Smokable Hemp Can't Be Processed or Manufactured in Texas, State Supreme Court Rules

Supply chain issues have already made for a tough year in the hemp industry, Zain Meghani of Wild Hempettes said. The recent ruling could make it tougher.
Supply chain issues have already made for a tough year in the hemp industry, Zain Meghani of Wild Hempettes said. The recent ruling could make it tougher. Malen Blackmon
People can possess, buy and sell smokable hemp in Texas, but if they want to manufacture and process the product, they'll have to do it elsewhere. That’s essentially what the Texas Supreme Court wrote in its majority opinion Friday regarding the smokable form of low-THC cannabis called hemp.

“This ruling hurts the Texas hemp industry top to bottom,” Zain Meghani, CEO of the Dallas-based hemp company Wild Hempettes, told the Observer.

This all comes out of a months-long legal battle between the Texas Department of State Health Services, its commissioner, John Hellerstedt, and hemp companies Crown Distributing, America Juice Co., Custom Botanical Dispensary and 1937 Apothecary. The main financial backing for the suit has come from Wild Hempettes.

Hemp, a strain of cannabis low in the chemical that gets users high, was federally legalized by the U.S. 2018 Farm Bill. Texas followed suit with its own hemp laws laid out in House Bill 1325. That bill tasked the health services department with creating rules for the consumable hemp program in Texas.

One of those rules banned the processing, manufacturing, distribution and retail sale of smokable hemp.

Hemp companies sued last August. Their suit claimed the rules violate the Texas Constitution because “its real-world effect is so burdensome as to be oppressive in light of any governmental interest.” In other words, such a ban would force the companies to leave the state, a move that could hurt them financially and even put them out of business.

That’s a reality Texas hemp companies like Meghani’s now face after the ruling on Friday.

For the last few years, Meghani’s company has been mass-producing hemp pre-rolls in an industrial park in Northwest Dallas. It’ll take a lot of heavy lifting, a lot of money and at least six months to set up the operation at a new facility they bought recently in Oklahoma. 

“This ruling hurts the Texas hemp industry top to bottom.” – Zain Meghani, Wild Hempettes

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In the ruling, the court wrote that “protected work-related interests” are not without limits. The Texas Constitution lays out the right to “engage in any of the common occupations of life" or "pursue a lawful calling, business or profession.” According to the court, those rights don’t extend to companies in the state wanting to manufacture and process hemp for smoking. That’s because those defenses have “never been interpreted to protect a right to work in fields our society has long deemed ‘inherently vicious and harmful,’” the court wrote in its ruling Friday.

Chelsie Spencer, a cannabis lawyer at the Addison-based Ritter Spencer PLLC, represented the companies in their suit.

“The Texas Supreme Court has determined that the Texas Constitution does not protect the economic liberty interest of smokable hemp manufacturers and processors in the state of Texas,” Spencer wrote on social media after the decision. “We are profoundly disappointed in this decision and disheartened by the continued stigma surrounding cannabis. It is telling when the Court insinuates that cannabis is ‘inherently vicious and harmful.’”

Reached for comment, Spencer said this is the end of the line as far as state challenges go. It could be the end of the line for the suit entirely.

“Wild Hemp is unwilling to expend any more money on this,” Spencer explained. “They funded this case entirely and are now being kicked out of their home state.

The state ditched its argument about selling smokable hemp products before the ruling, but the companies manufacturing and processing those products still have to leave Texas. That could affect prices, Spencer said.

“I would anticipate increased consumer costs for Texas products, simply because the state kicked them out this morning, and they all have to move now,” Spencer said. “Most telling, our economic expert found that the state will lose one million in tax revenue from Wild Hempettes alone by 2024 by kicking them out.”

Meghani said, “It’s very illogical.”
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Jacob Vaughn, a former Brookhaven College journalism student, has written for the Observer since 2018, first as clubs editor. More recently, he's been in the news section as a staff writer covering City Hall, the Dallas Police Department and whatever else editors throw his way.
Contact: Jacob Vaughn