The way Texas Lt. Gov. Dan Patrick sees it, the greatest gift the American THC industry is likely to enjoy in 2025 came late Sunday.
“The governor of the state of Texas wants to legalize recreational marijuana in the state of Texas,” Patrick said Monday, lamenting Gov. Greg Abbott’s surprising veto of a strict ban on hemp-derived THC.
“That’s the headline, folks.”
Abbott’s rejection of Senate Bill 3 – which would have banned hemp-derived THC outright in the state – is a stunning political reversal in the eyes of Patrick, long considered one of the most powerful figures in Texas politics and a proponent of the ban since last December.
It’s also an enormous reprieve for the state’s estimated $5.5 billon hemp industry, which Texas lawmakers will be on notice to regulate during a special session scheduled for late July.
The day before his veto, Abbott signed into law a significant expansion of Texas’ heretofore extremely limited medical marijuana program.
Starting Sept. 1, more powerful medical marijuana will be available to a greater number patients than ever before – and it can be produced and sold by up to 15 licensed companies, up from the current restrictive cap of three.
Texas poised to lead U.S. in THC – and THC policy
The remarkable weekend for THC in Texas is laying the foundation for significant advances for both the hemp and the regulated marijuana industries – in business as well as politics.
It also might be the beginning of the end of a bifurcated market for hemp-derived THC and marijuana – and the start of what most observers agree eventually will be known as a “THC industry.”
Texas is already one of the largest markets in the country for transformative products such as the hemp-derived beverages that both marijuana multistate operators and traditional alcohol companies and retailers are rushing to sell in other states.
Workable regulations will create confidence for big operators desperate for some stability amid an inconsistent nationwide patchwork of conflicting laws.
But Texas is also queuing up yet another struggle between marijuana and hemp, which in many markets have eyed each other as unwelcome intruders rather than just competitors.
However, Texas also might hold the key to some of the major questions vexing policymakers on Capitol Hill as well as state legislatures.
Most observers agree that, in the long term, marijuana and hemp – botanically identical plants that are differentiated only by their THC content – cannot continue to be regulated separately.
In this way, the unlikely source for the answer to how unified THC regulations might be reasonably and effectively crafted might well be Texas.
‘Room for both’ hemp and medical marijuana
“The way we’ve regulated this plant (to date), it’s not how everyday cannabis consumers perceived what legalization would look like,” said Kevin Caldwell, the southeast legislative manager at the Washington, D.C.-based Marijuana Policy Project, a major nationwide policy reform advocacy group.
“I think there’s room for both” medical marijuana and hemp, he added.
“And I also think a robust hemp market is what will keep the medical cannabis industry grounded.”
“Texas has a real opportunity here,” added Shawn Hauser, a partner at Denver-based law firm Vicente.
If Texas does end up funding medical research – as promised in the legislation – and if companies develop more sophisticated medical formulations, “it could be a better medical program than some states have.”
Meanwhile, Hauser added, the existence of an enormous, regulated market in a red state will have consequences for the few U.S. markets without access to regulated cannabis as well as on federal policymaking.
“If a state with as big a market as Texas allows those products to be available online, good luck maintaining prohibition.”
Unclear how hemp, medical marijuana will coexist
It remains to be seen how a preserved hemp market will get along with an expanded medical marijuana industry in Texas – or whether yet another conflict between sellers of THC is brewing.
Observers give partial credit for the explosive rise of hemp-derived THC in Texas to the decade-old, notoriously restrictive Texas Compassionate Use Program (TCUP).
According to a state Department of Public Safety analysis, there are fewer than 30,000 “active patients” among a population of 32 million.
As critics have long pointed out, the relatively few patients who qualified to buy low-THC oil under the TCUP must often drive long distances to obtain medical marijuana from one of only three companies granted state business licenses.
Both those barriers as well as the proliferation of cheaper, more plentiful and more accessible hemp-derived THC alternatives have hurt Texas’ MMJ companies – some of whom have hired “powerful Republican lobbyists” to back the hemp ban, the Houston Chronicle reported.
The three MMJ companies operating in Texas were reluctant to comment to MJBizDaily about Abbott’s veto of SB3 and how they might coexist with regulated hemp products:
- Nico Richardson, CEO of Manchaca-based Texas Original, declined comment.
- In a statement, Nicholas Fallon, Texas market president at Austin-headquartered Goodblend, an affiliate of Florida marijuana operator Surterra Wellness, praised state lawmakers for signing House Bill 46, which also eases MMJ companies’ distribution problems by allowing them to store products overnight at satellite locations. However, Fallon did not respond to MJBizDaily‘s specific questions about hemp and SB3.
- Fluent Cannabis, based in Schulenburg, did not immediately respond.
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‘Massive win but not end of the battle’
Another potential wrinkle is whether MMJ companies in Texas will start offering hemp products to complement their offerings.
“Here’s the thing: You never hear hemp people say, ‘We need to get rid of the marijuana industry,’ said Cynthia Cabrera, the chief strategy officer for Austin-based hemp company Hometown Hero and the president of the Texas Hemp Business Council.
“But you will constantly hear marijuana people say, ‘We need to get rid of hemp.’”
In addition to input from MMJ operators, Texas lawmakers will hear competing voices from liquor and beer lobbyists during the special session.
Some of them want to claim a piece of the hemp market through mandatory third-party distributors; others fear further decline in sales from younger consumers more interested in hemp beverages than alcohol.
It’s still far from clear what final form hemp will take in Texas, though Abbott’s veto message included one page of bullet-pointed recommendations.
Those include restrictions seen in other states, such as:
- Limiting access to adults 21 and older.
- Mandating child-resistant packaging and banning logos or marketing deemed attractive to children.
- Banning sales on Sundays, similar to liquor.
Most of those recommendations were found in a hemp regulatory bill that failed to pass the Texas Legislature earlier this year.
And, for the most part, the hemp industry is generally agreeable to them.
Notably, controversial so-called THCA flower – which most observers agree is marijuana claiming federal protection under an accommodating interpretation of the 2018 Farm Bill – is already illegal in Texas, Cabrera said.
However, many merchants continue to offer THCA flower because law enforcement hasn’t taken any notable action, she added.
In all, the weekend’s developments were “a massive win,” Cabrera said.
“But it’s not the end of the battle.”
Chris Roberts can be reached at chris.roberts@mjbizdaily.com.
