Texas at center of hemp-derived cannabinoid market

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Image of Colt Power and Kim Flores sorting hemp-infused gummies at Power Biopharms in Euless, Texas.

Colt Power and Kim Flores sort hemp-infused gummies at Power Biopharms in Euless, Texas. (Photo by Kevin Brown for MJBizDaily/Emerald)

(This story is part of the cover package in the March-April issue of MJBizMagazine.)

The future of federal regulation for hemp-derived cannabinoids is hard to predict – but industry stakeholders might find a crystal ball in the form of Texas.

So far, Texas regulators have taken a hands-off approach that has allowed the state’s hemp-derived cannabinoid sector to thrive.

“That hands-off approach has really allowed the market to figure out what (consumers) want and producers and manufacturers to figure out how to best get those products to them,” said Colt Power, CEO of Power Biopharms, a low-THC hemp cultivation business in Euless, Texas. “If anything, a more hands-off approach has shown how this state is ready for this.”

Shayda Torabi, CEO and co-founder of Restart in Austin, said Texas also has proved states can have a legal market for intoxicating hemp-derived cannabinoids that doesn’t go the conventional route of legalizing medical marijuana and then recreational cannabis.

“Texas has a very large market. And it’s not the illicit market, it’s the hemp-derived market,” Torabi said.

“People really discredited Texas’ cannabis program. And that’s probably because for so long we were expected as a country to go through medical to adult use,” Torabi said. “The law very clearly identified less than 0.3% delta-9 THC on a dry-weight basis, which became ripe for fostering this whole other side of the market of minor cannabinoids – both psychoactive and nonpsychoactive as well as the hemp-derived delta-9 market.

“People recognize that Texas is not waiting to enter the game. We’re already in the game.”

Delta-8 ban thwarted

Power credits Texas’ initial approach to hemp-derived cannabinoids to the 2018 U.S. Farm Bill, which legalized hemp production nationwide. The position was upheld by Texas’ 3rd Court of Appeals in October after the Texas Department of State Health Services tried to ban delta-8 THC products, which are created by synthesizing CBD, often derived from federally legal hemp.

But operators in the Texas market still have some requirements to follow, Power noted.

A hemp cultivator must have a so-called lot permit, or license, and can cultivate only low-THC strains from a state-approved list.

Plants must be tested within 30 days of harvest, and a test taken just a few days too late can result in total crop disposal, so timing must be precise, Power said.

Plants must test below 0.3% total THC, meaning THC + THCA multiplied by a conversion factor since THCA becomes THC when combusted.

Crops that pass testing must be harvested within 30 days.

Hemp regulations welcome

Operators in Texas’ hemp-derived cannabis market generally like the way it currently functions, but many say they are open to regulations that would help the market mature and set an example for federal regulators to follow.

“People are paying attention to Texas. They’re paying attention to how we’re handling this. And we want nothing more than to regulate – not eliminate,” Torabi said. “We want to be professional about it and recognize that we’re making products for consumers.

“As upstanding operators, we also want there to be expectations and requirements put in place to operate: quality assurance, trust, accountability. I think that’s why this market in Texas is thriving.”

And because Texans already have access to hemp-derived products, there is no “race” to legalize marijuana, Torabi said. Therefore, when lawmakers and activists do work on regulations, they can do so thoughtfully and without deadline pressures.

“I already have access to these products legally – to manufacture, to sell, to consume, to possess. So what legalization are we fighting for now? I think what we are preparing for more is the reality of consolidating the marketplace. What is that going to look like? Where are those cannabinoids going to fit?” Torabi said.

The future of intoxicating hemp

Cannabis consumers wondering what a store offering marijuana and intoxicating hemp-derived cannabinoids would look like can find out in Texas.

“They’re dispensaries; that’s what every single one of them are here in Texas. You can already go in these shops and buy these products,” said Kim Flores, director of business development at Power Biopharms.

She added that boutique shops often have sections for different types of products: THCA, delta-8, delta-9, blends and other cannabinoids.

If Texas changes rules in a way that upends the THCA and intoxicating hemp-derived cannabinoid markets, Power Biopharms will be ready, Flores said.

“You need to be ready to pivot because there’s so many other incredible cannabinoids that are in this plant that we are able to provide to the consumers,” she said.

Power believes the hemp-derived cannabinoid market will likely continue and thrive in the near term, until federal rules are revised or Texas legalizes adult-use marijuana.

Five Texas cities already have decriminalized marijuana, but they are being sued by state Attorney General Ken Paxton.

Consequently, it’ll likely be a long time before Texas legalizes marijuana statewide.

In the meantime, Texas cannabis consumers have options.

“Hemp will suffice as the pseudo-rec market while the medical market operates,” Power said.

Omar Sacirbey can be reached at omar.sacirbey@mjbizdaily.com.