Months Since New Rules Took Effect, Hemp Businesses Feel the Burn

Back in January, Mary Tello was planning for a big year. Co-owner of South Austin hemp shop Green Haus Wellness, she was considering expanding her business to a second location in town. The opposite happened: Amidst a chaotic year of rule changes and legal battles involving the hemp industry, Tello had to close her brick-and-mortar, transitioning to online-only sales.

“Things just kind of went downhill for everybody. … People were scared to come and purchase, and we lost thousands of dollars per month,” she told the Chronicle.

In March, the Department of State Health Services implemented new restrictions on hemp. Among those new rules were a large hike in licensing fees and the prohibition of products containing THCA – alterations that many business owners said put the entire industry at risk. The Texas Hemp Business Council, a nonprofit group of industry members and advocates that works to safeguard hemp access in the state, then led the effort in filing a lawsuit against state agencies in an attempt to overturn the new rules. After two Travis County district judges sided with the industry, blocking some of the changes, the state turned to the Texas 15th Court of Appeals, which reinstated those rules as the case continues to unfold. On Dec. 8, the appellate court will hear oral arguments.

Concurrently, the Texas Supreme Court issued a ruling on a 2021 lawsuit related to products containing Delta-8, in which it decided that the DSHS has authority to categorize certain hemp-derived THC isomers as controlled substances. Since July 31, retailers have been prohibited from selling any products containing Delta-8, Delta-10, THCP, and other cannabinoids, only allowed to distribute goods with less than the 0.3% Delta-9 THC legal limit. The DSHS did not respond to the Chronicle’s questions regarding enforcement of the regulations.

Three months after those July changes, Tello isn’t the only hemp business owner who has felt the impacts of the modifications the industry has undertaken this year. 

Mark Bordas, executive director of the THBC, told the Chronicle that the changes have substantially damaged businesses throughout the entire state. “People have to lay folks off, shutter their business, or move to another state and start all over again,” he said.

Botanic Bliss, a hemp retailer with locations in Downtown Austin and Pflugerville, is another one of those shops. Owner Nick Mortillaro told the Chronicle that reducing business hours and cutting staff has been one of the toughest decisions he’s had to make.

“To have our business go down 80%, you know, I have to start cutting, of course. … Those have been some of the most difficult conversations I have. It’s not the team’s fault; they’re doing great,” he said.

Along with cutting staff and reducing business hours, Mortillaro has had to take a more unconventional approach to keeping cash flowing, shifting to more of a wellness shop rather than focusing solely on hemp products. Think kratom, specialty coffee, electrolytes, alongside the hemp he is still legally allowed to carry.

“To really vote against your constituents and for lobbyists, private interest groups, your pocket, I think is emblematic of a much larger trend we’re seeing about corruption in the state.”

Nick Mortillaro, owner of Botanic Bliss

On the federal level, last year’s spending bill included a provision aimed at closing the loophole the 2018 Farm Bill created, which has permitted hemp access throughout the country. That ban is set to take effect in mid-November, though the industry members we spoke to are optimistic the restrictions will be postponed. 

“It was pretty transparently a power grab at the last minute, shoved into a budget funding bill that Congress had to pass. … I think what you’re more likely to see is an extension, giving them more time to sort it out,” Mortillaro said.

With the midterm elections currently underway, these three hemp entrepreneurs explained how much is at stake for publicly accessible hemp, stating that the future of the market here in Texas truly lies in the hands of those in office come next year’s legislative session. “If Dan Patrick stays, I know that’s not gonna be good for us in the industry at all next session,” Tello said. “I really think they’re gonna just shut it down completely.”

“To really vote against your constituents and for lobbyists, private interest groups, your pocket, I think is emblematic of a much larger trend we’re seeing about corruption in the state,” Mortillaro said.

Across the street from Botanic Bliss’ Downtown location sits the Travis County Civil and Family Courts Facility, one of 201 polling locations within the county. Mortillaro said he has incentivized consumers to cast a ballot, offering discounts for those donning an “I Voted” sticker. 

There are two different markets for Texans seeking cannabis products: the now nearly decimated hemp industry and the state’s medical cannabis framework, the Texas Compassionate Use Program. While hemp business owners have battled with state agencies and lawmakers throughout the year in an attempt to save their industry, Texas has actually expanded TCUP, issuing 12 new distributor licenses. It’s unclear whether the restrictions on hemp have resulted in an increased number of Texans hoping to take advantage of TCUP. The Texas Department of Public Safety – which oversees the program – told the Chronicle, “The active patient count for the Texas Compassionate Use Program has continued to increase throughout the year. The department is unable to determine if the increase is related to the rule changes you reference.”

Bordas does not believe hemp consumers are turning to TCUP as access to hemp has dwindled, saying that while the medicinal carve-out is well-intended, “it’s a terrible program,” pointing to the cost of obtaining products through the state’s framework. “Good luck being able to afford staying in the program,” he said.

All these hemp stakeholders can do is remain patient, keeping an eye on how the midterms shake out, followed by a potential delay of the federal ban and the December oral arguments on the DSHS’s March rules. Still, Tello said her faith in Texas is slim.

“We’re keeping our hopes at a minimum right now, just to kind of [say], ‘Okay, let’s just wait until Election Day and see where to go from there,’ ’cause I don’t know.”

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