HOUSTON — A Houston CEO is suing the state health department to stop its ban on Delta-8 after the cannabis extract was added to its online list of Schedule 1 controlled substances on October 15.
Ali Sheikhani, CEO of Sheikhani Group, is one of the plaintiffs in the lawsuit. His company owns more than 100 businesses, including more than 75 Vape City locations across Texas.
“It was so random,” said Sheikhani of the new ban. “At first, I did not believe it.”
Delta-8 THC, which was widely believed to be allowed under federal and state laws, made up 40 to 50 percent of sales at Vape City, which have more than 500 employees statewide.
“If I’m gonna shut down some stores, if I’m gonna lose some sales, I have to fire a couple of employees, a couple of hundred employees, as a matter of fact,” said Sheikhani. “Not just one, two, three, four, ten, and the unemployment is gonna go up. I’m not just talking about me at the moment. We have 5,000 plus stores all over in Texas who are selling Delta-8.”
Sheikhani believes his company’s other properties, which include gas stations, a shopping plaza, and retail stores, will help limit revenue loss.
“Sheikhani Group, we’ll survive somehow, but what’s gonna happen to other stores, other small businesses who took the loan from the bank?” he asked. “How are they gonna survive, (a retailer) who has one store, two stores, three stores?”
Michelle Donovan is the attorney representing Sheikhani in the lawsuit.
“Obviously it’s a tax revenue that will be lost, and most importantly, where do these products go?” said Donovan. “To the black market?”
Donovan says public notice is a key issue in both this lawsuit and a separate legal challenge filed by an Austin retailer of Delta-8.
“To not have anybody show up, to not have any written comments, I think says a lot that the notice just wasn’t adequately given,” said Donovan.
In response to the Austin lawsuit, lawyers for Texas DSHS wrote in a court filing that Delta-8 has been a Schedule 1 controlled drug in Texas for more than 40 years and the 2019 state law legalizing hemp did not allow this type of THC.
“To the extent there was any confusion about this, especially in light of federal regulations, the Commissioner took several steps over the last year to inform the public that the exception for up to 0.3 percent Delta-9 did not remove other THCs from the Schedules,” wrote the defense team in the legal response. “Plaintiff appeared to have ignored these notices.”
DSHS officials have called the Oct. 15 website update a “clarification”.
A hearing on the lawsuit filed by Sheikhani is set for Friday.