Texas Hemp Is Booming: Protect Consumers via Regulation

The Rise of Hemp-Derived Cannabinoids

The 2018 U.S. Farm Bill legalized the production and sale of hemp products and removed hemp from the U.S. Controlled Substances Act. Following this change at the federal level, Texas — like many other states — established regulations for the production and sale of hemp products (HB 1325). However, lawmakers did not anticipate the massive market for hemp-derived cannabinoids. From 2020 to 2023, sales of hemp-derived cannabinoids (excluding the non-impairing cannabidiol) increased by 1,283%, reaching a value of $2.78 billion last year. 

One of the most popular hemp-derived cannabinoids, delta-8 tetrahydrocannabinol (THC), has notably milder effects than delta-9 THC, the psychoactive crown jewel of the marijuana plant. The comparatively lower strength of delta-8 is a compelling reason to keep it legally available and properly regulated to ensure consumer safety. But hemp-derived cannabinoid products are generally subject to fewer regulations and weaker enforcement than state-approved marijuana products. Inadequate oversight of manufacturing, marketing, packaging, and sales has allowed unsafe products to make their way into the hands of consumers.

Manufacturing hemp-derived cannabinoid products typically involves extracting the compounds of interest from the hemp plant and synthesizing them to achieve greater volume. Without sufficient safeguards and oversight, products may end up containing harmful additives or having inconsistent and unreliable dosages. Though Texas requires hemp manufacturers to obtain Certificates of Analysis (COAs) verifying that products have been tested by independent laboratories and meet established standards, the Department of State Health Services — tasked with regulatory oversight — does not have the capacity to investigate and confirm product safety. COAs are commonly falsified, if they exist at all. Many retailers who purchase hemp products from manufacturers in bulk do not know how to interpret COAs, or even that products are supposed to have COAs.

The safety of delta-8 products has improved as the market has matured. But several other cannabinoids, some of which are more potent and less studied than delta-8, are now widely available and may pose greater risks to consumers. 

The rapidly evolving cannabinoid marketplace, combined with unreliable product labeling, can easily confuse consumers. When consumers do not have complete and accurate information about a product’s ingredients and likely effects, the risks of adverse health events increase. According to data from the National Poison Data System (NPDS), from 2021 to 2023, 7,954 individuals reported adverse events associated with consuming hemp-derived cannabinoids. Fifty-five percent of reports involved individuals under the age of 20; 29% involved children younger than six.

While it may seem obvious that minors should not have legal access to cannabinoids for non-medical use, several states, including Texas, have no age restrictions on product sales. Easy access can translate into greater use. In the 2023 Monitoring the Future survey, 11.4% of 12th graders reported past-year delta-8 use, with greater usage among teenagers living in states where marijuana is prohibited and delta-8 products are legal and underregulated.

Banning Hemp-Derived Cannabinoids Would Be Ineffective and Increase Risks for Consumers

The dizzying growth of the hemp marketplace, the complexities of the products involved, and the increase in reported adverse events, understandably may lead some lawmakers to try and ban the whole industry. But while prohibition may seem like the simplest response, it is almost certain to fail — both in eliminating widespread access to hemp-derived cannabinoids and in protecting the public.

As of April 2024, Texas had over 7,000 registered hemp dispensaries. More than 50,000 Texans are estimated to be employed through the hemp sector. A state ban would ruin this industry, but it would not reduce consumer demand for hemp-derived cannabinoids. Instead, consumers would turn to the illicit hemp market that would inevitably form in the wake of state prohibition. Products sold today in state-registered shops would still be available through underground supply networks that would reap billions in tax-free profits.

Implementing a blanket ban may require less precision than managing a well-designed regulatory system, but it is equally costly, if not more so. The Department of Public Safety (DPS) and local police departments, which would be tasked with enforcement responsibility, are already struggling to solve serious crimes, reflected in declining clearance rates for major offenses. Attempts to enforce the prohibition of hemp-derived cannabinoids would exacerbate the state’s unsolved crime problem without reducing the availability of these products.

The most compelling reason not to outlaw hemp-derived cannabinoids is that a broad ban, even a poorly enforced one, would harm consumers more than the state’s current system. Texas should strengthen oversight of the hemp industry, while prohibition would have the opposite effect. Declaring hemp-derived cannabinoids illegal would exempt them from the very regulations needed to ensure their safety. The most law-abiding manufacturers and retailers — those who are more likely to follow stricter safety guidelines already — would exit the market, leaving only less scrupulous actors to supply Texans’ demand for hemp-derived cannabinoids. Criminal organizations may view newly banned hemp compounds as a lucrative opportunity, stepping in to supply consumer demand that legally compliant businesses could no longer meet. The involvement of such organizations could introduce violence into a market that thus far has operated without such issues.

Protect Youth and Consumers Through Effective Regulation of Hemp-Derived Cannabinoids

Though prohibition would harm consumers and businesses, state action is needed to improve the safety and predictability of Texas’s hemp-derived cannabinoid market. Our preliminary recommendations are as follows:

1. Prohibit the sale of hemp-derived cannabinoids to individuals under the age of 21.
   • Clarify that purchasers must provide proof of age. 
   • Require hemp products that cause impairment to be kept behind store counters.
   • Stipulate that products have child-resistant packaging.
2. Establish an independent, well-resourced regulatory body devoted to cannabis oversight.
   • Direct this agency to adopt enhanced safety standards for hemp-derived cannabinoid products, including but not limited to: clarifying that testing must be conducted on final products; requiring products to have uniform cannabinoid distribution; and requiring product ingredients to match label claims.
   • Improve safety standards for out-of-state products sold in Texas.
   • Provide sufficient resources for the agency to investigate missing or falsified COAs.
   • Require retailers to test a portion of their inventory as an additional safeguard against falsified COAs and potentially harmful products.
   • Authorize the regulatory agency to conduct random inspections of retailers and manufacturers to ensure compliance.
   • Consider the Texas Alcoholic Beverage Commission for an organizational model.
   • Fund enforcement activities with modest increases in licensing fees and retail sales taxes.
3. Consider restrictions on select compounds that are highly potent and require extensive chemical manipulation to manufacture.
   • Examples include THC-O-acetate and hexahydrocannabinol (HHC).
   • Enlist chemists with expert knowledge of the cannabis plant to assist with defining cannabinoids and identifying those for which restrictions are warranted.
4. Improve advertising standards with a focus on public health.
   • Prohibit the use of labeling or packaging designs that appeal to persons under 21.
   • Restrict use of unverified health claims to market products.
   • Require product marketing and packaging materials to include health warnings and indication of impairing effects.

Prohibition will not stop the market for hemp-derived cannabinoids. Texas lawmakers, by strengthening current regulations and adequately funding their enforcement, have the opportunity to ensure that the hemp-derived cannabinoid industry is safe for consumers and provides sustained economic benefits for the state.

This material may be quoted or reproduced without prior permission, provided appropriate credit is given to the author and Rice University’s Baker Institute for Public Policy. The views expressed herein are those of the individual author(s), and do not necessarily represent the views of Rice University’s Baker Institute for Public Policy.