Texas Hemp Industry Update: Major Regulatory Shifts, Rising Fees, and What Comes Next

January 2026

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Quick Summary:

Texas is reshaping its hemp market through aggressive agency rulemaking rather than legislation. While hemp is not being banned outright, new enforcement authority, steep licensing fees, and testing changes are poised to push much of the existing industry out of the state. The outcome favors large, well-capitalized operators while placing existential pressure on small and mid-sized businesses ahead of an even larger federal crackdown scheduled for 2026.

At the same time, a clear path forward is emerging. The regulatory environment is shifting toward fewer, more compliant, better-capitalized operators, standardized product categories, and institutional-grade compliance frameworks. For businesses, lenders, and investors able to operate within higher regulatory thresholds, Texas is evolving into a more structured, defensible market with clearer rules, reduced gray-market competition, and long-term viability for compliant capital and scalable platforms.

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Texas is entering one of the most aggressive hemp regulatory transformations in the country, and the impact is already being felt across the supply chain.

After months of legislative gridlock, Governor Greg Abbott rejected a full statutory ban on consumable hemp THC products. But instead of leaving the status quo intact, the state has moved toward a sweeping regulatory crackdown driven by executive action and agency rulemaking rather than legislation.

The result is a coordinated, multi-agency squeeze involving the Texas Alcoholic Beverage Commission, the Texas Department of State Health Services, Governor Abbott’s Executive Order GA-56, and a looming federal hemp crackdown scheduled to take effect in 2026.

Taken together, these actions significantly raise compliance costs, expand enforcement authority, and shift the economics of the industry in favor of large, well-capitalized operators while placing severe pressure on small and mid-sized businesses.

How Texas Got Here

The legislative path to this moment was anything but straightforward. Lieutenant Governor Dan Patrick advanced Senate Bill 3, which would have effectively banned consumable hemp THC products statewide. The Texas House declined to advance the bill, citing concerns over economic impact and regulatory overreach.

Governor Abbott ultimately vetoed SB 3, stating that hemp products should remain legal, but only under strict regulation¹. With the Legislature unable to reach consensus, the Governor pursued a regulatory solution through executive authority.

Executive Order GA-56

On September 10, 2025, Governor Abbott issued Executive Order GA-56, directing multiple state agencies to jointly construct a comprehensive regulatory framework modeled on House Bill 309, a 149-page hemp bill that failed to pass but became the blueprint for agency rulemaking².

Agencies tasked with implementation include the Texas Alcoholic Beverage Commission, the Texas Department of State Health Services, the Texas A&M AgriLife Extension Service, and other enforcement and regulatory bodies.

The stated objectives were to preserve access to hemp THC products, address perceived public-safety risks, expand enforcement authority, and increase regulatory fees and compliance requirements.

What House Bill 309 Would Have Done

Although never enacted, House Bill 309 proposed criminal penalties for sales to minors, bans on child-appealing marketing and packaging, 1,000-foot retail buffer zones near schools, churches, playgrounds, and shelters, a ban on hemp flower and synthetic cannabinoids, THC potency limits per serving, Sunday sales restrictions similar to liquor laws, the creation of a Texas Hemp Council, and a full licensing, inspection, and enforcement regime³.

While rejected by the Legislature, many of these provisions are now being implemented through agency rulemaking instead.

TABC and Expanded Enforcement Authority

Effective October 1, 2025, TABC emergency rules brought consumable hemp products sold by alcohol-licensed establishments under direct regulation. This includes bars, restaurants, liquor stores, and convenience stores that sell alcohol.

Under the new rules, hemp products may not be sold to individuals under 21, government-issued ID verification is mandatory, and violations may result in fines, suspensions, or the loss of liquor licenses⁴.

Early drafts of the rules included automatic license cancellation for violations. While the final version allows for graduated enforcement, exposure remains significant. Approximately 60,000 TABC license holders statewide are affected⁵.

DSHS: The Primary Industry Threat

While TABC oversight is meaningful, DSHS rulemaking represents the most serious existential risk to the Texas hemp market.

Emergency rules effective October 17, 2025 prohibit sales to individuals under 21, require mandatory ID verification, and allow license or registration revocation for violations. These rules apply to smoke shops, hemp retailers, online sellers, manufacturers, and processors⁶.

Proposed Permanent DSHS Rules

Released December 26, 2025, DSHS’s proposed permanent rules introduce unprecedented fee increases. Retail hemp registration would rise from $155 to $20,000 per location, while manufacturer licenses would increase from $258 to $25,000 per facility, representing fee increases of approximately 9,600 to 12,800 percent⁷.

Industry response has been swift, with operators arguing these fees do not regulate small businesses but instead eliminate them.

An Effective Ban on Smokeable Hemp

DSHS also proposes altering THC testing methodology by counting THCA as Delta-9 THC. In practice, this would cause nearly all THCA flower to exceed legal THC limits, effectively banning smokeable hemp products statewide⁸.

Operators argue this redefinition exceeds administrative authority and amounts to de facto legislation.

Additional Compliance Burdens

Proposed rules include child-resistant packaging, expanded warning labels, multi-stage testing, mandatory recall protocols, enhanced recordkeeping, and written consent permitting TABC inspections⁷. The earliest potential effective date is January 25, 2026.

Scale of Impact

Texas has more than 9,100 registered hemp retailers statewide, with thousands of employees, farmers, processors, and distributors exposed to these changes. Significant industry consolidation is widely expected⁵.

Industry Reaction

Many operators support age restrictions and improved labeling standards. Opposition centers on smokeable hemp bans, extreme licensing fees, and perceived regulatory overreach.

As one operator summarized, large corporations will barely notice these fees, while small businesses will not survive them.

Public Health Versus Market Access

Public comment reveals a sharp divide between those prioritizing public-health framing and those warning that excessive regulation will drive consumers toward unregulated markets.

Legal Authority Questions

Key unresolved questions include whether DSHS can redefine THC through rulemaking without legislative approval and whether agencies can effectively ban product categories administratively. These issues are widely expected to be litigated.

The Federal Overlay

A federal law enacted in late 2025 will take effect November 12, 2026, limiting hemp products to 0.4 milligrams of THC per container and effectively prohibiting most intoxicating hemp products nationwide¹⁰.

Texas regulators acknowledge federal law may ultimately supersede state rules, but enforcement is proceeding regardless⁵.

What Remains Legal for Now

Edible hemp products such as gummies, beverages, and tinctures remain legal, as do Delta-8, Delta-9, and similar cannabinoids in edible form. Online sales with age verification and out-of-state shipments are permitted.

What Is Already Prohibited

Hemp vapes and e-cigarettes have been banned since September 2025¹¹. Sales to individuals under 21 and sales without ID verification are prohibited.

Key Dates to Watch

September 10, 2025 — Executive Order GA-56 issued

October 1, 2025 — TABC enforcement begins

October 17, 2025 — DSHS emergency rules take effect

December 26, 2025 — DSHS proposed permanent rules released

January 25, 2026 — Earliest potential DSHS effective date

November 12, 2026 — Federal hemp restrictions take effect

The Bottom Line

Texas is not banning hemp outright. It is constructing a high-barrier, enforcement-heavy market through agency rulemaking rather than legislation. Large, well-capitalized operators, beverage and edible manufacturers, and multi-state firms with compliance infrastructure are positioned to benefit. Small retailers, smokeable hemp producers, THCA sellers, and price-sensitive consumers stand to lose the most.

Texas is regulating hemp out of existence for much of the current market.

Sources:

1. Texas Tribune, Texas Legislature Hemp Debate

2. Executive Order GA-56 (Sept. 10, 2025)

3. Texas Legislature Online, HB 309, 89th Legislature (2nd Called Session)

4. Marijuana Moment, Texas Alcohol Board Advances Hemp Rules

5. Texas Tribune, Texas Regulators Propose Rules for Consumable Hemp Products

6. Texas Department of State Health Services, Emergency Rule Notices

7. Texas Department of State Health Services, Proposed Permanent Hemp Rules (Dec. 26, 2025)

8. Austin American-Statesman, Texas Regulators to Vote on Hemp Rules

9. Hemp Industry Daily, Texas DSHS Hearing Testimony

10. Congressional Research Service, Changes to the Statutory Definition of Hemp

11. Texas Health & Safety Code §161.0876 (Hemp Vape Prohibition)