A hearing that will help decide the fate of the hemp industry in Texas gets underway Tuesday.
At issue are new regulations and higher licensing fees put in place by the Department of State Health Services in March.
Hemp sellers sued over the new rules, claiming DSHS did not have the authority to issue those regulations.
Cynthia Cabrera, Chief Strategy Officer for Hometown Hero and founder and president of the Texas Hemp Business Council, knows the business and policy side of the issue.
She joined KERA's Ron Corning to talk about where these regulations stem from and how they could impact Texas businesses.
These interview highlights have been edited for length and clarity. To hear the full conversation, click the 'listen' button above.
The rules being challenged in court
The lawsuit is specifically challenging a rule that changes the definition of hemp in the state, which was established in 2019. That's the primary thing that affects many retailers who have built their businesses on the previous or the existing definition.
Every state agency is required to review the rules or regulations that cover whatever industry they're in charge of every four years. DSHS reviewed hemp regulations two years ago and decided they didn't have the authority to make any changes. Fast forward to this year, and suddenly they've made all kinds of sweeping changes. So, what happened that suddenly gave DSHS that authority? The answer is nothing.
The lawsuit is only challenging regulations that business owners feel exceeded DSHS's authority because remember, this industry has been regulated since 2019. All the other additional rules that DSHS issued are not being challenged.
Our company Hometown Hero, for example, we've had child-resistant tamper evident packaging for years. That's not a problem. Consumer safety is always our focus. No one is going to argue over things that support consumer safety, but things that abuse agency authority — that we will challenge.
Higher licensing fees
Another issue in this case is the much higher licensing fees for hemp sellers. The state is not allowed to collect more money in fees than they spend to regulate that respective industry. Now they've raised fees 30 times, but they're not going to be hiring any additional people. There's no additional enforcement. So why are you raising the fees by such a drastic amount?
Impact on Texas businesses
If these regulations stand, I foresee more lawsuits in addition to the one that's going on right now and I think some businesses will close their doors. If a business relied on just one type of product for their sales and suddenly that product is wiped out — which hasn't happened yet — but if that were to happen, that business either needs to be nimble enough to pivot to other types of products or they're going to close.
It's an entire bait and switch and when you consider that Texas touts itself as the friendliest business state in the country, it's even more of a slap in the face. For businesses to suddenly have the rug pulled out from under them with 30 days notice, no less, is really heart-wrenching.
What's next?
This case could make it's way to the U.S. Supreme Court. I mean, you're talking about a [state] agency changing a definition that affects an entire industry.
I will say that all eyes are on Texas. Texas is a very large market, 30 million people. Governor Greg Abbott is very encouraging of business development in the state. I think Texas is the eighth largest economy in the world. So all eyes are on us to see how this state handles it.
Even for conservatives, the overreach and the 'my way or the highway' approach that the Lieutenant Governor has taken has turned off a lot of people. Just the strength of the market in Texas tells you that these are products people want and yet you have a handful of people who are determined to have something their way, and we have to ask ourselves why.
Ron Corning is the host of KERA's forthcoming talk show, NTX Now. Got a tip? Email Ron at rcorning@kera.org.
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