Texas Supreme Court justices will decide whether a state public health department has the authority to effectively criminalize a chemical compound found in cannabis, which retailers argue could hurt the state’s multibillion-dollar hemp industry.
The court heard oral arguments Wednesday in a case that could revive a 2021 notice from the Texas Department of State Health Services classifying delta-8 — an intoxicating chemical compound found in the hemp plant, milder than delta-9 — as an illegal substance, even after federal law legalized its sale.
“Texas's hemp program has never been a legally permissible vehicle for the proliferation of synthetic and intoxicating forms of (THC),” argued Cory Scanlon with the Texas Attorney General’s office, which is representing DSHS. “The Legislature delegated final authority to the commissioner of State Health Services to decide whether the Texas schedules of controlled substances must comply with federal changes.”
The 2018 U.S. Farm Bill redefined "hemp" and removed cannabis products with less than 0.3% delta-9 THC from the federal Schedule I. Texas adopted the federal definitions the next year within its own 2019 Texas Farm Bill.
The Drug Enforcement Administration changed its regulations in 2020 to comply with the farm bill. But DSHS, under former commissioner John Hellerstedt, objected to and refused to enforce the DEA’s new rule.
DSHS then issued a notice on its website in 2021 classifying any amount of delta-8 THC and any amount of delta-9 over 0.3% as Schedule I controlled substances — effectively making them illegal. Schedule I substances are defined at the federal and state level as drugs with no accepted medical use and a high potential for abuse, and possessing or distributing them has criminal consequences.
Sky Marketing Corp., doing business as Austin-based hemp retailer Hometown Hero, and other retailers sued DSHS to prevent its rule change from going into effect. The company alleges DSHS acted outside its authority when it reclassified hemp products and didn’t follow the proper rulemaking procedures under the Texas Administrative Procedure Act or APA.
Sky Marketing also alleges enforcing the rule would unlawfully make the production, manufacturing, sale and use of all hemp products illegal in the state. Amanda Taylor, attorney for the hemp retailers, told justices the plaintiffs fear criminal prosecution, civil enforcement and financial loss.
“The businesses, immediately after that website rule was announced, began to suffer economic impact,” Taylor said. “They were about to have to lay off staff. Their reputations were put into question because, are they now illegal producers and sellers?”
Taylor argued DSHS can’t classify THC as a controlled substance when the Legislature has decided it’s not. Justice Evan Young wondered if the separation of powers needs to be clearer.
“That's the question, though, isn't it, whether or not this really is in excess of authority?” Young said. “I'm wondering if what that really is signaling is that, ‘in this area we're going to be super clear before we, the Legislature, are going to directly interfere with this.’”
But DSHS, Scanlon argued, is acting well within the authority it has under state law.
“What the vendors did here was they wanted to get legal cover,” he said. “They wanted to enjoin a rule to say, ‘this is what the law is, you are wrong on the law.’ The Legislature has said that the commissioner gets to make this determination regarding controlled substances unless altered by them, and that the decision is final.”
The state argues DSHS isn’t posing any criminal or civil enforcement threat to hemp retailers, like revoking hemp sellers’ licenses. Scanlon also said DSHS has always considered THC a controlled substance, and the 2021 website notice was just a clarification of existing law. Therefore, it’s not a binding rule, so the plaintiffs can’t challenge the guidance under the APA.
An Austin trial court issued an injunction preventing the DSHS rule from taking effect, ruling the state likely skipped legally mandated procedures in issuing the delta-8 notice. An appeals court affirmed the injunction, leading DSHS to appeal to the Texas Supreme Court.
A rapidly shifting landscape
Significant legislative and regulatory changes in the hemp industry have delayed oral arguments in the case. After a total ban on THC products failed to pass during the 2025 legislative session, Gov. Greg Abbott issued an executive order that generally permitted the sale of THC in Texas but banned businesses from selling it to minors.
Then Congress banned the sale of hemp products with more than 0.4% THC in November as part of legislation that ended the government shutdown. The ban is set to take effect later this year.
And in December, President Donald Trump issued an executive order that directed federal agencies to reclassify marijuana from a Schedule I to a Schedule III drug — but it didn’t legalize marijuana or approve it for recreational use.
Both sides agreed that, while the federal ban could eventually force DSHS to adjust how it schedules hemp, the state and federal changes don't currently affect the lawsuit.
"What this case is actually about is the bounds of agency authority as expressly delegated by our Legislature," Taylor said. "And while the policy choices underlying the legislators' decisions on hemp might be interesting or controversial, they are not for this court."
Toluwani Osibamowo is KERA’s law and justice reporter. Got a tip? Email Toluwani at tosibamowo@kera.org.
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