Hemp or pot: What’s the difference?
The governor’s signature on a Texas bill that legalized the sale of hemp and CBD products on June 10 came too late for one smoke shop store owner.
Amy Wazwaz and her husband own two smoke shops — one GM Tobacco store in Duncanville and another in Lancaster — that were raided on March 15 by members of the Duncanville Police Department.
Officers seized what they identified as more than “30 pounds of marijuana, hundreds of pounds of CBD oil in various forms, weapons and other evidence pertinent to the case,” Duncanville police said in a statement.
More than three months later, no charges by the Dallas County District Attorney’s Office have been filed, and officials with that office have declined to pursue prosecution based on the current evidence.
“The District Attorney’s Office informed the agencies we would fairly review and consider any additional evidence they developed but to this time, no case has been filed,” said Kimberlee Leach, spokeswoman, Dallas County District Attorney’s Office.
The products seized during the raid that were already paid for, the cash that was seized and the property that was damaged, amount to a loss of about $100,000, Wazwaz said.
“It’s about equivalent to three years’ profit,” Wazwaz said. “I’m not even sure on how to fight back.”
CBD retailer: We just want our stuff back
The Duncanville police have not returned the property, cash or electronics that were seized as evidence.
“The Duncanville Police Department has a current and ongoing investigation on possible criminal activity at the business location,” a city official said. “Until such investigation is completed, we shall not make any further statements concerning the seized evidence or possible charges. The evidence seized will be retained until completion of the investigatory process or prosecution in accordance with law.”
Duncanville police declined to comment on whether the seized products had been sent to a laboratory for testing or what type of violation they are investigating, saying that making that information public would jeopardize the integrity of the investigation.
Wazwaz said she would like to work with the police to resolve this issue without going to court. She and her husband are not drug dealers, Wazwaz said. In the past they have given surveillance footage to police to help them find people suspected of committing crimes at businesses near her stores, but that past cooperation has not benefited her present situation, Wazwaz said.
She and her husband just want their stuff back, Wazwaz said.
“I’m not sure why they keep waiting,” she said. “It’s been quite a confusing series of events. My attorney said the police are just harassing us. Sometimes I believe I was targeted because I am a Muslim. I don’t want to believe that, but I don’t want to be naive either.”
The money needed to pursue the case in court also presents a problem. The least expensive attorney quoted her an initial fee of $20,000, Wazwaz said. And as long as police can say in good faith that they are pursuing an active investigation, there is no time limit on how long they can keep what they consider is evidence, according to Chad Ruback, a Dallas attorney.
Based on the information he has heard, Ruback said it seems as though Wazwaz has a winnable case. In the end a judge could order police to return the seized merchandise; however, it’s unlikely she would ever recover her legal expenses, Ruback said.
“It’s not going to be fast and it’s not going to be cheap,” Ruback said. “Sadly, that’s the state of the American legal system. It’s the best legal system in the world, but it’s not perfect.”
New law makes CBD products legal. Old mindsets make trouble for retailers
Selling hemp products that are now legal in Texas while the regulatory framework is still being created will present risks and require patience, according to attorneys familiar with the industry.
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, said Richard Cheng, an attorney with DLA Piper, LLP. The retailers who sell those hemp products such as CBD oil are regulated by the Texas Department of State Health Services, according to the agency.
“We are in a gray area,” Cheng said.
The two state agencies have not issued regulations yet, Cheng said. Once the two agencies draft rules, those rules will have to be approved by federal officials who are also developing a regulatory framework to manage hemp and hemp product production and sales.
Law enforcement officials, police, prosecutors and judges, will have to be educated, Cheng said. Two years ago, hemp products were illegal and now they are not. Search and seizure of marijuana products will have to change.
“The whole struggle about legalizing hemp is that hemp looks and smells like marijuana,” Cheng said. “The only factor that will distinguish the hemp product from marijuana is the THC concentration.”
The new Texas law, which mirrors provisions of the newest federal farm bill which legalizes hemp and hemp derived products with THC (Tetrahydrocannabinol) concentrations of 0.3 percent or less, still leaves those products heavily regulated.
Texas laboratories that once only tested to determine whether a product contained or did not contain THC will now have to test for the specific amount of THC contained in the test sample to tell if a violation of the law has occurred.
State officials have published rules for retailers who are already selling consumable hemp products to follow. More rules sellers will have to follow will come later.
Banks reluctant to do business with CBD retailers
Another issue that Wazwaz said she also faces relates to financial institutions.
She has run into some difficulties getting credit card orders processed and recently, the bank she had been dealing with for 15 years closed all of her accounts, Wazwaz said.
Kurt Purdom, Texas Department of Banking deputy commissioner, said he is beginning to get calls from bankers about the new legal landscape for hemp and hemp products and he suspects bankers are receiving inquiries from their customers about bank policy.
“Banks have been notoriously conservative over the years,” Purdom said. “If they know of a customer who could get them into trouble, they tend to shy away from them.”
While the department has no policy to do outreach or educate bankers about the new law, state banking associations and trade groups may be exploring opportunities provided by the legislation.
“I think as time goes on and as some of these hemp related products become mainstream and we have programs that are operating, you will see banks be more receptive to those types of customers,” Purdom said.
The larger the institution, the more difficult it may be for them to pivot. Wells Fargo closely monitors the legislative and regulatory developments related to hemp and CBD-related businesses, said Michael King, a Wells Fargo spokesman.
The bank evaluates relationships with businesses manufacturing and selling hemp in accordance with these developments, including the 2018 Farm Bill and Gov. Greg Abbott’s bill signing in Texas, King said.
“Since federal law prohibits the sale and use of marijuana, national banks like Wells Fargo may not knowingly bank or provide services to marijuana businesses or for related activities,” King said.
“We acknowledge the conflict between state and federal laws and understand it presents challenges to our customers,” King said. “Financial institutions nationwide face the same challenge and we continue to seek resolution through work with industry associations.”