Texas leaders zero in on exploding hemp market

Sign up for The Brief, The Texas Tribune’s daily newsletter that keeps readers up to speed on the most essential Texas news.

Austin hemp entrepreneur Shayda Torabi is looking at a year filled with uncertainty.

For the six years they've been in business, Torabi and her two sisters have operated Restart, their hemp dispensary, in a modest neighborhood in North Austin within an entirely lawful framework — evolving as the laws changed, and staying comfortably and legally off the radar of state lawmakers who authorized the sale of consumable hemp in Texas in 2019.

But all of that is about to change.

Some Texas lawmakers have marked hemp dispensaries for what could be some radical changes in regulations next year. Since their products were legalized, there’s been an overnight proliferation of shops offering baked goods, gummies, oils, and smokable buds made with cannabis derivatives — some containing small amounts of psychoactives.

Once the darling of a burgeoning wellness industry, the purveyors of legal cannabis products now face questions from critics who remain unconvinced of the safety of their products and want tighter regulations — or even partial bans.

Consumable hemp products come in forms that include smokable vapes and flower buds, oils and creams, baked goods, drinks, gummies and candies.

They contain industrial hemp or hemp-derived cannabinoids, including the non-intoxicating cannabidiol known as CBD. They may not contain more than 0.3% concentration of tetrahydrocannabinol, or THC, the intoxicating part of the cannabis plant that comes in forms known as delta-8, delta-9 and THCA.

The difference in the legal and illegal products lies in the plants from which they come. Hemp and marijuana plants are both cannabis plants. Marijuana plants have high THC. Hemp has low THC.

Texas is one of about a dozen states that has not legalized marijuana in any form for broad use.

But thousands of dispensaries in Texas are selling hemp-derived products that look, taste and sometimes intoxicate similar to their more potent sibling. They’ve sprung up in recent years through loopholes in state and federal law that allow them to sell their low-THC products with no age limits, loose and inconsistent testing requirements, and no limit on the number of licenses allowed in the state. And it’s happening amid a series of oft-changing statutes and court decisions that throw retailers, advocates, police, prosecutors and parents into confusion over what’s actually legal to buy, sell, possess and consume.

Since consumable hemp was legalized in Texas , the number of retail registrations for consumable hemp products has exploded in the state.

In 2020, the first year the Texas Department of State Health Services began registering retailers, some 1,948 retailers were actively registered. By 2023, that number had jumped to 8,343. And in the first four months of 2024, the state has already seen more than 7,700 active registrations.

Last month, Republican Lt. Gov. Dan Patrick ordered the Texas Senate to look into potentially banning the hemp products that contain THC, and investigate strict regulations for retailers across Texas. A hearing is scheduled for later this month.

There is no similar charge for the more business-friendly Texas House, which voted last year to expand the state’s medical marijuana program in legislation that also would have regulated the dispensaries.

That bill never got a vote in the Senate, the result of a political maneuvering over unrelated issues and a decided lack of interest in expanding weed laws in the conservative upper chamber.

Because it’s a Patrick priority, it’s likely to come up when lawmakers convene in January for the regular legislative session. Meanwhile, Congress is getting ready to reauthorize the Agricultural Improvement Act of 2018, also known as the Farm Bill, that instituted widespread changes for the hemp industry, including the authorization of the sale of intoxicating hemp-derived products.

So far, the latest U.S. House and Senate versions of that bill — which both propose to loosen barriers for industrial hemp farmers — leave out any changes that would address either the increasing calls by critics for limits on dispensaries or pushes by advocates for wider access. But further changes could come before the legislation gets a vote later this year.

Torabi, the Restart brand owner and president of the Texas Hemp Coalition, said she is looking for some clarity and support from both Austin and Washington.

“We're now seeing the hemp conversation not just in Texas, but nationally, show the pathway for how we can access this plant and really, ultimately help consumers who are seeking relief with cannabis products,” Torabi said. “We’re watching and waiting to see what happens next.”

The state does not limit the number of dispensary registrations or hemp licenses it allows. Health officials conduct random testing for the presence of heavy metals, pathogens, pesticides, solvents and the concentration of THC.

Retailers must pay an annual fee of $155 per location. License holders are on the hook for additional required state fees.

Torabi’s cannabis dispensary sells hemp-derived gummies, oils, edibles and smokable plant buds that are marketed as having wellness benefits like decreased depression or stress relief. While federal drug officials have approved the use of a seizure medicine that contains CBD, most of the hemp-derived products are not regulated by the federal government.

Her products contain either CBD, or low-concentration cannabinoid THC derivatives like THCA, delta-9 and delta-8. Some products are combinations of those.

Some regulations that would keep her industry legit would be welcome, Torabi said.

“It is the wild, wild West out there, and I can imagine you’d throw a stone in any direction and find not only new CBD products but the expansion of psychoactive cannabinoids,” said Torabi, who sells both types. “And it's a double-edged sword. It’s great that we’re giving access to these products where the consumers are, but the lack of regulation is really the crux of the conversation.”

The presence of bad actors who could trigger regulations that drag down legitimate operations not only threaten the very existence of her business if they cause a total ban on her products, Torabi said.

They also ruin the reputation of people like her and the products she passionately believes in after she used CBD, at her mother’s urging, to deal with chronic pain after she was hit by a car as a pedestrian in downtown Austin years ago, she said.

And while it’s true that consuming low-quality, unregulated products from unscrupulous retailers can be uncomfortable or unsafe for users, the customers coming to Restart to purchase high-quality CBD and low-dose THC products consistently tell her how they have helped them with issues like inflammation, insomnia, depression and similar benefits, Torabi said.

“We share the same concerns as Patrick, which is why we really do try to self-regulate as much as possible because we see where there can be malintent or taking what the intent was and twisting it,” she said. “It's a challenging place to be in because I do empathize with the state's concerns, but the transformative conversations that we're having on a daily basis are just so powerful, and those shouldn't be overlooked.”

The wellness benefits claimed by purveyors of hemp-derived consumables have been neither endorsed nor refuted by the U.S. Federal Drug Administration. Federal drug enforcement officials recently signaled that marijuana, would soon lose its status as a Schedule 1 narcotic — which are drugs that are highly addictive but have no medicinal value — and become eligible for broad research on its medicinal effects.

That’s not an opening for legal pot or any other changes in Texas, but it does bolster the argument that cannabis in whatever form it takes can have uses beyond industrial rope and intoxicating party drugs, advocates say.

“We're simply asking Dan Patrick to not eliminate the market but to further regulate and lean on organizations like ours, and to lean on leading operators like myself at Restart, to really understand and become educated,” Torabi said.

The state’s miniscule medical marijuana program, the Compassionate Use Program run by the Texas Department of Public Safety, has about 12,000 enrollees and a short list of conditions that would qualify a resident to buy low doses of marijuana in either edible or oil form.

Texans with a variety of conditions — such as epilepsy, autism, cancer and post-traumatic stress disorder — can access cannabis oil from marijuana plants with less than 1% THC. Medical cannabis can treat the symptoms of some of these diseases or reduce the side effects of other treatments, such as alleviating the nausea and loss of appetite associated with chemotherapy or reducing nightmares in patients with PTSD.

It is legal to buy and use most smokable hemp products such as flower or vape cartridges with CBD, THCA and delta-8. The smokable version of delta-9, a hemp derivative which has a higher THC level than delta-8, is illegal in Texas.

All hemp derivatives can be legally sold in oils, creams, gummies, sodas, candies, coffee and other consumables that retailers like Torabi stock in storefronts, convenience stores, breweries, coffee shops, trailers and online.

Consumable hemp was made legalby the federal Farm Bill in 2018 and in Texas, the following year by House Bill 1325, which Gov. Greg Abbott signed into law.

Critics say that because consumable hemp stores have been allowed to sell their products without stringent testing requirements, age limits or other regulations, they pose a health risk and their extreme growth in numbers has undercut access by the patients who truly need cannabis for health reasons.

They want lawmakers to enact age restrictions, on-site or in-state testing requirements, regulations on the ingredients and changes to how the psychoactive ingredients in the consumable hemp products are measured by state regulators.

States like Colorado, where both medical and recreational marijuana are legal, are putting tighter restrictions like these on those products as a way to reign in access and force more health and safety accountability on the consumable hemp industry.

Many of the current retailers, including Torabi, put some of these restrictions on themselves. All of Restart’s non-smokeable products are produced in Texas, including some handcrafted in her hometown of Austin. Her shop does not sell to anyone under the age of 21 for delta-8 and delta-9 products and 18 for CBD products.

Nico Richardson, CEO of Texas Original, the leading medical cannabis provider in the state, is frustrated that his operation, which his medical marijuana patients depend on for relief from symptoms of cancers and nerve disorders among other ills, is hindered by enormous regulation while businesses like Torabi’s are not.

For example, since he can only store his inventory in one location under Texas law, it gets ferried back and forth across the state at Richardson’s company’s expense. If a patient in the medical marijuana program in El Paso doesn’t pick up an order, Richardson’s staff has to drive to that city and bring that order of medical grade cannabis product back to Austin — a huge expense as well as an enormous waste of staff resources, he said.

“On the way, my driver passes probably 1,500 hemp dispensaries dealing delta-8 and delta-9 with no restrictions, and it’s everywhere in the state,” Richardson said. “Am I upset about that? Yes. I think it’s absolutely horrendous.”

Texas Original is one of two medical marijuana providers in Texas and serves the vast majority of the patients on the state program, Richardson said.

“You have patients in Texas that have gone through the process in the compassionate use program to get clean, well-tested, well-regulated medicine that is safe. That’s what they’re coming into the program for, and that’s what we’re trying to provide them,” Richardson said.

But that system will not survive if the hemp industry is not reigned in, he said. People are too easily convinced that all consumable hemp products are safe because they can buy them in the gas station or because they were at some point tested before they were sold, he said.

“It is complete and utter gaslighting,” Richardson said.

Lawmakers have instituted regulations beyond basic licensing fees and requirements in place, such as a restriction that the products can’t contain more than 0.3% THC by weight and that retailers have records showing that the products have been tested to confirm those numbers. But there is no guidance, for example, on how recently a product should have been tested, even though the amount of THC in a product can increase over time due to degradation and environmental factors.

Short of seeing a shutdown of the entire hemp industry, Richardson said tighter industry regulations “are long overdue.”

“It was never the intent here in Texas, and it certainly was never the intent for the 2018 federal Farm Bill, that you'd have a massive industry of — let's call it what it is — intoxicating hemp derivatives. It's marijuana by another name,” he said. “That's certainly not how the system was supposed to run.”

Near the end of May, the Texas Senate State Affairs Committee will hear public testimony about the issue. Both Richardson and Torabi plan to be there.

Torabi envisions a movement that would join people like her and Richardson — currently at odds in the fight — to craft a regulatory framework in Texas that allows access to all cannabis products, from low-dose CBD to medical grade pot to maybe even recreational legalization.

But what Torabi sees now is an opportunity for the pro-cannabis community to be a national leader in treating the plant as a tool for wellness, in whatever form it can be delivered.

“It's not like we're legalizing cannabis, and it's going to be a free-for-all, and there's no rules and checkpoints — that's absolutely not what we're asking for,” Torabi said. “We're just asking for inclusion, legitimacy and the acceptance that this is not something that you can keep dismissing as a conversation.”

We’ve got big things in store for you at The Texas Tribune Festival, happening Sept. 5–7 in downtown Austin. Join us for three days of big, bold conversations about politics, public policy and the day’s news.