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Hemp-derived THC products are shown at a Texas retailer. An Austin medical marijuana company has sued several hemp businesses, alleging their products exceed legal THC limits.<\/p>\n
Mikala Compton\/Austin American-Statesman<\/p>\n
As Texas lawmakers and regulators continue to\u00a0grapple with the future of hemp-based products<\/a>, an operator in the state’s medical marijuana program says several hemp companies are selling illegal drugs under the guise of legal hemp.<\/p>\n Austin-based\u00a0Texas Original Compassionate Cultivation<\/a> has filed a lawsuit seeking to block several companies from doing business in Texas and recover damages for lost revenue. The case was removed to Texas Business Court last week by one of the defendants. \u00a0<\/p>\n Article continues below this ad<\/p>\n Since 2017, the Texas Original has had one of the rare and valuable state licenses to sell low-THC medical marijuana through the state\u2019s Compassionate Use Program<\/a>. Known as TCUP, it was signed into law in 2015 to help Texans with conditions like intractable epilepsy, cancer and Lou Gehrig\u2019s disease.<\/p>\n But the value of that license has been degraded, the company says, by \u201cwildcat\u201d operators in the hemp space it says are increasing\u00a0THC levels<\/a> beyond the legal limit and lying about it. The largely unregulated market is now competing with the highly regulated TCUP market to the detriment of its licensees, it argues.\u00a0<\/p>\n Under House Bill 1325<\/a>, passed in 2019, hemp-derived products are legal if they contain less than 0.3% delta-9 THC. The state\u2019s Compassionate Use Program formerly allowed products with up to 1% THC before switching to a 10-milligram-per-dose limit.<\/p>\n The lawsuit alleges 10 companies are selling marijuana products as legal hemp, marketing them deceptively and offering products that may contain contaminants. It also claims many are poaching Compassionate Use customers through false advertising while operating outside the regulatory framework imposed on medical marijuana providers.<\/p>\n Article continues below this ad<\/p>\n TOCC says it has spent millions of dollars complying with state regulations governing the Compassionate Use Program, including security, inspections, testing and background checks.<\/p>\n By contrast, the company argues, hemp businesses face far fewer restrictions while potentially exposing consumers to unregulated products that may contain synthetic drugs and harmful substances.<\/p>\n The companies named in the lawsuit are Big Dan\u2019s Hemporium, Cloud Ponics, Greenbelt Botanicals\/Greenbelt CBD, JTE Enterprises, doing business as Green Cross ATX, Green Cross CBD and Greenbox; Restart CBD; CBD American Shaman LLC; Southeast Farming Partners, doing business as Haygood Farms; Cookies Creative Consulting & Promotions; VIIA Hemp\/VIIA; and Mood\/Hellomood.<\/p>\n Restart CBD filed to move the case to Texas Business Court. Its attorney disputed the allegation that the company was illegally selling marijuana.<\/p>\n Article continues below this ad<\/p>\n \u201cThis petition reads less like a legitimate effort to vindicate a legal right and more like a 39-page hissy fit from a company that appears to have confused a license to sell medical marijuana with a right to control every cannabis-related product sold in Texas,\u201d said Joseph \u2018Jeb\u2019 Golinkin II, attorney for Restart.<\/p>\n TOCC says it commissioned independent national labs to test the defendants\u2019 products and can prove they are exceeding the legal limit for THC.<\/p>\n \u201cOur position is succinct, it\u2019s based in law, and we are confident it will succeed in court,\u201d said Heidi Coughlin, attorney for TOCC.\u00a0<\/p>\n The defendants, it alleges, have managed to grow rapidly in an industry valued in the billions.\u00a0<\/p>\n Article continues below this ad<\/p>\n TOCC is seeking damages for lost business, arguing that customers who should have purchased products through the Compassionate Use Program instead bought products from the defendants. The lawsuit alleges the companies were unjustly enriched through illegal sales.<\/p>\n Texas Original’s lawsuit accuses Mood and other hemp-based companies of telling consumers one thing, while selling them something else.\u00a0<\/p>\n Court Records<\/p>\n Laboratory testing<\/p>\n According to the lawsuit, the tests TOCC commissioned of the defendants\u2019 products show they have illegally high amounts of delta-9 THC, and a variety of other problems that would make them illegal in other states.\u00a0<\/p>\n Article continues below this ad<\/p>\n \u201cOver 200 independent chemical analyses proved that the vast majority of Defendants\u2019 so-called \u2018hemp\u2019 products are not hemp at all,\u201d the lawsuit reads.\u00a0<\/p>\n Big Dan\u2019s Holdings LLC, doing business as Big Dan\u2019s Hemporium, sells a product called Marshmallow Dream cereal bar containing 116 milligrams of delta-9 THC\u00a0\u2014 about 10 times the legal limit in Texas and above limits in some states where recreational marijuana edibles are legal, according to the lawsuit.<\/p>\n It goes on to argue Big Dan\u2019s is deriving its products not from hemp, but from synthetic and illegal substances.\u00a0<\/p>\n Restart sells a vape called \u201cGreen Crack,\u201d which TOCC claims was \u201cnearly pure\u201d delta-9 THC, according to the lawsuit.\u00a0<\/p>\n Article continues below this ad<\/p>\n Restart denied the allegation that it was selling products that violated Texas law.\u00a0<\/p>\n A company called Cookies sells a product called \u201cTahitian Lime THC Flower\u201d that was 22 times stronger than advertised and 10 times over the state limit, according to the lawsuit.\u00a0<\/p>\n Rize Wellness, doing business as VIIA, sells a \u201cBlackberry Kush Vape\u201d that the lawsuit says has a 24% delta-9 THC level. Mood\u2019s \u201cStrawberry Cough Vape\u201d has a nearly 15% delta-9 THC level.<\/p>\n The lawsuit says the labs also tested for pesticides and microbial contaminants which it says would be illegally high under TCUP or in other states.\u00a0<\/p>\n Article continues below this ad<\/p>\n Big Dan’s Hemporium is among the defendants in a lawsuit alleging certain hemp products exceed legal THC limits.<\/p>\n Court Records<\/p>\n A growing industry\u00a0<\/p>\n Texas has been grappling <\/a>with what to do with the explosion in hemp-based companies since shortly after the 2019 Farm Bill passed.\u00a0<\/p>\n The Texas Department of State Health Services said it has issued more than 9,000 retail registrations across Texas. The Compassionate Use Program, meanwhile, is only now expanding its number of licenses into the double digits more than a decade after lawmakers authorized it.<\/p>\n Article continues below this ad<\/p>\n And while TCUP licensees are regularly tested, inspected, and have vast guardrails over its locations, who has access and when \u2014 hemp-based companies have few.<\/p>\n The battle over regulating hemp businesses has\u00a0divided some of Texas’ most powerful Republican leaders<\/a> and sparked court fights over testing standards for hemp products.<\/p>\n The Texas Legislature failed to pass regulations last year which precipitated an attempt to add regulations administratively, which have now been challenged in court.\u00a0<\/p>\n Article continues below this ad<\/p>\n<\/p>\n
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