Texas hemp group and Tyler company sue to block state rules counting THCA toward the THC limit, alleging a 4,000% fee hike

A Texas hemp trade group and a Tyler-based hemp company have filed a new lawsuit seeking to block state health rules that count THCA toward the legal THC limit for consumable hemp products and that, the plaintiffs say, raised fees by 4,000% for manufacturers and 3,333% for retailers over the past year. The Texas Hemp Constitutional Alliance and Green Nation, a hemp product manufacturer and retailer based in Tyler, filed the suit on Monday, Oct. 19, in Travis County, KXAN reported. MJBizDaily followed with its own report on Oct. 23.

The case is another legal challenge to consumable hemp rules that the Texas Department of State Health Services (DSHS) put into effect on March 31. The suit names Stephanie Muth, interim executive director of the Texas Health and Human Services Commission (HHSC), and Imelda Garcia, the interim commissioner, as defendants. HHSC told KXAN it does not comment on pending litigation.

What the lawsuit claims

The plaintiffs argue that the agency went beyond the power the Legislature gave it. "These rules exceed and even directly contradict the very statutes under which DSHS purports to regulate," the lawsuit says, according to KXAN. It continues: "In its new rules, DSHS has unilaterally deigned to do what Texas lawmakers refused to do … to impose a general ban on a broad array of consumable hemp products."

At the center of the case is how Texas measures THC. Texas law defines hemp as cannabis with no more than 0.3% delta-9 THC on a dry-weight basis, and state law already limits THCA in the hemp plant and requires testing before harvest, KXAN and MJBizDaily reported. THCA is not intoxicating in its raw form but converts to delta-9 THC when heated. The suit specifically challenges the agency's "redefinition of 'total delta-9 THC' to include tetrahydrocannabinolic acid," and argues that the rules go further than the statutes by changing the pre-manufacturing test to account for THCA and by requiring a pre-retail test on all finished consumable hemp products that also accounts for THCA. In the plaintiffs' view, that redraws which finished products are legal.

The suit also targets the cost of staying in business. The plaintiffs say administrative fees tied to the program rose 4,000% for manufacturers and 3,333% for retailers over the past year. "The increased fees are untethered to any reasonable estimate of actual program costs under the New Rules but are instead a naked attempt to drive businesses from the market—achieving something the Legislature refused to do—by prohibitive taxes disguised as administrative fees," the lawsuit says, according to KXAN. The plaintiffs are asking the court for an injunction blocking the rules.

What the rules do

The Texas Tribune reported in March that the DSHS rules require child-resistant packaging and add new labeling, testing and bookkeeping requirements. They also write into rule the 21-and-older purchase age that took effect last year as an emergency directive. Manufacturer license fees rose from $258 to $10,000 per facility, and retail registrations rose from $155 to $5,000, the Tribune reported. Businesses caught selling noncompliant products face penalties that include license revocation and up to $10,000 in fines for each day the products were sold.

The testing change is what hits smokable products. Under the rules, labs measure total THC, and a product over the 0.3% threshold is noncompliant even if the THC only becomes active when the product is smoked, according to the Tribune. KUT, Austin's NPR station, reported that the state's "Total THC Rule" counts THCA as 88% delta-9 THC for selling and manufacturing hemp products. The result, the Tribune reported, is that THCA flower and pre-rolled joints, which retailers said make up more than half of some stores' inventories, can no longer be sold. MJBizDaily noted that the Texas State Law Library describes the rule as effectively prohibiting most smokable consumable hemp products. Edibles and beverages remain available, the Tribune reported, because of their lower THC concentrations or because beverages fall under the Texas Alcoholic Beverage Commission (TABC).

DSHS has defended the fees. According to MJBizDaily, the agency maintains they are meant to cover the cost of running and enforcing the program, including inspections, lab testing and related enforcement work. MJBizDaily put the Texas hemp-derived cannabinoid market at an estimated $5.5 billion in 2025.

How Texas got here

Texas legalized hemp in 2019. Lawmakers have said products high in THCA let a recreational THC market appear without direct state approval, the Tribune reported. In 2025, the Legislature voted to ban such products, but Gov. Greg Abbott vetoed the bill and asked the TABC and DSHS to tighten regulation instead. The DSHS rules followed.

The first major court fight over those rules is still going. In a case brought by the Texas Hemp Business Council, Hemp Industry & Farmers of America and several Texas businesses (Cause No. D-1-GN-26-002511), Travis County District Judge Daniella DeSeta Lyttle signed a temporary injunction on May 1. Her order found the plaintiffs had shown a substantial likelihood that the total delta-9 THC compliance standard and the higher license and registration fees exceed the agency's rulemaking authority. The state appealed. On June 5, the Fifteenth Court of Appeals denied the industry's emergency request to keep that injunction in place, letting the rules take effect again while the case continues, KUT reported. The two-sentence order did not decide whether the rules are legal. At the time, DSHS spokesperson Lara Anton told KUT, "DSHS is still determining how to proceed given that there is not a final disposition yet." MJBizDaily reported this week that the THCA rule remains in effect while that litigation continues.

Reactions

Industry leaders have opposed the rules since they were released. "They did a ban with their own regulatory scheme," Lukas Gilkey, chief executive of hemp manufacturer Hometown Hero, told the Tribune in March. Heather Fazio, director of the Texas Cannabis Policy Center, told the Tribune, "We estimate this will hand 50% of the legal market to illicit operators, making our state less safe." Fazio also said many in the industry welcomed stricter age checks, warning labels and child-proof packaging, but were concerned about the licensing fees and product restrictions. Supporters of the licensing fee increase have called the new regulations a necessary step, the Tribune reported, and lawmakers who voted for a ban in 2025 cited fears that intoxicating products were reaching children.

The federal backdrop

The Texas fight is unfolding as a federal limit approaches. Federal legislation signed late last year redefined hemp so that only products with no more than 0.4 milligrams of total THC per container stay legal, Marijuana Moment reported. A federal funding law enacted in September moved that ban's effective date from Nov. 12 to Dec. 11; the House passed the bill 370-48. Like the Texas rule, the federal definition counts total THC rather than delta-9 alone.

What happens next

The new lawsuit asks the Travis County court for an injunction against the DSHS rules. None of the reports reviewed by Hemp Law Watch gave a hearing date, and HHSC has declined to comment. The earlier Texas Hemp Business Council case is still pending on appeal. Hemp Law Watch will follow both cases and report any ruling.