Approximately two months ago in the midst of a daunting Legislative Session, Texas Cannabis Collective spoke with intellectual property and trademarks attorney Chelsie Spencer, a name partner of the Dallas-based law firm Ritter-Spencer and an attorney who’s received national attention for her unique legal speciality in the complicated and not entirely crystal clear laws surrounding the legality of the CBD and hemp industry in Texas.
In our discussion, we spoke about the removal of hemp from Texas’ Controlled Substances List and the lasting legal impact of House Bill 1325 on the blossoming CBD/hemp industry in Texas. Spencer discussed, among many helpful insights and explanations, the aftermath of the passing of House Bill 1325 and the regulatory bodies whose policies and duties would need to be amended.
And in accordance with the hopes and wishes of the many hemp/CBD business owners and consumers throughout the state, House Bill 1325 passed unanimously. This groundbreaking piece of legislation means that the multi-useful crop will, after many decades of prohibition, be readily and legally available for cultivation within the state. Yet even with HB 1325’s passing, ample amounts of confusion in regards to the precise date when farmers are allowed to begin planting as well as the legality of CBD remains.
Once again, Texas Cannabis Collective was able to speak with Chelsie Spencer and receive further explanations of HB 1325 now that the bill has been signed into law by Governor Abbott.
JK: When we spoke previously, you mentioned how the descheduling of hemp of Texas Controlled Substance list has “caused more confusion and a proliferation of misinformation.” Yet, hemp producers are elated that House Bill 1325 passed both chambers unanimously and signed by Governor Abbott. With the bill becoming a reality in Texas, how could HB 1325 be beneficial in compared to the descheduling that’s been problematic?
CS: HB1325 is certainly more beneficial than the Texas Department of State Health Services (“SHS”) descheduling in more ways than one. First and foremost, it amended the Texas Controlled Substance Act to provide that properly sourced hemp and hemp-derivatives are not controlled substances. This amendment is what we were lacking before. Now, there is no basis to arrest someone for having a CBD product that has been properly sourced and that has tested at a .3% level or below on THC on a dry weight basis. Most importantly, the Bill provides that Texas will participate in a hemp growth plan and permit retail sale of hemp goods.
JK: In what ways would industrial hemp being cultivated within the state affect those either already in the industry or those aspiring to do so? Would usages of industrial hemp become as widespread as more common plastics and papers?
CS: The largest impact for those already in the industry here in Texas are the licensing requirements for manufacturers and retailers of consumable hemp products. I hope to see hemp usage become widespread, but the market is going to be the most reliable indicator of that and until Texas can receive federal approval of its growth plan and draft its own regulations and hemp grower’s license application, no one can cultivate.
JK: How is the very specific subject of law that you practice going to change in the upcoming months? How would it alter the operations and usual workings of both yourself as an attorney and your respective clients?
CS: We will certainly be processing a lot of applications. As a hemp lawyer, it has been a busy two-week post-passage time frame for me. We have a list of clients who are ready to file the moment the applications are released. They have the land, they have prepped the soil, they know where they are sourcing seed, and they are ready to go. Cultivators are going to need grow licenses, manufacturers are going to require licensing from SHS, and retail stores will require registration with SHS. Additionally, I always advise those in the industry to seek legal counsel from a qualified hemp lawyer. Texas regulations are not the only ones impacting this industry. Federal agencies such as the FDA have a lot to say about CBD right now and consumer watchdog groups are practically begging the government for industry oversight. This is also an area of the law where regulations tend to change daily. For e-commerce, you have to be aware of the state laws in the jurisdictions where you sell. Those companies running around stating that CBD products are legal in all fifty states are dead wrong. There are still states (like Texas was until June 10) where it remains illegal to sell CBD products, even with non-detectable THC.
As for a change in operations for clients, they should be prepared for more oversight, including random inspections from the Texas Department of Agriculture, the Texas Department of State Health Services, and/or law enforcement. Because no field-testing mechanism exists that can differentiate marijuana from hemp with a quantitative analysis, I also certainly expect we will see many clashes between law enforcement and legitimate hemp industry participants. One of my retail store clients just told me that even this week, post-effective date of HB1325, a police chief of a large metropolitan city told them that CBD remained illegal in Texas. Assuming proper sourcing and THC level below .3%, this just simply is not true; however, it is going to take some time for law enforcement to familiarize themselves with the new law and to learn to work with the plant.
JK: Since hemp is now legal in Texas and CBD is a non-psychoactive byproduct of the hemp plant, does the passing of this legislation mean that the burgeoning CBD industry will no longer exist in a legal grey area and CBD products will gain far further legality?
CS: Though hemp-derivative products did gain legality here in Texas, this bill certainly won’t clear the grey areas in hemp law. You will still see companies making statements such as “this product cures cancer” in their advertising, which is a prohibited advertising claim since CBD products, except for Epidiolex and Sativex, do not qualify as a “drug” under the federal Food and Cosmetics Act. We have the FDA struggling to appease Congress by providing a regulatory pathway to permit CBD to be sold as food additives and dietary supplements. We still have companies using the term “full spectrum” without knowing what that means. We still see issues with shipping seizures on carriers outside of USPS. We have states where only pharmacies can sell CBD. We have states that have banned edibles containing CBD. We have states where use of a CBD product with detectable THC can result in termination from employment. We have fly-by-night operations using industrial paint thinners for extractions. It is very much still an industry in regulatory flux.
JK: The passing of such a landmark bill will surely lead to unavoidable confusion. Any legal advice you have for hemp business owners who’ve found themselves in a wildly different reality from a year ago?
CS: Again, a qualified hemp lawyer is a must for this industry particularly because it remains an emergent industry with fluctuating regulations. What is really important moving forward and what I cannot stress enough is that hemp business owners vet any hemp lawyer before retaining them. Post-passage of HB1325, there are a lot of attorneys throwing up websites claiming to have experience in hemp law and in the hemp industry that just dove into these areas in the past two weeks.
If you are a small business that can’t afford a lawyer, Ritter Spencer really strives to provide comprehensive analysis on some of these issues on our blog at www.ritterspencer.com as a public service. The blog won’t substitute for targeted legal advice and is not intended to be legal advice, but it can certainly provide a starting point to understanding some of these complex issues. We don’t outsource our blogs. It is actually our hemp lawyers sitting down, looking at the statute or regulation, and drafting a blog covering that piece. We put a lot of time into these pieces and if you’ve been on the blog, you know we do a really deep dive and not a surface level analysis that won’t help anyone.
The second part of advice for those in the industry is always the most important: record keeping. Have your crop certification documents from the relevant state agricultural department and your certificates on analysis on a product batch basis at the ready. Texas will also require certain documentation on shipments of raw hemp, but until the regulations are announced, we don’t know what those transit manifestos are going to look like.
Thats my lawyer! Probably knows more about hemp and cannabinoids than I do lol