Cloudy Business Directives

Amplifier loves helping creators and companies grow.

  • We proudly serve all shapes and sizes, including some of the web’s biggest juggernauts as well as creators just getting started.

  • Our clients control their supply chains and enjoy tremendous flexibility in this regard. Thousands of suppliers send product here on behalf of our clients.

Lately, one sector has confused us.

In Texas, is CBD legal or not? It’s a cloudy situation, maybe clearing up though not yet clear.

For a couple years, entrepreneurs in the space have routinely told us it’s legal, and yet news stories have painted a vastly different picture.

For example:

  • In September of 2018, Lena Bartula, a 72-year-old woman, was arrested at the DFW Airport after a search turned up CBD oil. Instead of catching her flight to Portland, she spent the night in county jail, and it took two months for a grand jury to dismiss the charges. [Fort Worth Star-Telegram]

  • In March of this year, Duncanville police seized hundreds of pounds of CBD products from two stores. [NBC5] As of June 24th, the proprietors were still struggling to get their product and cash back. [Star-Telegram]

  • The Tarrant County DA’s office has also maintained that, per the Texas Compassionate Use Act, CBD oil is legal only for those suffering from intractable epilepsy . [Star-Telegram]

In this video Cameron Pinkerton, legal assistant at the Law Offices of David Sloane, discusses the legality of CBD in Texas, the 2018 Farm Bill, the FDA's recent statements about CBD, and the Tarrant County DA’s comments about prosecuting people for CBD products.

Who’s got time for this?
Why risk running afoul of the law?
What is the law here?

Amplifier is not alone in pondering questions like this.

“On March 14, 2019, Elavon, a payment processing subsidiary of U.S. Bank, notified its hemp and CBD clients that it had recategorized hemp and cannabidiol-based merchants as a prohibited business type and that accounts for such merchants would be closed within 45 days.  

“‘After several months supporting this merchant segment, it has become clear that the pace of an evolving Federal and State regulatory framework makes it extremely difficult to validate the qualifications required to operate within this industry,’ said Elavon in an email to its hemp and CBD clients.”
Green Market Report]

Many other banking and financial institutions are struggling with these questions, and rule makers are trying to catch up. [Forbes]

Here, our state government loves to proclaim that Texas is open for business, but, for now, this apparently does not apply to CBD.

Many people outside Texas don’t realize that:

  • The state legislature here works about 140 days every two years. [Wikipedia] The legislature just concluded a session, so certainly they cleared up all this regulatory cloudiness, right? Not necessarily.

  • The state legislature has a long history of over-ruling local decisions, especially with respect to Austin — see Barton Springs, bag bans, ride-hailing, and (perhaps next) camping rules.

  • (Incidentally, while recounting items that outsiders don’t always know about Texas — “Don’t Mess With Texas” is an environmental, anti-littering campaign.)

The legislature just wrapped up another session, and they passed legislation which opens up Texas for hemp and CBD, and the governor signed it, and still the landscape isn’t so clear:

“Texas Gov. Greg Abbott has signed into law a bill that lets Texas farmers grow hemp — and allows the sale of products such as CBD oil.

“Supporters and those who sell the products say the new law makes clear that it’s legal to sell hemp products in Texas, as long as they contain less than .3% of the psychoactive element in marijuana. The law went into effect with Monday’s signing.

“‘Texans are now free to use CBD without fear of arrest,’ said Heather Fazio, director of Texans for Responsible Marijuana Policy. ‘This is a big step for Texas and one we can all be proud of.’

“Not so fast, say some who believe these products will be legal once state agencies create rules and procedures to test and inspect the products.

“The law requires retail stores planning to sell CBD products to register with the state’s health department.

“It also lets Texas stores continue selling hemp products such as CBD oil if they contain less than .3% of THC, according to a statement from the office of Rep. Tracy King, the Batesville Democrat who carried the measure through the House.

“‘But stores cannot replenish until the manufacturer complies with the new testing and labeling requirements,’ according to the statement.

“The new law has created a two-tier system where the farmers who want to grow hemp are regulated by the Texas Department of Agriculture and the retailers who sell those hemp products such as CBD oil are regulated by the Department of State Health Services, said Richard Cheng, an attorney with Dallas-based DLA Piper, LLC.

“‘We are in a gray area,’ Cheng said.

Community Impact Newspaper ran a story on June 17, i.e. after this bill’s passage, stating:

More than a dozen stores in the Greater Austin area advertise the sale of CBD products. Although the 2018 farm bill legalized hemp-derived products containing less than 0.3% THC at the federal level, there is still legal gray area surrounding the sale of CBD in Texas, said Nishi Whiteley, director for America’s business development for the International Cannabis and Cannabinoids Institute.

Whiteley told Community Impact Newspaper in April state law is complicated but CBD technically remains illegal in Texas.
Community Impact Newspaper]

In addition, outside Texas, the FDA is only starting to get involved and investigate health claims, and who knows how long this process might take. [CNN]

According to Texas Senator Charles Perry, a Lubbock Republican who carried the recent bill in the Texas Senate, the CBD market is projected to exceed $20 billion by 2022.

Despite the magnitude of the opportunity and all the value Amplifier’s platform could bring to this growing space, given all this confusion, we have had to ask a few CBD-related clients to leave for now. We have also turned away more than a few interested parties, and now I can share this post with future inquiries, at least until the rules landscape solidifies.

Bummer, right?

We are going to discuss this terrain with entrepreneurs, lobbyists, and watchers, and we will report back what we learn.

Joel BushComment