by Ron Holmes
Now that I have your attention, let’s talk about the legal issues surrounding the sale of CBD in Texas. This is a topic primarily for shopping center owners, managers and leasing companies, but is also applicable to owners and leasing agents of office/warehouses.
There are two basic forms of marijuana plants, one that produces high levels of tetrahydrocannabinol (THC) that is commonly associated with getting “high” from smoking or ingesting THC. The other is cannabis sativa L., which is essentially hemp, a non-psychoactive product primarily grown for industrial goods and products (think rope).
Even though non-psychoactive, CBD (one of 98 cannabinoids in marijuana and hemp) “may” possess an array of therapeutic benefits, such as the treatment of epilepsy, depression, headaches, Crohn’s disease, pain, etc. CBD is not listed in the Controlled Substances Act (CSA), but has recently come under attack by the DEA as a controlled substance.
Shopping center owners, managers and leasing companies need to think ahead on this
Why is this important? If you own or are the leasing agent for a shopping center (and maybe an office/warehouse), the question becomes whether or not you should enter into a lease with a tenant who proposes to sell CBD. The sale of CBD products (ingestible oils, gummies, gumdrops, creams, oil rubs, capsules, sleeping masks, coffee, vape pens, pet products, bath bombs, etc.) is currently about a $90 million market and has been projected by Forbes to become a $2.1 billion market by 2020. Some estimates are that the CBD market may be $24.5 billion by 2025.
That is a huge market which will need retail space and no doubt office/warehouse space to operate. Some of you may have already been approached to lease space to CBD distributors. Should you do so?
It is my opinion, at this time, that you should not, at least until this area of the law goes from muddled to at least understandable.
Why do I say that?
Although the Controlled Substances Act (21 U.S.C. §802(16)) does not include CBD as a controlled substance, the DEA has continued to attempt to regulate CBD. In 2004, the Ninth Circuit Court of Appeals issued an unanimous decision holding that the DEA cannot regulate CBD, as CBD is not a controlled substance. Even so, the DEA has continued to attempt to regulate CBD.
In 2011, the DEA included CBD in the definition of marijuana, making it a controlled substance. The HIA (Hemp Industry Association) challenged that DEA rule (HIA v. DEA), but its case was dismissed by the Ninth Circuit on procedural grounds (not substantive grounds). That leaves everyone in limbo as to whether or not, under federal law, CBD is or is not a controlled substance.
The State of Texas, pursuant to Texas Compassionate Use Act, allows the sale of CBD (so long as it does not reach at least 10% concentration) for the treatment of “intractable epilepsy”, but not otherwise. Prior to the decision in HIA v. DEA, at least the Ninth Circuit had unequivocally decided that CBD was not a controlled substance. Now, the DEA rule is still in effect, which makes CBD a controlled substance. Thus, the dilemma on whether or not a shopping center or warehouse owner should lease space to a CBD distributor.
Do you want to be the test case?
It is likely the federal courts will override the DEA such that the sale of CBD will not be illegal. You have to decide if you want to be the test case or if you prefer to wait for someone else to be the test case. There’s also the marketing issue associated with CBD distributors in terms of the perceived clientele who frequent CBD distributors. That is a marketing issue, not a legal issue. Also, you need to have the deed restrictions affecting your property reviewed carefully to determine whether or not CBD may be a product type prohibited from sale by the deed restrictions.
Bottom line: Be very cautious in this area.
If you have a desire to be a trend setter, this is an opportunity. If your business plan leans to the conservative side, these may be waters into which now is not the time to wade.
If you want to know more, please contact me at firstname.lastname@example.org or 469-916-7700 X105. Please know that I borrowed heavily from Richard Y. Cheng, Esq. of Dykema Cox Smith and his May 20, 2018 presentation to the Science and Technology Section of the Dallas Bar Association entitled “Industrial Hemp CBD Products – The Current Legal Outlook”