Yesterday, our office filed a lawsuit against the Texas Department of State Health Services (“DSHS”) on behalf of our client, Crown Distributing LLC (“Crown”), challenging the smokable hemp bans in Texas. A copy of our filed Petition can be accessed here.
On August 2, 2020, DSHS banned the distribution and retail sale of smokable hemp products in the state of Texas. See Tex. Admin. Code § 300.104. Texas banned the processing and manufacturing of consumable hemp products for smoking when it passed HB 1325 on June 10, 2019. See Tex. Health & Safety Code § 443.204(4)
Not only did DSHS ban the distribution and retail sale of smokable hemp products by Texans, the agency appears to desire to prohibit out-of-state sellers from selling smokable hemp products to consumers located in Texas. In response to a commenter requesting clarification as to whether e-commerce sellers constitute retailers for purposes of the rules, DSHS responded with the following in the Texas Register:
“…e-commerce, like brick-and-mortar, with a recipient in Texas is required to obtain a license or registration from DSHS and to comply with Texas Health and Safety Code, Chapter 443 as well as this chapter.”
By noting that e-commerce sellers must comply with the requirements in the administrative rules implemented by DSHS, DSHS is sending a clear message that e-commerce sales of smokable hemp products to consumers in Texas is prohibited, even where the e-commerce retailer is located outside of the state of Texas.
The smokable hemp market is one of the fast-growing sectors in the nationwide hemp industry. Hemp flower and pre-roll sales were estimated to constitute $70.6 million dollars of the hemp market share in 2019 alone. Instead of fostering a new market, Texas instead elected to completely foreclose it.
The statutory prohibition on the manufacturing and processing of smokable hemp products has already forced existing Texas companies, like Crown, to move their businesses out of state. Where Texas could have a taxable, job-generating business base, it has instead forced companies to abscond from its borders, taking other permissible factory operations, such as consumable hemp products, with them.
Unlike other challenges, such as the one lodged in Indiana for its smokable hemp ban, our Petition focuses on issues of state law and state constitutionality, not the federal interstate commerce clause. We look forward to resolution of the matter on the merits by the Court.
In the interim, please contact your state representative or senator to let them know what impact the smokable hemp bans are having on your hemp business. With session beginning in less than six months, it is imperative your legislators hear from you now.
Hemp lawyer Chelsie Spencer is committed to providing legal services and support to a wide range of cannabis businesses. As an experienced attorney in several practice areas, Chelsie frequently handles matters in medical marijuana, hemp, and CBD, in addition to litigation and transactional issues in commercial and intellectual property law, including copyrights and trademarks. Contact Ritter Spencer or give us a call at 214.295.5070 for more information.