Cannabusiness in Texas

Trends and prospects

How would you describe the current state of the cannabis industry in your jurisdiction, including areas of growth, market prospects and trends, and M&A activity?

Cannabis is an illegal Schedule I hallucinogenic substance under the Texas Controlled Substances Act, and its possession, use, cultivation, and distribution is illegal in Texas (Sections 481.032 and 119 to 22, Texas Statutes & Codes Annotated (West 2001); 43 TexReg 2825 (2018)). Given the substantial population of Texas, the availability of farm land, and the entrepreneurial spirit of the people in the state, if cannabis is legalized, the market prospects for hemp and marijuana are strong.

Legal framework

Legislation

What primary and secondary legislation governs the use, cultivation and retail of cannabis in your jurisdiction?

The Texas Controlled Substances Act (Sections 481.001 et seq of the Texas Statutes & Codes Annotated) prohibits the use, cultivation, and retail of cannabis in Texas (Id. at Sections 481.119 to 122). However, the Texas Compassionate Use Act allows for the possession and use of cannabidiol products that are less than 0.5% by weight of tetrahydrocannabinol (THC) by persons with intractable epilepsy when such products are prescribed by a doctor (Sections 169.001 to 169.005 and 487.001 to 487.201 of the Texas Statutes & Codes Annotated (West 2015)).

However, the Agriculture Improvement Act 2018 removed only “hemp”—which it defines as any portion of the cannabis sativa L. plant with a THC concentration of 0.3% or less—from the Controlled Substances Act’s definition of “marijuana.” Thus, to the extent that the Texas Compassionate Use Act allows cannabis with a concentration greater than 0.3% to be used, it is still illegal under federal law. It remains to be seen whether Texas will modify its definition under the Compassionate Use Act to comport with the definition of “hemp” in the Agriculture Improvement Act 2018. In addition, although the Agriculture Improvement Act 2018 removes hemp from the federal Controlled Substance Act’s definition of “marijuana” and permits states to oversee the production of hemp, the cultivation of all forms of cannabis, including hemp, remain illegal in Texas.

The Agriculture Improvement Act 2018 permits the large-scale commercial production of hemp. The act gives the authority to implement programs to oversee the production of hemp to states and, in the event that a state does not implement a plan, the federal government retains the authority to oversee production. Because Texas did not establish a hemp pilot program under the Agriculture Improvement Act 2014, it does not currently have a program in place to oversee the production of hemp. Further, hemp continues to fall under Texas’s definition of “cannabis” (Section 481.002(26) of the Texas Statutes & Codes Annotated). Thus, because the Agriculture Improvement Act expressly does not pre-empt state laws regulating hemp production that are more stringent than federal law, hemp production will likely remain prohibited under the federal hemp program once it is initiated. Consequently, all cannabis cultivation, including hemp, will remain illegal in Texas until the state establishes a hemp program and removes hemp from its definition of “marijuana.”

The original article, "Cannabusiness in Texas," first appeared on Lexology Navigator on February 1, 2019.