Part of the reason we started a Cannabis Industry team at a Southeastern-based law firm before any Southeastern state had adopted a marijuana program was because we had a hunch that the expansion of cannabis would eventually make its way to our neck of the woods. And we guess it was just kind of a slow day around the office.
It turns out that our hunch – which even we are modest enough to admit was pretty much obvious and inevitable – turned out to be true. In the last seven years, there has been an explosion of cannabis activity and controversy in the Southeast. From marijuana in various forms to hemp and all of its iterations, the Southeast has been playing catchup with the rest of the country and in doing so is experiencing the progression of cannabis reform at an accelerated pace with the benefit of seeing the experiences of earlier cannabis adopters. We aren’t alone in observing this phenomenon. Jessica Billingsley, for Rolling Stone, has written on the topic several times.
C’mon. What’s Happening in the Southeast That Makes It So Special? Aren’t You Just Writing This Because You Live There? Could You Be More Egocentric?
Wow, that got a little weird and revealing there for a second but we’re back. For those who may not enjoy the privilege of calling the Southeastern U.S. home, here is a sampling of the cannabis activity currently taking place in the region:
Florida’s Medical Marijuana Market Matures, but Voters Narrowly Rejected the Ballot Initiative for an Adult-Use Program; Hemp Program Survives by Governor’s Veto (for Now)
Florida broke the seal on medical marijuana in the Southeast when it adopted a medical program in 2016. While the program has certainly had its hiccups, it has generally proven to be a popular program as it has matured over the years.
On April 1, 2024, the Florida Supreme Court ruled that voters would decide whether Florida will become the 24th state to legalize adult-use marijuana at the ballot boxes in November. The significant opposition that succeeded in keeping a similar initiative off the 2022 ballots evidently prevailed this year. The initiative came short of receiving the required 60% approval to pass with only about 56% of Florida voters voting in favor.
On the hemp front, earlier this year we wrote that the Florida Legislature passed a bill that would limit the amount of THC in hemp-derived products and upend the novel cannabinoid industry in the state by banning delta-8 and delta-10 products. But in a surprising move described by Marijuana Moment as “somewhat contradictory,” conservative Gov. Ron DeSantis vetoed the legislation, even as he campaigns against adult-use marijuana. This being the South and a controversial issue involving potentially extraordinary amounts of money, there are strange bedfellows and innuendo:
The governor of Florida is reportedly planning to veto a bill that would ban consumable hemp-derived cannabinoid products such as delta-8 THC, apparently because he’s hoping the hemp industry will help finance a campaign opposing a marijuana legalization initiative on the state’s November ballot.
As Gov. Ron DeSantis (R) prepares to step up his push against the legalization measure, officials close to the governor… say he’s plotting to leverage the hemp industry’s economic interest in participating in the intoxicating cannabinoid market to convince people to vote against marijuana reform.
Safe to same there’s more to come in the next couple of months for what has become the 5,000 lbs. gorilla in the Southeastern cannabis landscape.
Arkansas’ Medical Program Booms While Adult Use and Hemp in Limbo During Court Battles
Like Florida, Arkansas was one of the pioneers of bringing medical marijuana to the Southeast. Arkansans voted to approve a medical marijuana program in 2016 via Amendment 98, although the first legal sales did not occur until May 2019. The program eclipsed $1 billion in sales by late 2023, and as of August 2024, sales in 2024 exceeded $158.5 million. From all metrics, the program appears to be doing very well.
And, while an effort to place on the November ballot an initiative that would have further expanded the program was stymied by the Arkansas Supreme Court just before the election, a ballot initiative in 2022 to create an adult-use program didn’t fail by an insurmountable margin, with 43.8% voting in favor.
On the hemp front, all eyes are on the United States Court of Appeals for the Eighth Circuit. That court conducted oral arguments in the Sanders v. Bio Gen appeal on September 24, so a decision should be forthcoming. The trial court action was filed by hemp companies challenging an Arkansas law (known as Act 629) that the plaintiffs contended impermissibly outlawed hemp-derived consumable products in Arkansas. The appeal followed issuance of an injunction by U.S. District Judge Billy Roy Wilson blocking enforcement of Act 629.
Mississippi Struggling to Reconcile Supply and Demand on the Marijuana Front; Unsettled Hemp Rules
Mississippi surprised many observers when a statewide ballot initiative in 2020 went overwhelmingly in support of medical marijuana. After a couple of years of frustrating and largely obstructionist legal wrangling, Mississippi’s medical program is fully up and running now, going on almost two years.
One of the most notable and unique aspects of Mississippi’s program is the absence of any limitations on the number of licenses available to operators. While there are components of the Mississippi laws and regulations governing the program that necessarily limit how many licenses can be issued (e.g., local government opt-outs and distance setback limitations) the program is struggling due in large part to an oversupply of product and not enough patients (as of November 21, 2024, the state reports 48,129 patients). Last legislative session, the Mississippi Legislature modified the state’s medical cannabis law in certain ways that were aimed to improve patient access hurdles, and more amendments are expected in the upcoming session.
On the hemp front, Mississippi lacks any real legislative or regulatory guidance on the subject. Consequently, many in the state view the hemp-derived intoxicating products sold in gas stations and other retail stores as a real problem. Last legislative session, a bill (HB 1676) aimed to regulate intoxicating hemp products failed. Since then, state law enforcement has conducted raids and arrests of retail stores that sell products they believe are illegal under Mississippi law. Also, the Mississippi attorney general recently issued an opinion concluding that hemp-derived THC beverages could be illegal under Mississippi law. We wrote about that opinion here. The Mississippi legislature will almost assuredly revisit legislation governing these products next session while it also explores ways to amend the Medical Cannabis Act.
Texas Low-THC Marijuana Program Continues as Fierce Debates Rage Over Hemp
Texas passed the Texas Compassionate Use legislation in 2015, allowing certain qualified physicians to prescribe low THC products (max of 1% THC by weight) to patients having certain medical conditions. Currently, the state has only licensed three entities, all located in the central region of the state, as “dispensing organizations” to cultivate, process, and dispense low-THC cannabis. While the state has implied it may issue more licenses and a third-party consultant it hired recently recommended that it should, that has not yet occurred. The last application window closed on April 28, 2023. We, along with most everyone in the industry, is watching what Texas ends up doing with this program; everything is supposed to be bigger in Texas, and a real-deal medical cannabis program shouldn’t be any exception.
The hemp world in Texas slightly resembles the one in Arkansas; it’s mired in litigation. Texas has a robust legal and regulatory program that governs hemp and consumable hemp products. That program operated for years without much interruption until the Texas Department of State Health Services (TDSHS) took action in 2020 and 2021 to restrict the sale of certain consumable hemp products. This culminated in the publication of an official statement online in October 2021 stating that Texas law only “allows Consumable Hemp Products in Texas that do not exceed 0.3% Delta-9 . . . THC [, and] [a]ll other forms of THC, including Delta-8 in any concentration and Delta-9 exceeding 0.3% are considered Schedule 1 controlled substances.”
In response, a group of plaintiffs sued the TDSHS and its commissioner seeking to enjoin the “‘effectiveness going forward’ of the amendments to the terms ‘tetrahydrocannabinols; and ‘Marihuana extract’ in the Department’s 2021 Schedule of Controlled Substances.” The trial court granted the requested injunction, ordered the TSDHS to “remove from its currently published Schedule of Controlled Substances the most recent modifications” the subject definitions and any subsequent publications, and “enjoin[ed] the effectiveness going forward of the rule stated on [the Department’s] website that Delta-8 THC in any concentration is considered a Schedule 1 controlled
substance.” The state appealed, the Austin Court of Appeals affirmed, and the matter now sits with the Texas Supreme Court.
THC-infused beverages have also been a focus in Texas recently. As we wrote last month, the Texas Senate Committee on State Affairs held a hearing on October 17, 2024, to discuss how the state might soon regulate THC-infused beverages. That issue will most assuredly be addressed by the Texas legislature this next session.
Louisiana Medical Program Expands Amidst Fight Over Scope of Hemp Program
While Louisiana technically legalized medical marijuana in 1978 and passed several laws in the years that followed in that pursuit, the first products weren’t sold until 2019. The very limited license (only two authorized cultivators and processors) regime is now headed towards a bustling program. The number of dispensaries that can exist in Louisiana is currently capped at 30, but that number will only grow as the patient numbers increase in the regions identified throughout the state.
Louisiana’s hemp program, which is governed by a well-developed regulatory regime, is also in a current state of uncertainty. During the 2024 legislative session, the Legislature amended the hemp laws to restrict where certain hemp-derived products can be sold and their potency. As in Arkansas and Texas, the hemp industry quickly responded with litigation. In that matter, Hemp Assoc. of La. v. Landry, No. 3:24-cv-00871, in the U.S. District Court for the Middle District of Louisiana, was filed on October 18, 2024. The plaintiffs alleged that the 2018 Farm Bill preempts the legislation and is unconstitutional on other grounds. The state disagreed and moved to dismiss, but on November 19, 2024, the state informed the court that it would stay the effective date of the new legislation so that the parties could fully brief the pending motions and the court could reach a decision. The motions are due to be fully briefed in the coming days.
Georgia Trying to Get Its Act Together
The Georgia Access to Medical Cannabis Commission describes the Georgia law as “much more limited than some other states.” The statute does little more than allow registered people to buy and possess low-THC oil from licensed dispensaries. This oil may contain CBD and up to 5% THC by weight.
Only a select number of licensed producers can grow the cannabis that will eventually be turned into the allowed low-THC oil. As in many other states, the application and licensing process is quite strict.
To obtain a registration card, prospective patients must have a qualifying condition or disease and be registered through their physician. Once a patient has their card, they can buy low-THC oil and possess 20 fluid ounces or less so long as they keep it in the manufacturer-labeled pharmaceutical packaging.
On the hemp side, the Georgia Legislature recently passed SB 494, which Gov. Brian Kemp subsequently signed into law. This law introduces substantial changes to the hemp industry. The Georgia Department of Agriculture is in the process of drafting the corresponding and required agency rules. It appears that most hemp extracts like delta-8-THC, delta-10-THC, HHC, and other cannabinoids remain legal under Georgia law as “consumable hemp products.”
Alabama Medical Marijuana Program on the Ropes While Hemp Flourishes
Sigh… where do we even begin when it comes to medical marijuana in Alabama? There have been more twists and turns than a classic Iron Bowl.
The Legislature approved a medical program in 2021, and recent court hearings suggest that we are potentially no further along after three years, with a possibility of the Legislature being forced to take action to modify (or end) the program.
We have written extensively about the years of litigation and dysfunction that have plagued the Alabama medical marijuana program. In a nutshell, the cap on the number of licenses for various categories (cultivators, processors, dispensaries, etc.) has led to a scenario where applicants dissatisfied with the regulators’ decision to award licenses have sued on multiple occasions, and the regulators have either acceded to the demands or ended up in a court that has not acted quickly to impose order on the process.
In the midst of this chaos, the Legislature had an opportunity to tweak the law but overwhelmingly chose not to do so.
We’re choosing to take the optimistic view that the court system will be able to find a resolution to the years of litigation without putting the matter into the Legislature’s hands. We stress that view is very optimistic, but we should know more by the beginning of 2025.
On a brighter note for cannabis advocates, hemp is growing strong in the state, benefiting largely from a relatively liberal regulatory regime. Although the Legislature considered a significant rollback of hemp sales during the last session, the only law passed was a statewide age-limit on products containing hemp. There have been recent reports of law enforcement activity related to hemp businesses being raided for selling unlawful products, but on the whole Alabama should be considered hemp-friendly for the moment.
Tennessee Marijuana Reform Frustrated While Hemp Market Experiences Growth But Tighter Regulation
For years we were astonished that Tennessee was not a huge marijuana (at least medical) spot, but years of hearing over and over from friends and colleagues in the state have finally convinced us of the political complexities at play.
We, likely as most people, tend to view Tennessee as being dominated by Nashville, Memphis, Chattanooga, and other hemp-friendly areas of east Tennessee. If the decision was up to the citizens of those areas, Tennessee would likely have a well-established marijuana program. But, as it turns out, Tennessee is a big state with widely varying views on all ranges of social issues, including marijuana. For that reason, marijuana proposals have had little success in the largely conservative state Legislature. We still think Tennessee could be a monster player with the right program in place, but we’d be lying if we predicted that was imminent.
On the hemp side, Tennessee was an early adopter, and its hemp industry blossomed for years under a hands-off regulatory regime. In May 2023, Tennessee enacted T.C.A. § 43-27-201, which is an industry-friendly statutory framework for products containing hemp-derived cannabinoids like delta-8 and delta-10 THC. The statute delegated rulemaking authority to the Tennessee Department of Agriculture (TDA) to flesh out its requirements.
That is where the trouble began. In December 2023, TDA published emergency rules that largely aligned with T.C.A. § 43-27-201 with respect to its licensing and labeling requirements, leaving those operators that focus on edible hemp-derived cannabinoid products pleased. But the rules contained a bombshell: specifically, the requirement that hemp contain 0.3% or less total THC, which includes both delta-9 THC and THCA. The TDA maintained this total THC standard in the permanent rules it promulgated in September 2024.
The TDA’s total THC requirement is at odds with Tennessee’s hemp statute, which defines hemp as cannabis containing 0.3% or less delta-9 THC (with no mention of THCA). In reliance on this statutory scheme, many Tennessee hemp companies that focus on psychoactive products have made high-THCA smokable products a large part of their offerings. The TDA’s new rules, which go into effect on December 26, 2024, pose a grave danger to those operators.
Industry groups, including the Tennessee Growers Coalition, are preparing for war to prevent these new rules from going into effect. Stay tuned to Budding Trends for updates on the lawsuits against the TDA that are coming down the pike.
Kentucky Begins Medical Marijuana Program and Remains Hemp Stalwart
The OG of hemp, with the help of its powerful Sen. Mitch McConnell, Kentucky has an outsized responsibility for passage of the two most recent farm bills that have led to the explosion of the hemp industry. Kentucky’s hemp program remains strong, and many of its Congressional delegation represent a bulwark against efforts to severely limit the availability of hemp products.
Kentucky’s medical cannabis program is just now off to the races. Licenses are currently being awarded and industry observers are carefully watching the Bluegrass State’s progress as the program gets off the ground.
Nothing to Show Yet, But South Carolina Begins to Show Signs of Life in Cannabis Reform Efforts
Ah, South Carolina. Its siren song has tempted cannabis advocates for years with its diversity – political, geographical, geological, and otherwise. But to date, nada. We’ve written about the fits and starts with the South Carolina Compassionate Care Act in the past few years. The Legislature has not enacted the law as of yet, but we are keeping our eyes on it during the next legislative session.
On the hemp side, coming from a state that has famously been near the back of the line on cannabis liberalization, we’ll admit that we were surprised to read a recent letter from the solicitor general of South Carolina stating that, as a general rule, hemp beverages containing less than .3% delta-9 THC on a dry-weight basis are legal. We suspect that will be a topic of discussion at the next legislative session.
North Carolina Not Quite there on Marijuana , Stalled on Hemp
North Carolina is going to be a monster marijuana jurisdiction, but like Tennessee, the geopolitical makeup of the state has restrained cannabis liberalization to date. Maybe we should have known better than to predict that the Tar Heel State was going to take action on marijuana legislation in an election year in which the speaker of the N.C. House, Tim Moore (R), is running for an open U.S. Congress seat. Passing a marijuana legalization bill was not going to be a political priority and could have given political adversaries an opportunity to paint supporters as soft on crime, even if a majority of the state’s electorate does support some kind of legalization.
For its part, the state Senate passed yet another medical marijuana and hemp regulation bill, House Bill 563, though one of the most restrictive in the country, only to see it stall in the hose. As in years past, Moore has not allowed the House to take a vote on a bill and has cited his “majority of the majority” policy and lack of Republican support in the House as a basis for refusing to bring the Senate bill to the House floor for a vote.
It’s likely not going to move anytime soon, but what’s in HB 563? Half the bill is dedicated to the regulation of hemp, while the second half – the North Carolina Compassionate Care Act – opens the door to legalizing medicinal marijuana. On the medicinal marijuana side, the bill creates a state commission to oversee the distribution of medical marijuana and regulate which medical conditions are eligible for treatment. It also outlines the process for patients to obtain medical cannabis cards, creating restrictions on where cannabis can be smoked, and requires physicians to write prescriptions for patients to use medical cannabis.
Some Senate Republicans expressed concern that legalization of medicinal marijuana was a fast and slippery slope towards legalizing recreational marijuana. To alleviate that concern, an amendment was adopted that clarified that recreational use would remain illegal in North Carolina even if the federal government reclassified or legalized marijuana nationwide.
On the hemp regulation side, HB 563 would require all hemp product manufacturers and distributors to be licensed. In addition, there are new safety and testing standards, marketing and label restrictions, and more strict product regulations on the amount of cannabinoids that can be included in ingestible or inhalable products.
Politically, it makes sense for supporters of medical marijuana to tie its fate to hemp regulation. Hemp regulation has broad bipartisan support and would likely pass both chambers if presented as a standalone bill. By linking hemp regulation to the Compassionate Care Act, medical marijuana supporters are daring their House and Senate colleagues to vote against hemp regulation. For the time being, that leaves the hemp industry with the uncertainty, and opportunity, of North Carolina continuing to have very limited regulations for the industry.
Why Is the Southeast Experiencing Such Explosive, Concentrated Cannabis Activity?
Part of the reason for the accelerated pace of developments of cannabis reform in the Southeast is precisely because the Southeast started cannabis programs later than other parts of the country. As a result, Southeastern cannabis efforts are, on the whole, not as mature as markets in other states. There are examples from other states that legislatures and regulators can look to for how other states in recent years have addressed the issues just now facing Southeastern states.
There is a great scene in the movie Major League where Willie Mays Hayes, played by the wonderful Wesley Snipes, is removed from the Cleveland (then) Indians’ baseball spring training while he sleeps in bed because there is no record of anyone by that name being invited to spring training (because he wasn’t invited). When Willie wakes up in the morning to the sound of potential Indians running sprints, Willie jumps out of bed in his pajamas and starts running, eventually finding himself running between two uniformed players. Because of his remarkable speed (“I hit like Mays, and I run like Hayes”), Willie explodes past the other two even though they had a head start. The manager Lou Brown, played sublimely by the delightful James Gammon, immediately says “[g]et him a uniform.”
What the hell are we talking about? We think the Southeastern cannabis market is a little like Willie Mays Hayes. The market was late to the cannabis industry, but once it arrived it has the benefit of seeing the experiences of other states and, like Willie, has the benefit of hitting the ground running.
Separately, the issue of cannabis reform is ripe for political battles in the Southeast. The region is certain not as socially progressive on most issues like cannabis. After all, in this part of the country there are still knock-down, drag-out fights about whether to allow the sale of beer before noon on Sundays. But the region is proving to be more progressive than many would have thought, in part perhaps because people around these parts have heard anecdotal reports about friends and family who have used cannabis products safely and perhaps in part because we have seen that cannabis liberalization in other parts of the country has not led to the type of Reefer Madness scenarios long feared.
So, What’s Next?
As with most trends, the rapid expansion of cannabis activity mirrors – and is in many ways a microcosm – of the policies, setbacks, and successes experienced across America.
If we were certain what the future holds for cannabis in the Southeastern United States, we would be sitting on an island somewhere instead of writing blog posts. That said, we expect (1) clear, if not sometimes frustratingly paced expansion of medical cannabis across the region; (2) an expansion of qualifying medical conditions and form factors; (3) an eventual tipping point in the direction of adult-use programs; and (4) hemp continuing to see strong sales unless the federal or state governments enact laws to thwart that growth.
At the conclusion of the wonderful Ken Burns’ epic documentary on country music, the great Marty Stuart says the following about the genre:
Country music has something for everybody, and it’s inside the song, it’s inside the characters. It’s really colorful in here. I invite you in.
Cannabis in the Southeastern United States has something for everybody, and maybe not enough for some people. And we certainly have colorful characters making some of the important decisions about the future of cannabis policy in our little corner of the world. We see this area as one of massive potential growth, particularly with the help of the right people. We invite you in.