An eclectic group packed a private room inside a tony downtown Austin steakhouse on a Friday evening in September.
Burly and bearded, conservative and buttoned up, tattooed and pierced – roughly 60 representatives of the state’s multibillion-dollar consumable hemp sector gathered to figure out how to keep state lawmakers from eliminating their fast-growing industry.
Why This Story Matters
The consumable hemp industry in Texas generates billions of dollars a year in sales, but the availability of hemp-based products hurts medical marijuana suppliers and a lack of regulation puts consumers at risk. The Texas Legislature is likely to consider regulations for the industry, and could shut it down, during the 2025 session.
The creator of the Texas Hemp Show podcast, whose 190th episode had aired that day, sat across from a woman whose family founded Create-A-Cig, the nation’s largest vape chain.
A consultant who helps an Amsterdam-style coffeehouse and smokeshop in South Austin chatted near a lobbyist who fights for hemp retailers – and whose clients at one time included powerful beer companies.
“We’re out here in the trenches, and we need you to join us in this fight,” AJ Velador, a Dallas hemp entrepreneur who had sponsored the dinner, told the crowd. “I just want to know you’re in this with me.”
With the Texas Legislature launching its next session in January, some Texas Republicans want to curtail the use of consumable hemp-based products, saying the industry has taken advantage of unintended loopholes in a 2019 state law to offer intoxicating products with little regulatory oversight or quality control.
Lawmakers will consider, for the third consecutive session, new restrictions on products containing delta-9 THC, the primary psychoactive compound in cannabis, as well as its synthetic cousin, delta-8, and dozens of similar substances. Some lawmakers and advocates are pushing to ban all products containing any type of consumable hemp-derived cannabis – including gummies, vapes, drinks and smokeable buds.
Other proposals seek stricter regulations, such as requiring child-proof packaging, setting age limits for purchase and mandating product safety testing by a third-party lab. One proposal would limit legal use to drinks infused with low-dose THC – tetrahydrocannabinol, a psychoactive compound that comes from hemp, a variety of the cannabis plant – so sales can be overseen and taxed by the state’s alcohol regulators.
Marijuana remains illegal except for Texans who meet strict medical exceptions, but hemp-based products, including those that contain intoxicating cannabis compounds, can be smoked, vaped, sipped or eaten – and Texans are eager consumers. The state’s retail hemp industry raked in an estimated $8 billion in 2022.
Tighter regulations could force a sea change in an industry that has grown from a few dozen players in the non-intoxicating CBD market to nearly 8,500 registered sellers of a vast array of intoxicating products.
The low-potency products are derived from the chemicals found in the cannabis plant – some intoxicating and some not. Products also may contain CBD, or cannabidiol, a non-psychoactive chemical found in cannabis plants. It has been federally approved for treating a form of childhood epilepsy, and there is evidence it could be used to treat anxiety disorders, pain, insomnia and possibly inflammation.
The industry has created about 50,000 jobs in the state since a 2019 law allowed them to operate in near-direct competition with the illegal marijuana market and the legal medical marijuana program, said Lukas Gilkey, CEO and co-founder of Hometown Hero, a founding member of the Texas Hemp Business Council.
Retailers hope to allay lawmakers’ concerns so their businesses can thrive, said Mark Bordas, an Austin lobbyist and spokesman for the Texas Hemp Business Council, which formed earlier this year and is working with Velador and others to help shape legislation. The Texas Hemp Coalition, which is not affiliated with the group, has also been working on the issue.
Exterior of Retro Revolution Smoke Shop, on Tuesday, Nov. 26, 2024, in Dallas.
Exterior of Retro Revolution Smoke Shop, on Tuesday, Nov. 26, 2024, in Dallas. (Shafkat Anowar / Staff Photographer)
“They’re trying to clean up their own industry and make sure the best practices are employed across the board,” Bordas told the Texas Senate State Affairs Committee in a recent hearing. “Because the industry itself becomes imperiled by bad actors.”
‘Our industry generates revenue’
Purveyors and consumers say hemp-based products offer an array of benefits, from lifting moods to offering relief for depression, anxiety, pain, insomnia, eating disorders and post-traumatic stress disorder. A recent study showed a non-intoxicating cannabis product known as THCV holds promise for weight loss or diabetes patients.
The U.S. Food and Drug Administration has approved a medicine that contains hemp-derived CBD to treat rare seizure disorders – although the agency and other U.S. health officials warn the benefits and risks are still largely unknown and products can be low quality or mislabeled.
Hemp-derived cannabis retailers want the right to operate in a fair and legal environment while selling products they see as helpful to people and more accessible than medical marijuana, Andrea Salas Daniels, vice president of DRMZ Brands, told lawmakers at an October committee hearing.
“Our dedication to this state is firm, and we chose Texas as our home because of its pro-business environment and the tremendous opportunities it provides for growth and innovation,” said Salas Daniels, whose company invests in and owns consumable hemp businesses and has 100 employees in Texas. “Our industry generates revenue, creates jobs and contributes to the well-being of communities across Texas.”
Texas does not regulate the labs that test products to ensure they contain legal amounts of cannabis ingredients. Beyond risking harm to users, the situation can have legal implications for those who buy products – or inadvertently sell – advertised as legal but contain illegal levels of THC.
With few regulations, many retailers try to protect their businesses and customers by following best practices recommended by advocacy groups and consultants – and which mirror what they hope Texas will eventually adopt. Some test products and impose age limits for purchase. Some only sell products enclosed in childproof packaging.
Kimberly Evangeline, owner of Retro Revolution smoke shops in North Texas since 1996, puts those safeguards into place at her shop and said she would be glad to see state law catch up. It’s difficult to do business when the laws are unclear, said Evangeline, whose “hippie boutique” stores in North Dallas and Plano employ 20 people and sell hemp-derived consumables along with pipes, art, fashion and similar merchandise.
Hans Enriquez, CEO of Dazed Inc. is photographed at the flagship store in South Austin, on…
Hans Enriquez, CEO of Dazed Inc. is photographed at the flagship store in South Austin, on September 26, 2024. In the background, Benjamin Rumsey, who found the coffee shop at the beginning of the year, visits regularly to smoke and hang out.(Thao Nguyen / Special Contributor)
“I believe in the plant. It’s a crime in and of itself to not let people have something that grows out of the ground naturally to use as medicine,” Evangeline said. “I think there does need to be a level of sophisticated regulation. We need to make it so that there is an intelligent law that says, ‘This is what you can do, and this is what you can’t do.’”
Banning most or all hemp products sold by almost 8,500 businesses could imperil two decades of investment in Texas for Hans Enriquez, CEO of MedX Holdings, the publicly traded parent company of Lazydaze + Coffeeshop dispensaries, including shops in Austin and Pflugerville.
Enriquez, 44, also owns a legal adult-use recreational cannabis Lazydaze shop in New Mexico and has plans to expand along the East Coast, and in Las Vegas and Colorado. If Texas lawmakers restrict the hemp industry, he said he would have to change his business model, maybe by turning his Austin-area locations into plain coffee shops.
He’s no stranger to adaptation. Enriquez started Lazydaze as a smoke shop 20 years ago in Laredo, where he grew up, after attending business school. He expanded the retail brand into tattoo shops, counterculture gear stores and similar retail businesses.
Enriquez ventured into the legal hemp-derived market when CBD was introduced into Texas.
“I keep my ear to the ground because it changes so much, and it feels like the sky is falling every time,” he said. “But I know better at this point that it’s not. As a company, we’ve always evolved on whatever the rules and regulations are.”
Lazydaze lets customers buy and smoke pre-rolled low-dose joints while they sip lattes, purchase gummies and vapes, or order coffee infused with CBD or low-dose THC compounds. Enriquez believes his customers have the right to access products that are safe – particularly with the medical marijuana program in Texas being inaccessible to most people. He also believes that as a purveyor of legal products, he should be allowed to do business in a state that champions entrepreneurship.
“I want to be able to operate,” he said. “Just give me the rules.”
Critics say retailers want to continue exploiting loopholes to sell intoxicating THC in violation of state marijuana laws – without limits on how much can be purchased and no age restrictions.
Parents, some pediatricians and other critics also say the largely untested products can be hazardous.
“It’s crazy what we’ve done here,” said Nico Richardson, CEO of Texas Original, the leading medical cannabis provider in the state. “This is the biggest open drug market in the country now.”
The hemp-derived products that have not gained FDA approval cannot be marketed as medicine, but the items are often sold as alternative treatments for people who want to save money or don’t qualify for prescriptions. Because there are no medical prescriptions needed, there are serving sizes on labels but no recommended dosages – even though consuming large quantities of some products can produce a high similar to that of marijuana.
“We are defying all logic at this point in Texas,” Richardson said. “If you want a recreational cannabis industry, that’s fine. Legalize a recreational cannabis industry with the right controls and the right regulations in place.”
Trouble at the Legislature
Among the consumable hemp industry’s biggest detractors is state Sen. Charles Perry, a Lubbock Republican whose 2019 bill legalized growing and selling hemp and hemp products to help Texas farmers.
The legislation limited the amount of delta-9 THC, the primary psychoactive compound in cannabis, in the plants to no more than 0.3% by weight as a way to avoid high-potency products getting into the market.
The law did not place limits for any other hemp derivatives.
The law also did not specifically address consumable hemp, as there was little market at the time. It also removed hemp from the state’s Controlled Substances Act, effectively legalizing all of its derivatives without potency limits on most of them.
Those include compounds like delta-8, a synthetic version of delta-9, and THCA, the non-intoxicating precursor that turns into intoxicating THC when heated in vapes and smokeable flower buds.
Perry has criticized hemp retailers for suing the state to block attempts to restrict consumable hemp products. The Texas Supreme Court responded by upholding a prohibition on manufacturing consumable hemp products for smoking within Texas, which allowed retail sales and wholesale distribution of products made outside Texas.
“A ban is required. We need to do our law enforcement a huge favor to fix this problem with clarity and no opportunity for loopholes,” Perry said during a recent Senate committee hearing. “If you can’t regulate it, control it and enforce it, you just don’t allow it to happen.”
A bill attempting to ban intoxicating hemp-based products in 2023 did not get a committee hearing, the first step in the legislative process, but renewed attempts are expected when the Legislature meets next year. Earlier this summer, Republican Lt. Gov. Dan Patrick instructed senators to curtail the consumable hemp industry, bringing state law closer to the intent of Texas’ strict regulations on recreational cannabis.
Medical marijuana vs. hemp
The stakes are high.
An unregulated market in products sold as alternative medical solutions can put lives and health at risk, while an overregulated market can kill commerce and deny access to beneficial treatments, advocates on both sides of the debate say.
Medical marijuana advocates would like to see the medical program expanded to reach more Texans and to allow easier transportation, storage and delivery of their low-dose marijuana products.
Some would also support a ban on all hemp-derived consumable products, similar to a ban recently passed in California as part of emergency legislation in September.
Perry appears to be on their side. Instead of allowing hemp-based products, the senator said he’d rather give more Texans access to doctor-prescribed, regulated and safe substances under the Compassionate Use Program for medical marijuana. Expansion is widely supported by veterans who use it to treat chronic pain and post-traumatic stress disorder.
Patients in Texas can legally use cannabis, with THC at no more than 1% of total volume of the product, with a prescription to treat debilitating or life-threatening symptoms of conditions such as cancer, epilepsy, autism and PTSD.
Programs in other states offer access for a wider range of acute and chronic conditions, from muscle spasms to HIV-AIDS, and give doctors wide latitude in determining which additional conditions could be treated with prescribed marijuana.
During the 2023 legislative session, the GOP-dominated Texas House enthusiastically supported expanding the medical marijuana program to include more qualifying conditions such as anxiety and depression. The initiative died in the Senate, where Patrick has repeatedly opposed expanding access to marijuana.
Expanding the program could breathe new life into the medical marijuana industry, which is foundering in Texas under burdens created by the small number of people allowed by law to access marijuana, competition from consumable hemp retailers, and dated regulations that restrict where medical marijuana can be stored and dispensed and how it can be transported, Richardson said.
Without a ban or at least significant guardrails, even expanding the state’s medical marijuana program may not be enough to let companies like Richardson’s keep providing THC treatments to their patients, who include children with cancer and veterans with post-traumatic stress disorder.
Consumable hemp retailers can market products with the same basic ingredient, THC, that are much cheaper and sold in more places, he said.
For Richardson, no action at all would be the worst-case scenario.
“We’ll be forced out,” Richardson said. “We can cry foul all we want, but the reality is, you know, patients over time simply will not find a reason to pay more for regulation. And that’s the problem right now. We have a huge regulatory burden, and we’ve done nothing but drop prices in the last three years.”
H/T: www.dallasnews.com
