Ongoing Delta-8 THC Legal Battle Moves to the Texas Supreme Court
By Daniel Molina
Sep 16, 2024
The Delta-8 THC ("D8") battle in Texas continues, with the arena now moving to the Texas Supreme Court. On August 21, 2024, the Texas Department of State Health Services (DSHS) filed an opening brief with the Texas Supreme Court in the case Texas Department of State Health Services v. Sky Marketing Corp. as part of an ongoing effort to ban D8 in Texas, a battle the agency has been waging since 2021.
Why Does This Case Matter?
DSHS' ongoing attempts to ban D8 could have significant ramifications for Texas' hemp industry. It could also negatively impact hemp markets in other states, given that such a large amount of hemp is imported into Texas.
Following the passage of the 2018 Farm Bill, the Texas hemp market has flourished, with D8 products notably contributing to the industry's revenue, which, according to Whitney Economics, amounted to $3.3 billion in retail sales of CBD and converted cannabinoids.
Should the Texas Supreme Court rule in favor of DSHS, the impact on hemp businesses could be considerable, restricting a rapidly expanding market and leading to economic losses. Alternatively, a ruling against DSHS could bolster the legal standing of D8, further fueling growth in the Texas hemp industry.
Of course, Texas' 89th Legislature, which begins on January 14, 2025, could pass a bill impacting the legality of D8 before the Texas Supreme Court rules on this case. Potential legislation could be just as impactful on Texas' hemp industry as a ruling in favor of DSHS.
How Did We Get Here?
This case stems from the US Congress' decision to legalize industrial hemp. When Congress passed the 2018 Farm Bill, among other things, it changed the definitions of "Tetrahydrocannabinols" (THC) and "Marihuana Extract" to exclude industrial hemp. Texas similarly legalized hemp in 2019. Due to the changes in definitions, the Drug Enforcement Administration's (DEA) changes to the schedule of controlled substances, and innovation in hemp production and hemp-derived products, the newly legal cannabinoid D8 became increasingly popular nationwide, and its popularity has steadily grown ever since.
In response to growing concerns over intoxicating hemp, including D8, on September 9, 2021, the Commissioner of DSHS signed and filed a Notice of Objection to the DEA's new definitions in the Texas Register. The Commissioner then held a public hearing on October 6, 2021, but no one submitted comments at the hearing or in written form. The Commissioner based his decision not to adopt the federal government's new definitions, in part, on the lack of public opposition.
That lack of public opposition is one of the main arguments underlying the claims in Texas Department of State Health Services v. Sky Marketing Corp. (dba "Hometown Hero"). Hometown Hero, an Austin-based manufacturer of hemp products, alleged in its original complaint that a temporary restraining order (TRO) was needed because DSHS' Oct. 15 online notice resulted from an administrative process that did not adequately notify retailers. Initially, the TRO was denied on October 22, 2021. However, on November 5, 2021, the trial court granted Hometown Hero's Application for a Temporary Injunction.
Almost immediately, DSHS filed a Notice of Appeal and Motion for Temporary Relief (asking to rescind the lower court's injunction) in the Court of Appeals of Texas, and on November 18, 2021, the appeals court denied DSHS' motion. Five days after, DSHS filed a Petition for a Writ of Mandamus with the Texas Supreme Court (separate from the current case before the court), asking the court to overturn the injunction. However, the Texas Supreme Court ultimately dismissed DSHS' petition "as moot" on December 10, 2021. Then, on September 28, 2023, the appeals court ruled in favor of Hometown Hero.
The court ruled that the lower court did not err in concluding that it had jurisdiction over Hometown Hero's APA claim. Additionally, the appeals court ruled that the lower court did not abuse its discretion when granting a temporary injunction on DSHS' ban on D8.
The Current Case
Now, DSHS has once again appealed the unfavorable decision against it. This time, they appealed to the Texas Supreme Court.
DSHS' Arguments
In its Opening Brief, DSHS argues that:
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It is not the government agency responsible for criminal prosecutions which can result from D8 being classified as a Schedule I substance in Texas and therefore there is no connection between Hometown Hero's alleged harm and DSHS' enforcement capacity (alleging Hometown Hero lacks standing to pursue the case)
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The Commissioner has sovereign immunity, has the statutory authority to object to federal classifications of controlled substances, and because his decisions are final, they are not subject to judicial review
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DSHS' public facing October 15, 2021, comment was not a "rule" subject to APA proceedings because it had no binding effect on private rights
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The appeals court erred in upholding the injunction because:
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Hometown Hero lacked standing for the same previous reasons
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Hometown Hero's claims fail on the merits
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The status quo that the court allowed Hometown Hero to enjoy was the continuance of illegal activity
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Hometown Hero's assertions of irreparable injury do not meet the high threshold for a temporary injunction
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Hometown Hero's Arguments
Hometown Hero's Response to Petition focused on the arguments that the Commissioner's 2021 acts relating to D8 were Ultra Vires (beyond the scope of authority) acts and that Hometown Hero met its burden to show the trial court that a temporary injunction was appropriate.
Specifically, Hometown Hero argues that:
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"The Commissioner's alterations to the definition of THC in the 2021 State Schedules contravened the Texas Farm Bill's plain text, as enacted by our Legislature in 2019"
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The Texas Constitution prohibits the Commissioner from making unilateral changes which carry legislative force
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The commissioner exceeded his statutory authority by employing improper procedures
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The October 15, 2021 publication was a "rule" and provides an independent basis for standing
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Hometown Hero (a) had standing to request a temporary injunction and (b) satisfied the standard for the injunction
Ultimately, Hometown Hero's arguments could go in a different direction depending on how they perceive the validity of the arguments that DSHS made in its Opening Brief; however, it is unlikely to be known exactly what those arguments will be for at least a month.
Delta-8 and Synthetic THC Case Precedent
On September 4, 2024, in Anderson v. Diamondback Investment Group, LLC, the Fourth Circuit Court of Appeals ruled that DEA's position that THC-O doesn't “occur naturally in the cannabis plant and can only be obtained synthetically, and therefore do[es] not fall under the definition of hemp" was not a reasonable interpretation of the 2018 Farm Bill's unambiguous text. The court "reject[ed the] contention that the DEA's interim final rule or letter mandates a finding that THC-O is illegal."
Similarly, in AK Futures LLC v. Boyd St. Distro, LLC, the Ninth Circuit upheld the legality of D8 products, potentially providing a basis for legal protection against state actions attempting to ban such products. Also, cases like Bio Gen., LLC v. Sanders emphasize that federal law under the 2018 Farm Bill, which includes all hemp derivatives, may preempt stricter state laws.
These precedents may support Hometown Hero's argument that D8 should remain legal in Texas. If the Texas Supreme Court considers these rulings persuasive, it could rule against DSHS' attempt to classify D8 as a Schedule I substance, similar to how other courts have favored the legality of D8 under the federal definitions established by the 2018 Farm Bill.
That being said, the arguments before the Texas Supreme Court in this case are primarily based on procedure, so it is unclear whether the court will consider the precedent set in the preceding cases.
What's Next?
Hometown Hero's Response Brief is not due with the Texas Supreme Court until October 10, 2024, and DSHS' subsequent Reply Brief, barring any extensions of time, is not due until October 25. In light of this, a decision from the court may not come out until well into 2025. This case could significantly impact the Texas hemp industry, so stay tuned!
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