A lawsuit filed Monday alleges the Texas Department of State Health Services exceeded its legal authority by adopting new hemp rules that took effect March 31.
Plaintiffs Texas Hemp Constitutional Alliance and hemp company Green Nation argue the rules effectively ban certain hemp products and impose testing, labeling and licensing requirements that go beyond state law, according to KXAN.
The lawsuit could have significant implications for Texas’ hemp-derived cannabinoid industry, a market estimated at $5.5 billion in 2025.
What is at the center of the dispute?
The case centers on how Texas measures THC in finished hemp products.
Under the new regulations, DSHS includes THCA when calculating total delta-9 THC concentrations in consumable hemp products.
THCA, a compound found in raw cannabis, is not intoxicating in its natural form but converts to delta-9 THC when heated.
Texas law defines hemp as cannabis containing no more than 0.3% delta-9 THC on a dry-weight basis. State law also requires testing before harvest that accounts for THCA.
The plaintiffs argue that DSHS exceeded its authority by extending THCA calculations to finished consumable hemp products, effectively changing which products can legally be sold.
What does the change mean for hemp products?
Under the new rules, THCA must be considered during testing before manufacturing and retail sale, potentially making previously compliant hemp products illegal, according to KXAN.
For example, hemp flower containing low levels of delta-9 THC but high levels of THCA could exceed the legal limit, preventing retailers and manufacturers from selling it.
The Texas State Law Library notes the rule effectively prohibits most smokable consumable hemp products.
The restrictions have faced other legal challenges. In a separate case brought by the Texas Hemp Business Council, the Texas Fifteenth Court of Appeals lifted a temporary stay June 5, allowing the THCA rule to remain in effect while litigation continues.
How could the new rules affect hemp businesses?
The lawsuit also challenges the increased costs of complying with the regulations.
Under the adopted rules, manufacturers must pay an annual licensing fee of $10,000 per facility, while retailers face an annual registration fee of $5,000 per location, excluding online processing fees.
The plaintiffs argue the higher fees, combined with stricter testing and labeling requirements, could force businesses out of the market, particularly smaller operators with limited budgets.
According to KXAN, the lawsuit alleges that licensing fees increased by 4,000% for manufacturers and 3,333% for retailers.
The plaintiffs contend the increases amount to an attempt to restrict the hemp industry through administrative fees rather than legislation.
DSHS, however, maintains the fees are intended to cover the costs of administering and enforcing the program, including inspections, laboratory testing and related enforcement expenses.
The plaintiffs are seeking an injunction to block enforcement of the rules.
