Smokable hemp is one of the fastest growing submarkets of the hemp industry, but hemp growers and manufacturers in Texas may not be able to take advantage. A pair of cases in Texas district and appellate courts are trying to make sure that’s not the case.
Texas House Bill 1325, signed into law in 2019, authorized the cultivation of hemp crops and the manufacture of hemp products and consumable hemp products, but prohibits the processing and manufacture of hemp products for smoking. HB 1325 also delegates regulatory authority over consumable hemp products to the Texas Department of State Health Services (“DSHS”), which issued a rule banning not just the processing and manufacture of smokable hemp, but also its distribution and sale. The entire scheme is being challenged by a group of hemp manufacturers, distributors, and retailers who claim that the statutory restriction on smokable hemp has no rational relation to any legitimate government interest (especially since the possession and consumption of smokable hemp remains legal) and is therefore unconstitutional.
In 2020, plaintiffs Crown Distributing, LLC and others challenged the State’s statutory and regulatory smokable hemp bans and requested that a District Court enjoin enforcement of the bans until a decision could be reached on the merits of their argument, citing irreparable economic injury without such relief. In arguing that the statutory hemp ban is unconstitutional, plaintiffs point out that, since possession and consumption of smokable hemp remains legal, it could be imported from other states into Texas, while Texas hemp manufacturers and retailers are barred from participating in this growing and lucrative market themselves. They further claim that the DSHS rule banning distribution and sale of smokable hemp goes above and beyond the authority granted to DSHS by HB 1325, which only bans the processing and manufacture of smokable hemp.
The 345th District Court in Travis County seemed to agree, at least in part, that staying enforcement of the ban was warranted until the matter could be sorted out at trial. The District Court issued a temporary injunction enjoining the DSHS from enforcing its rule banning processing, manufacture, distribution, and sale of smokable hemp.
In March of this year, the District Court heard argument on plaintiffs’ underlying complaint, while in June the State’s Third Court of Appeals heard the DSHS’ petition requesting dissolution of the temporary injunction. DSHS argues, in part, that its rule was merely a logical extension to the statutory definition of “manufacture:” the processing or combining of a food (and smokable hemp is apparently characterized as a food) for sale at wholesale or retail.
The cases are interesting ones to watch, as the legalization of hemp was a progressive moment for the traditionally conservative state. Smokable hemp continues to grow in market share in the hemp industry, and these cases will determine whether Texas hemp manufacturers and retailers can have a piece of that pie. The cases also underscore the confusing and contradictory regulatory landscape in which the hemp industry operates. The 2018 Farm Bill legalized the cultivation and processing of hemp and interstate commerce in hemp-derived products, but the FDA still maintains that CBD products for human consumption are adulterated. State by state hemp product and CBD rules are a patchwork of regulatory approaches. Our office continues to monitor the evolution of these important new markets and is available to help entrants navigate this ever-evolving space.
Plaintiffs’ original case is Crown Distributing LLC et. al. v. Texas Department of State Health Services, No. D-1-GN-20-004053 in the 345th District Court, Travis County. DSHS’s challenge to the temporary injunction is Tex. Dep’t of State Health Servs. v. Crown Distrib. LLC, No. 03-20-00463-CV, in the Third District Court of Appeals of Texas.