A group of Texas hemp businesses has filed a lawsuit against the Texas Department of State Health Services, challenging new enforcement policies they say unlawfully restrict hemp products containing cannabinoids such as THCA and threaten billions of dollars in economic activity.
The lawsuit was filed in the 459th Judicial District Court of Travis County by attorney David K. Sergi on behalf of SS Distro USA LLC, Topps Distro LLC doing business as KingPin Kush, Jason Moreno doing business as My City Hemp, and Trevor Kocaoglan.
The case names the Texas Department of State Health Services (DSHS), Interim Commissioner Imelda Garcia and Division Director Glenn Hargett as defendants.
At the center of the challenge is what the plaintiffs describe as DSHS’ new “Post-July Implementation and Enforcement Standard.” According to the lawsuit, the agency is threatening to detain products and refer businesses to law enforcement when products contain more than trace amounts of naturally occurring cannabinoids such as tetrahydrocannabinolic acid (THCA).
The businesses argue that the policy conflicts with the definition of hemp approved by lawmakers under House Bill 1325 in 2019, which legalized hemp containing no more than 0.3% delta-9 THC on a dry-weight basis.
“This lawsuit presents a fundamental question of constitutional structure: whether an executive administrative agency can, through informal webpage policy and arbitrary rulemaking, criminalize conduct that the Texas Legislature explicitly legalized,” Sergi said.
The lawsuit also challenges fee increases that the plaintiffs say were imposed without legislative authorization, including annual fees of $10,000 for manufacturers and $5,000 for retailers.
Plaintiffs acknowledge the Texas Supreme Court’s recent decision in DSHS v. Sky Marketing Corp., which involved manufactured delta-8 THC, but argue that the ruling does not authorize DSHS to apply the same restrictions to naturally occurring hemp compounds such as THCA.
The lawsuit alleges the agency violated the Texas Administrative Procedure Act and the Texas Constitution’s separation-of-powers provisions by implementing the new standards without going through the required rulemaking process.
An economic analysis from Whitney Economics included with the filing estimates Texas’ consumable hemp market generates about $5.1 billion in annual business revenue, supports nearly 48,900 jobs and produces approximately $254 million per year in state sales tax revenue.
The filing claims the state’s actions could result in $3.85 billion in lost annual revenue and more than 36,000 job losses. Some plaintiff businesses say their sales have fallen by roughly 50%, while wholesalers have reduced their product catalogs by as much as 90%.
The lawsuit also raises an anti-monopoly claim under the Texas Constitution, alleging that restrictions on the broader hemp market benefit the state’s limited medical marijuana program, the Texas Compassionate Use Program, which sells products containing some of the same cannabinoids.
The plaintiffs are seeking a temporary restraining order and temporary injunction preventing enforcement of the challenged policies while the case proceeds, along with final court declarations concerning the legality of the agency’s actions.
“Texas business owners should not be forced to choose between shutting their doors or facing criminal prosecution under administrative standards that our Legislature never passed,” Sergi said. “We are asking the Court to uphold the Texas Constitution, protect thousands of Texas jobs, and keep policy decisions where they belong—with the elected representatives of the people.”
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