Texas Wants High-THCA Hemp Tested Like Marijuana. Retailers Face a Major Revenue Threat

Texas is asking an appellate court to reinstate consumable hemp regulations that could determine which products remain legal, how businesses demonstrate compliance, what penalties they face, how frequently they are inspected, and how much they pay to operate in the state.

In a reply brief filed with the Court of Appeals for the Fifteenth Judicial District, the Texas Department of State Health Services and other state officials defended a requirement to count THCA when determining whether a product exceeds the legal THC limit.

THCA is not a Texas regulatory invention but the acidic precursor to the THC naturally produced by the cannabis plant. A product can contain little delta-9 THC but substantial THCA, which becomes intoxicating delta-9 THC when exposed to heat. That distinction has allowed high-potency cannabis products to be sold as federally legal hemp.

The disputed framework would also impose licensing fees of $10,000 on manufacturers and $5,000 on retailers, restrict the transportation of noncompliant hemp material, and allow penalties to accumulate for each day a violation continues.

A Travis County district court temporarily blocked the rules after the Texas Hemp Business Council, Hemp Industry & Farmers of America, and several hemp businesses challenged them. Its order protected the entire Texas consumable hemp industry, not only the plaintiffs in the case.

The State is asking the appellate court to dismiss the claims against Texas officials and vacate that injunction.

The case comes as federal hemp policy is changing.

According to the State’s brief, recently enacted legislation delays a new federal hemp definition until December 11, 2026, but retains a November 26 deadline for consumable products containing cannabinoids that cannot be produced naturally by the cannabis plant.

Texas argues that the transition strengthens its case because the new federal standard more closely resembles the framework it is seeking to enforce.

The Dispute Is About How THC Is Measured

Both sides recognize the current 0.3% delta-9 THC limit separating federally legal hemp from marijuana. Their disagreement centers on how regulators determine whether a finished product complies with that limit.

THCA is a naturally occurring cannabinoid that converts into delta-9 THC through decarboxylation, a process accelerated by heat. Texas wants compliance testing to include the delta-9 THC that could become available through that conversion.

The hemp businesses contend that THCA should not be treated as delta-9 THC when regulators test finished consumer products. According to the State’s characterization of their argument, the businesses accept that products can be tested for THCA but dispute whether those results can be used to establish a violation of the delta-9 limit.

Texas argues that such a distinction would undermine the purpose of testing. Measuring THCA without incorporating its potential conversion into the compliance calculation would identify the cannabinoids present but would not necessarily limit the amount of intoxicating THC ultimately available to consumers.

The State also rejects the idea that agricultural hemp and finished retail products should operate under separate testing systems. Its brief argues that farmers should not face a stricter standard for raw hemp while retailers are permitted to sell more intoxicating finished products under a narrower interpretation of the same threshold.

Texas maintains that its approach is consistent with federal regulations and the state’s federally approved hemp plan. The brief points to Texas Department of Agriculture rules and federal testing practices that account for THCA conversion when calculating total delta-9 THC.

The businesses, however, are challenging whether those agricultural testing principles can be applied to finished consumable products sold at retail. That distinction is commercially important because hemp flower and other high-THCA products may contain less than 0.3% delta-9 THC before use while producing substantially more delta-9 THC when heated.

A decision favoring the State could therefore narrow the range of products that qualify as legal hemp in Texas even without changing the nominal 0.3% limit.

New Fees Would Finance More Inspections

The litigation is also about the cost and intensity of regulation.

Texas had more than 14,000 consumable hemp licensees and registrants in 2025, up from none when the program began in 2020, according to the State’s brief. Regulators testified that the existing system resulted in an inadequate inspection cycle of approximately six years.

DSHS says it needs to increase its inspection staff from seven people to 23 and acquire additional laboratory testing capacity. The agency argues that the higher fees are intended to fund manufacturer and retailer inspections, inspector salaries and travel, product testing, legal proceedings, and cooperation with the Texas Alcoholic Beverage Commission and Department of Public Safety.

Under the challenged rules, manufacturers would pay $10,000 and retailers $5,000.

The hemp businesses argue that the charges operate as an unconstitutional occupation tax rather than a regulatory fee. Texas responds that the payments are tied to the cost of supervising a rapidly expanded industry and that state law expressly authorizes DSHS to collect fees with license applications.

The difference matters most for smaller operators and retailers with multiple locations. Even when a fee is justified by overall enforcement costs, its effect is not distributed evenly across the market. A vertically integrated company or large retailer may be able to absorb higher compliance expenses more easily than an independent store, manufacturer, or early-stage brand.

The rules could consequently do more than fund enforcement. They could influence which businesses have sufficient scale and capital to remain in the market.

Texas compares the fees with those charged under the state’s limited medical cannabis program. A dispensing organization in that program pays $7,356 to apply and $488,520 for a two-year license. The State argues that hemp fees are modest by comparison, although the two programs operate under different structures and serve different markets.

Violations Could Carry Substantial Penalties

The rules permit penalties of up to $25,000 per violation per day, although regulators may consider severity, public-health risk and good-faith efforts. The lower court found the provision potentially excessive, while Texas argues that penalties should be reviewed in individual enforcement cases. For operators, the exposure extends beyond failed inventory to fines, legal costs, product withdrawals and business disruptions.

Texas Challenges the Statewide Injunction

A separate issue before the appellate court is whether the trial court had the authority to block enforcement for every participant in the Texas consumable hemp industry.

The underlying lawsuit is that the injunction protects businesses beyond the plaintiffs that brought the case. Texas argues that the order effectively grants universal relief to an undefined group of manufacturers, retailers, and possibly consumers.

The State maintains that any injunction should ordinarily protect the parties before the court rather than every company operating under similar circumstances. The hemp businesses contend that industrywide relief is necessary because the challenged rules apply throughout Texas and affect millions of residents.

That procedural issue could determine how much immediate protection the hemp sector receives even if the broader dispute over THCA testing remains unresolved. The appellate court could conclude that the lower court went too far without necessarily endorsing every part of the State’s regulatory framework.

The Court’s Decision Could Reshape the Texas Hemp Market

The case places several pressures on the industry at once: stricter THCA testing, higher licensing fees, more frequent inspections, transportation restrictions, expanded laboratory oversight, daily penalties, and a changing federal definition of hemp.

If Texas prevails, retailers and manufacturers may need to reassess product formulations, supplier documentation, laboratory methods, and inventory exposure. Products marketed as hemp because their pre-use delta-9 THC concentration remains below 0.3% could face greater scrutiny when their THCA content is included.

Companies may also need to budget for higher fees and a regulatory system designed to conduct inspections more frequently. Those costs could encourage consolidation, reduce the number of marginal operators, or favor businesses with established compliance teams and access to capital.

If the hemp businesses prevail, Texas may have to revise the rules, repeat portions of the rulemaking process, or enforce a narrower testing standard while the federal transition proceeds.

The appellate court is being asked to determine whether Texas agencies acted within their legal authority, followed the required rulemaking procedures, and can enforce the disputed framework while the litigation continues.

For the Texas hemp industry, however, the consequences will be commercial as well as legal. The answer will help determine what can be sold and what it costs to participate.