The industry has been taking a hit from raids, and our Executive Director Austin Z. spoke with Rae Guyse of Ritter Spencer Cheng law firm to get the dirt on what’s been happening.
If you’re actively following the social media presence that Texas Cannabis Collective presents to the people of Texas, you’re familiar with this issue. If you’re not, this could quite be one of the best times to catch up as primary elections are around the corner in March. It’s a statewide problem and it won’t go away on it’s own either.
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Austin: Why are these raids on hemp businesses in Texas happening?
Guyse: There are several factors that are likely contributing to the recent increase in raids.
Firstly, the issue of legality for cannabis consumer products is still unclear and has a lot of uncertainties. It can be confusing to consumers, businesses and even law enforcement. Given the level of ambiguity and confusion, this can result in inconsistent application of the law and lead to unpredictable enforceability by local authorities. The belief that all novel cannabinoid products are legal if they contain 0.3% or less delta 9 THC is an oversimplified and possibly incorrect analysis. While there is an injunction supporting the argument that delta-8 THC and other similar products are compliant with the 2018 Farm Bill, it is important to note that the 2018 Farm Bill was not intended to legalize psychoactive products, and courts consider the intent of the legislature when deciding how to interpret the law.
Lawmakers are aware of the legal “loophole” and are working on ways to possibly correct it in the upcoming 2023 Farm Bill. The DEA’s stance also supports law enforcement’s ability to regulate these products under current law, as CBD-derived delta-8 THC and THCa are considered by the DEA Schedule 1 substances under the Controlled Substances Act. Furthermore, in Texas, the Supreme Court has the final say on the interpretation of the law, and they have historically taken an anti-cannabis stance. We are yet to see how this case will unfold at the Supreme Court.
However, there are also plenty of arguments supporting the legality of THCa and other novel cannabinoid products under Texas law and even in jurisdictions outside of Texas. For example, the DEA’s argument that federal law requires delta-9 THCa to be tested using a “post-decarboxylation” method is not explicitly written into the Texas statute. Businesses likely have a solid defense against criminal enforcement should they find themselves in a legal battle. It is also worth noting that prosecutors have not been actively pursuing criminal cases related to these products, despite the increase in law enforcement raids.
Another issue contributing to the raids is the lack of education and understanding by law enforcement. That problem coupled with fear of the unknown creates an uneasy atmosphere for law enforcement regarding our nuanced hemp laws. Even more-so in the less populated counties. There have been complaints from businesses impacted by the raids. They are the ones who have experienced first-hand how law enforcement struggles to accurately interpret the delta-9 THC content on a certificate of analysis (“COA”). And from there tell the difference of it from other cannabinoids.
This lack of understanding becomes even more complicated with THCa products. This is because law enforcement in Texas uses gas chromatography testing to test for THC levels. This testing method converts delta-9 THCa to delta-9 THC. This leads to the products testing “hot” and causing further confusion. A business has an argument to rely on equally accurate HPLC testing which will not convert THCa. But dealing with law enforcement officers not familiar on the differences between testing methods or literate on the report data can be a major headache and expensive.
Austin: What, if anything, is the state doing to manage the issue?
Guyse: We haven’t seen any effort by the State to slow down the recent law enforcement raids on hemp businesses.
In fact, the State’s interest seems to be more intent on getting control over the unintended creation of the market for psychoactive cannabis products. One reason for this is the State’s low-THC medical cannabis program is having a hard time surviving in the current climate of widespread access to the novel cannabinoid market. Our medical cannabis program, the Texas Compassionate Use Program (“TCUP”) limits cannabis products to 1% THC, and its hard for medical dispensaries to compete with a market flooded with higher percentages of delta-8 THC and other types of THC consumable products.
Again, it was never the intent of lawmakers to allow psychoactive products into the market. Between the new anticipated version of the Farm Bill set to be released, mounting pressure on the FDA to regulate consumable hemp products, and the realization by lawmakers in Texas and elsewhere about the legal loopholes created, the legality of these products will likely evolve over the next few years.
Austin: What is the best thing to know for retail shop owners who are concerned?
Guyse: It is important for you to understand your risk and prepare yourself financially and in other aspect should you find yourself subject to law enforcement. Especially if you are selling products that contain higher risk cannabinoids like THCa.
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You should set aside ample funds, if possible, in case you ever need to hire a criminal defense attorney to defend you in a prosecution matter involving a raid. Defense costs add up quick and can easily cost tens of thousands of dollars. Enforcement levels are still low despite the recent uptick. Charges are unlikely to ultimately stick. Even with all of that in mind, being the subject of a raid is still a costly and time-consuming consequence. And the risk is there when operating a business in a gray area legal market.
You should also try and understand the stance of law enforcement in the specific county where you operate your business. While enforcement for even illegal cannabis products is relatively low in city centers, other counties are not so friendly to any hemp or cannabis product. Business starters should work with counsel to discuss risk levels in potential locations before signing a lease, if possible.
Finally, be aware that legal changes to the hemp market are almost guaranteed. If you are thinking about launching a business, limit inventory purchases until the latest version of the Farm Bill goes into effect to ensure that products will still be legally compliant. Shifts are likely at the state level as well. This is a readily shifting area of law and what is compliant today is not certain to be compliant tomorrow.
