Texas Attorney General Ken Paxton on Wednesday filed lawsuits against five cities that have passed marijuana decriminalization measures. The legal action was filed against the cities of Austin, San Marcos, Killeen, Elgin, and Denton “for adopting amnesty and non-prosecution policies that violate Texas laws concerning marijuana possession and distribution,” according to the attorney general’s office.

In 2022, the five cities each adopted ordinances or civic policies that instruct police officers not to enforce state laws prohibiting the possession or distribution of cannabis. After filing the lawsuits this week, Paxton said that such policies are prohibited by the Texas Local Government Code, which bars municipal and county governments from adopting “a policy under which the entity will not fully enforce laws relating to drugs.”

“I will not stand idly by as cities run by pro-crime extremists deliberately violate Texas law and promote the use of illicit drugs that harm our communities,” Paxton said in a statement on Wednesday. “This unconstitutional action by municipalities demonstrates why Texas must have a law to ‘follow the law.’ It’s quite simple: the legislature passes every law after a full debate on the issues, and we don’t allow cities the ability to create anarchy by picking and choosing the laws they enforce.”

The attorney general also noted that under Article 9, Section 5 of the Texas Constitution, it is illegal for municipalities to adopt ordinances that are not consistent with the laws enacted by the Texas Legislature. With the lawsuit, Paxton has asked the district court to overturn the city ordinances and instruct local officials to enforce state law.

Progressive Leaders Push Back

Julie Oliver, executive director for Ground Game Texas, a group that works to advance progressive issues including local marijuana decriminalization ballot measures, said that the attorney general’s legal action seeks to undermine the right of Texans to govern themselves at the local level.

“Ken Paxton’s lawsuits represent an anti-democratic assault on the constitutional authority of Texas Home Rule cities to set local law enforcement priorities,” Oliver told local media. “In each of the cities sued, a supermajority of voters adopted a policy to deprioritize marijuana enforcement in order to reduce racially biased law enforcement outcomes and save scarce public resources for higher priority public safety needs.”

In Denton, a city of about 140,000 people in the Dallas-Fort Worth metropolitan area, voters passed an initiative to decriminalize misdemeanor marijuana offenses in November 2022. The ballot measure received the approval of more than 32,000 votes and the election marked the highest voter turnout recorded in the city’s history.

“This ordinance has now received more votes than any council member or mayor in the history of Denton,” Nick Stevens from Decriminalize Denton, a grassroots organization behind the ordinance, told the Denton Record-Chronicle after the election in 2022. “We’re ecstatic that Republicans, Democrats and independents came together to reclaim their power in the city.”

Denton’s marijuana decriminalization policy, however, has not yet been fully implemented and the city’s police have still been issuing citations for misdemeanor marijuana offenses. In June, the Denton City Council considered an ordinance that advocates said would have strengthened the measure approved by voters but voted 4-3 against the proposal.

New Law Restricts Local Control

The attorney general’s lawsuit is partly based on HB 2127, a bill passed last year that restricts so-called home rule authority. Attorneys for cities including Denton, San Antonio, Waco and Plano that filed suit against the law last year explained that home rule allows local governments “to create policies that address local concerns that vary from jurisdiction to jurisdiction based on many factors such as demographics, population density, environmental concerns and public safety issues.”

But Stevens said that HB 2127 does not cover the city marijuana decriminalization measures because it states that it only applies to municipal or county codes involving agriculture, finance, insurance, labor, natural resources and occupations.

“Ken Paxton should read this law before wasting Texans’ tax dollars with another frivolous lawsuit that distracts from the work we have done to deliver for the people of Denton,” Stevens said.

Ground Game Texas is currently sponsoring a campaign to decriminalize marijuana in Dallas. Known as the Dallas Freedom Act, the measure would end most arrests and citations for Class A and Class B misdemeanor marijuana possession. The proposed ordinance, which is similar to the one passed in Denton, would also require city leaders to report on cannabis enforcement and forbid the use of city funds for laboratory testing to distinguish hemp from marijuana.

“The Dallas Freedom Act is a dynamic initiative that will reduce unnecessary arrests, address racial disparities in marijuana enforcement, and save millions of dollars in city and county resources for much-needed public safety programs,” Tristeza Ordex, campaign manager of Ground Game Texas, said in a statement about the proposal.

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While states throughout the U.S. continue to embrace the new legal wave of cannabis, it doesn’t eclipse the strife within the industry. Over the past few years, the industry has faced issues around oversupply, falling prices, stringent regulations and distribution problems, among others, which often fall especially heavy on cultivators.

Now, new research findings show exactly how these employees are faring in the current climate. According to the third edition of the U.S. Cannabis Cultivator survey from Wells Fargo, a majority of growers have a grim outlook on the current state of the cannabis market, as reported by Green Market Report. 

Majority of Cultivators Feel Negatively About State of Industry

The survey, including responses from more than 400 growers across eight U.S. states, found that 58% of growers said they feel “bad” or “terrible,” in reference to the current cannabis market. Specifically, 34% answered that “I feel terrible. Things look awful,” while 24% said “I feel bad. Things don’t look good.” 

Additionally, 31% of respondents said they feel “okay,” while only 9% of cultivators said they feel “good” and 2% said they feel “great” about the current state of the market.

The survey also looked at responses by state, finding that California (which also has the highest number of growers) felt most negative about the current market, with 66% of cultivators expressing a “bad” or “terrible” outlook on the market. Most of the negativity was because of falling wholesale prices, with 34% of respondents citing this as their main source of stress, followed by restrictive regulations at 29% and lack of distribution avenues at 10%.

As the largest cannabis market in the world, California saw a dip in cannabis sales in 2022, the first since adult-use sales launched in 2018. The loss is likely due to a decreased price per pound of cannabis across the state.

Falling Prices a Main Obstacle for All Cultivators

California growers weren’t the only group to express concerns about falling prices.

Approximately 87% of cultivators said they are selling wholesale flower for $1,250 per pound or less, up from 83% and 74% at the same level in fall and spring 2022, respectively. Perhaps even more shocking, a majority of cultivators also reported selling flower at $750 per pound or less, below the average breakeven price of $800 per pound. This ultimately makes profitability a challenge for many growers. 

This assertion reflects a recent survey from Whitney Economics, which found that only 24.4% of cannabis operators in the U.S. are profitable. The consulting and research firm also signified that there is little relief in sight for operators, forecasting seven quarters of slower-than-normal growth in the future. Also nodding to some of the concerns of cultivators, the survey noted that the success of cannabis businesses is largely dependent upon the regulatory structure of the states in which they are operating, among other factors that may be beyond their control.

In It For the Long Haul

While the current outlook may seem bleak, cultivators widely indicated that they wouldn’t be leaving the industry anytime soon. The survey found that only 19% of growers planned to partially or completely exit from the industry, a decrease from 22% and 27% in fall and spring 2022, respectively.

This persistence could prove problematic, potentially exasperating oversupply issues and causing continued price drops. The survey found that 42% of cultivators plan to increase cultivation over the next 12 months. 

However, the report also shows that growers are investing in nutrients (65%) and soil (45%), essentially looking to optimize production while keeping costs low. To hammer in that point, few cultivators planned to drop cash on high-cost items like lights (32%), irrigation systems (30%) and extraction equipment (16%).

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