When the 2018 federal Farm Bill opened the door to legal commercial production of hemp, Texas was among the first states to pass its own enabling bill, creating a huge new crop worth billions of dollars. created an industry.
But the bill also opens the door to what some have called a “loophole” that would effectively legalize products containing tetrahydrocannabinol (THC), the main psychoactive ingredient in marijuana, and create unique This is true even in states that continue to adopt marijuana programs, as well as states that have drug possession. Drugs are strictly illegal.
The move gave momentum to what has become a blockbuster but opaque business. Currently, the hemp industry is valued at approximately $28 billion nationally and includes numerous retail stores, manufacturing plants, and large agricultural operations.
Now, everything associated with the industry, including real estate, could collapse in Texas and elsewhere.
Courtesy of Kenny Banks
Kenny Banks, farmer and owner of HTX Hemp, operates hemp operations in Texas and Alabama. He is one of thousands of Texans who have launched new businesses and bought or leased real estate to take advantage of new hemp laws.
Echoing bills introduced across the country, Texas Lt. Governor Dan Patrick earlier this month rescinded portions of Texas House Bill 1325, which would have allowed Texans to sell hemp for consumption with a THC concentration of 0.3% or less. announced Senate Bill No. 3.
Patrick, who has made the bill a top priority, said industry players have exploited loopholes and “exploited the Farm Bill to sell life-threatening, unregulated forms of THC to the public.” He has vowed that he and other lawmakers will stop it in the next legislative session, which begins in January.
“Since 2023, thousands of stores have sprung up selling harmful THC products to communities across the state, many with a THC content of 3-4% that can be found in marijuana purchased from drug dealers. We sell products containing beverages with double the THC content,” Patrick said in a statement.
Cannabis industry officials say they are not using any loopholes and are following the law. And they argue that while it’s all for regulation, a complete ban would be fatal to their businesses, the Texas economy, and the commercial real estate space they occupy.
In Texas alone, approximately 8,000 retailers are licensed to participate in the hemp business, with estimated annual sales of more than $8 billion, including retail sales, manufacturing sales, wholesale and distribution of CBD and converted cannabinoids. . Texas cannabis manufacturers are investing more than $1 billion in infrastructure to expand operations across Texas, according to a report from Whitney Economics.
“If Senate Bill 3 were to suddenly become law overnight… it would be disastrous for commercial real estate and obviously for the hemp industry,” said Roberts, executive director of the Texas Hemp Business Council. Mark Bordas said. For the industry.
Courtesy of Kenny Banks
Some of HTX Texas’ products
The 2019 legalization of hemp sales in Texas was due to the 2018 federal Farm Bill, which removed hemp containing less than 0.3% THC, the intoxicating compound found in the hemp plant, from the Controlled Substances Act’s definition of marijuana. This was done after its cultivation and sale were legalized.
The measure would allow the legal sale of hemp-derived cannabis products, accelerating a national green rush that states are still weighing.
A December analysis by Rice University’s Baker Institute for Public Policy found that states are taking different approaches to the exploding hemp-derived cannabinoid market.
While some states have set age limits and left the potency issue unanswered, federal weight-based metrics still allow for amounts of THC that cause severe intoxication, meaning the total THC in a product. Some states have a milligram limit. Some places have banned hemp-based products. Cannabinoids are derived from a chemical process known as isomerization, which essentially removes intoxicating compounds from the product.
The analysis shows that in states where recreational marijuana use is legal, authorities are cracking down on marijuana markets or moving sales under the legal marijuana umbrella.
Texas lawmakers said a 2019 law legalized hemp cultivation and consumption while adding consumer protections, as hemp products began to flow into the state after the 2018 Farm Bill.
Courtesy of Brandi Townsend
Brandi Townsend is inside a cozy cannabis store on Austin’s 4th Avenue. She expanded to three locations in five years.
Cynthia Cabrera, founding director of the Texas Hemp Business Council and chief strategy officer of cannabis products company Hometown Hero, is technically in the “no loophole” camp.
“When you say the U.S. Congress authorized the loophole…that means you talked to 435 members of Congress to confirm that they don’t want the loophole, or that they actually do want it. We will,” Cabrera said. “If you look at the USDA language, it’s very broad and specific, so this is not a loophole. They said it was to encourage innovation, and that’s what happened. ”
Texans jumped at the chance to participate in hemp innovation, and industry insiders are hopeful that hemp has grown to a point where it can’t be faulted.
In 2020, the first year the Texas Department of State Health Services registered consumer hemp retailers, nearly 2,000 retailers registered. By 2023, there will be more than 8,000 of them, and the industry continues to grow, often with support from legislators.
Texas Agriculture Commissioner Sid Miller celebrated the opening of a 500,000 SF hemp processing plant in Wichita Falls this summer. The plant is the second largest industrial hemp production facility in the world and the largest in the United States.
“Texas will be a leader in the Americas when it comes to hemp production,” Miller said in June. “This factory allows us to be number one.”
Texas farmers are licensed to grow hemp on 3,300 acres, and the hemp industry supports approximately 50,100 Texan jobs, according to a July 2023 Whitney Economics study. The study estimates that the entire supply chain supporting cannabinoid retailers operating outside of Texas has an economic impact of $19.1 billion to $22.4 billion.
Hometown Hero is an Austin-based company founded in 2015 and has been championing the cannabis industry for years. The brand transitioned to manufacturing and selling hemp products after a 2019 law change, and now consumables such as gummies, vapes, cereal bites and drink mixes are sold in thousands of stores across multiple states.
“Here in Texas, we’ve been leading the way, because somebody has to be leading the way,” Cabrera said. “We have 60 families making a living from this business.”
Kenny Banks applied in the first round for a license to grow cannabis on his homegrown row crop farm in Brazoria County, south of Houston. Banks said he dedicated half an acre to growing it and began selling the product, branded HTX hemp, online and at his hyperbaric oxygen chamber therapy business in Houston.
“This year we’re going to scale up,” he said.
Bisnow/Ansley Bird
Mobile smoke shop truck spotted on the streets of Austin
Banks said he is learning how to grow in a more controlled environment that allows him to produce more cannabis in a smaller space. He plans to purchase a shipping container and turn it into a cannabis cultivation space, with the goal of putting his product on more shelves.
If Texas bans marijuana cultivation in the next legislative session, banks have a backup plan.
“I also own a farm in Alabama, and my grandfather and father were farmers there,” Banks said. “Alabama has approved hemp too.”
But some, like Brandi Townsend, aren’t lucky enough to have another business plan. Townsend just opened the third Cozy Cannabis location in the Austin area, a meticulously decorated, stylish and colorful store with an emphasis on wellness and healing.
After serving a prison sentence for drug sales, Townsend said he used cannabis as part of his recovery from addiction and opened a vape shop to support his five children.
“When the (2019) law was passed, it was like the last piece of the puzzle that I needed to complete what I offer,” she said.
Although Austin is a relatively progressive city, opening a cannabis-based business hasn’t been easy. Townsend said many landlords strongly opposed the idea. She wrote heartfelt letters and made persistent phone calls, trying to convince him to let her rent a room before finally succeeding.
“Homeowners love us because we’ve elevated our space so much,” Townsend said. “We spent a lot of time and resources turning these spaces into something that felt magical. It would be heartbreaking to lose them.”
Townsend said he was reassured by Cozy Cannabis’ success when he opened a store in Georgetown, which tends to have an older, more conservative population.
“They fell in love with us and found a safe place to buy our products,” Townsend said.
If Texas bans marijuana sales again, Townsend said he would likely have to close all three stores.
“We have a staff of 35 people,” she said. “If they take away all the THC products, we can’t sustain that. For our customer base, you’re leaving them high and dry. The part that goes to the black market. There are some parts that are not distributed.”
Courtesy of Brandi Townsend
Brandi Townsend and husband Daniel Turbin in a cozy cannabis store
Cabrera said bans don’t work, but regulation can make the industry safer. He said the Texas Hemp Business Council previously supported legislation that would have added a 21-year age limit to purchase intoxicating hemp products. There are currently no age restrictions, but most retailers do not sell to children. Because that’s not good business practice, she said.
“But it’s a convenient topic because as soon as you bring minors into this industry, people get all worked up about it,” Cabrera said, adding that the Texas Department of State Health Services, which oversees the industry, added that age restrictions may be added. rule.
“Simply adding an age element to the existing rules that we currently have in place would solve the problem,” Cabrera said. “So I have to ask myself, why are we neglecting the ban? What does that mean?
There is a clear demand for cannabis products nationwide, and whenever it becomes illegal to meet that demand, the illicit market steps in, says California-based 420property.com, which bills itself as the world’s largest cannabis real estate marketplace. said Ryan George, CEO. .
420 Properties currently has 5 Texas properties for sale, including a cannabis dispensary and acreage. Given the state’s business-friendly reputation, George said from the outside looking in, he would be surprised if the state Legislature passed a law that would disrupt the industry.
“When you look at the amount of business and commerce that’s involved in this and how sophisticated some of these businesses actually are…the main arguments we’re hearing from the state of Texas are the job creation aspects, the business and tax revenue generation. aspect,” George said. Said.
Banks is familiar with the returns involved in the industry, given that they help clients organize permits, inspections, equipment, and real estate space.
“Why would we spend that revenue out of the state of Texas? … There are people who have started (marijuana) testing businesses and are putting a lot of money into it,” Banks said.
At the federal level, there is some bipartisan support for the 2025 Farm Bill to undo the 2018 hemp legalization, but what will happen remains unclear. That leaves state legislatures across the country facing battles like the one expected in Texas starting in January.
Despite the introduction of Senate Bill 3, Bordas said he approaches the session with cautious optimism given the size and scope of Texas’ industry.
“We will continue to work with legislators and hope common sense prevails,” he said.
