guidelines.”

“Hair follicle testing is highly problematic,” Armentano said. “A positive test, even when confirmed, provides neither evidence of behavioral impairment nor recent drug exposure. Moreover, the sensitivity and accuracy of the test is highly variable.”

Because hair exists outside a person’s body, for example, it’s more vulnerable to contamination—including secondhand smoke and other chemicals—than other sample types. That can put workers at risk of false positives unless results are checked through another testing method.

“Arguably most problematic,” Armentano said in an email, “is the reality that these tests discriminate against certain ethnicities because it is influenced by melanin content and is thus more sensitive to those with darker hair—while far less sensitive to those with gray hair.”

Other factors, such as humidity and hormones, could also affect test outcomes, Armentano added.

SAMHSA in its proposal acknowledges that numerous studies “provide scientific evidence that melanin pigments may influence the amount of drug incorporated into hair,” as well as that hair products more commonly used by people of color could lead to false positives. “As noted,” the filing says, “the Department wishes to solicit feedback on scientific studies comparing drug results and hair color and comparing urine to hair.”

The proposal is the latest effort by SAMHSA to expand federal drug screening to include specimens besides urine, including hair, saliva and even sweat. SAMHSA initially floated the idea of hair-based testing in 1997, and the agency put forward a rulemaking proposal along those lines in 2004. Regulators ultimately rejected that proposal amid concerns over accuracy, but SAMHSA has pursued the plan ever since. In recent years, the agency expanded testing to include saliva.

Unlike urine and saliva, hair can take up to a week to show evidence of drug use, rendering it especially useless as a measure of a worker’s immediate impairment. SAMHSA is proposing that hair testing be used only in pre-employment drug screening and random testing—not in cases where workers are suspected of recent use.

In an effort to protect workers from false positives and ensure that hair tests hold up in court, the proposal includes a directive that an alternate specimen, such as urine or saliva, be collected in order to verify a positive hair-test result. “This two-test approach,” SAMHSA’s summary says, “is intended to protect federal workers from issues that have been identified as limitations of hair testing, and related legal deficiencies.”

Marijuana-related cases, however, may not qualify for that additional layer of scrutiny. “The Department is specifically requesting comments, including support from the recent scientific literature, on whether hair tests that are positive for the marijuana analyte, delta-9-tetrahydrocannabinol-9-carboxylic acid (THCA), should be excluded from the requirement to test an alternate authorized specimen,” the proposal says.

Workers, some labor unions and even a Federal Drug Testing Advisory Board (DTAB) member have criticized the SAMHSA proposal as misguided, warning that the proposal is getting away from the science.

As reported in the trade publication Freight Waves, which covers the shipping and logistics industries, independent truck drivers are opposed to the rule, citing bias toward hair color and texture as well as a general lack of evidence that hair testing would improve driver safety. Major trucking companies, however, generally support the change.

DTAB member Michael Schaffer criticized the rulemaking process as “fatally flawed” because the board was left out of discussions.

“This means that these proposed guidelines were developed without the expertise needed to ensure that they are scientifically accurate and defensible,” said Schaffer, a toxicologist at a drug-testing lab, according to a Freight Waves report. “I fear that these proposed guidelines are going to unnecessarily restrict the use of hair drug testing, an incredibly effective tool at detecting drug use, for reasons which have no scientific basis.”

Armentano at NORML said that doubling down on a testing procedure that could exacerbate racial disparities simply doesn’t make sense, especially given today’s political climate.

“Given the heightened awareness surrounding the need for social and racial equity,” he said, “the idea of proposing a testing procedure that will inherently deny more people of color opportunities than it would others who have engaged in exactly the same activities is beyond tone deaf and counterproductive.”

SAMHSA estimates that about one percent of the 275,000 drug tests it expects federal agencies to do every year will be for hair specimens. When it comes to workers in jobs regulated by the Department of Transportation, the agency anticipates that 1.53 million of a total 6.1 million drug tests will be hair-focused. For nuclear workers, 15,000 of 150,000 total tests would be of hair specimens.

“These projected numbers are based on existing annual pre-employment testing that currently occurs in the regulated industries and current hair testing being conducted,” SAMHSA wrote

The agency is accepting public comments on the proposal through November 9.

This story was updated to add comment from Lee.

FDA Teaches Marijuana Growers And Researchers How To Protect Trade Secrets From Competitors

Photo courtesy of Markus Spiske

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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