SB 3 is projected to have a negative net fiscal impact of approximately $37.1 million to General Revenue-related funds through the 2026–2027 biennium. The legislation mandates a sweeping transition of regulatory authority over consumable hemp products from the Department of State Health Services (DSHS) to the Texas Alcoholic Beverage Commission (TABC) effective January 1, 2027. The bill imposes new licensing regimes, product registration requirements, and excise taxes, which are intended to fund a newly established General Revenue-Dedicated account for hemp law enforcement and regulatory administration.

The largest costs in the near term stem from the creation of infrastructure at TABC to oversee the new regulatory regime. These include substantial one-time technology implementation costs—estimated at $23.4 million in FY 2026 and $9.7 million in FY 2027—for developing a licensing and case management system. Additionally, TABC is expected to onboard 78 new full-time employees across licensing, enforcement, audit, and other divisions. Operational costs associated with these new positions, estimated at over $6 million annually beginning in 2027, will be sustained through the new dedicated fund.

While new fees and taxes are expected to generate significant revenue (estimated at $32.4 million in FY 2027, increasing to over $45 million in FY 2029), much of this income is offset by expenditures tied to implementing and enforcing the regulatory framework. For instance, the cost of hiring staff, operating testing labs, supporting compliance efforts, and funding rulemaking initiatives will all draw from these revenues. The bill also redirects hemp-related sales tax and excise tax revenues away from unrestricted General Revenue into the newly created dedicated account, reducing available general-purpose funds.

At the local level, jurisdictions may experience new fiscal responsibilities, including costs for holding elections on hemp product sales, responding to increased licensing and criminal enforcement activity, and managing an anticipated rise in local court caseloads. However, the exact local impact remains indeterminate due to insufficient data on offense prevalence and enforcement demand. In summary, while the bill aims to create a self-sustaining regulatory ecosystem funded by industry-derived fees and taxes, it carries significant startup and administrative costs that will weigh on the state budget at least through the early implementation period.

SB 3 proposes a sweeping overhaul of Texas’s regulatory approach to consumable hemp products and hemp-derived cannabinoids. While the stated intent of the legislation is to safeguard public health, particularly that of minors, the bill's structure reflects a significant and overreaching expansion of state authority. It restricts lawful commercial activity, imposes excessive financial and regulatory burdens on businesses, and establishes a punitive enforcement model that criminalizes previously lawful behavior. Given the scale and scope of these provisions, SB 3 is fundamentally misaligned with core principles of individual liberty, free enterprise, and limited government.

The bill transfers regulatory authority over consumable hemp products from the Department of State Health Services (DSHS) to the Texas Alcoholic Beverage Commission (TABC), an agency historically associated with highly controlled regulatory models. This shift embeds consumable hemp within a framework designed for intoxicating substances like alcohol, even though many of the hemp-derived cannabinoids in question, such as delta-8 and delta-10 THC, are not controlled substances under federal law and have not been conclusively linked to public health crises. Instead of applying a proportionate, risk-based regulatory model, SB 3 effectively bans all cannabinoids except cannabidiol (CBD) and cannabigerol (CBG), regardless of their legality or safety profiles.

This prohibition dramatically narrows consumer choice and devastates a thriving segment of Texas’s hemp industry. Retailers and manufacturers who currently derive substantial revenue from the sale of these alternative cannabinoids will face closure or downsizing. The bill imposes burdensome financial obligations—$10,000 licensing fees per processing location and $20,000 annual registration fees per retail site—that are insurmountable for most small businesses. These costs, coupled with the ban on core product lines and the inability to utilize common sales methods like mail order, make continued commercial viability nearly impossible for many operators.

The legislation also introduces numerous new criminal offenses, including felony charges for possession or sale of non-compliant products. It bans delivery services, imposes severe marketing restrictions, and authorizes law enforcement inspections of business premises without the traditional procedural safeguards associated with searches and seizures. This aggressive enforcement posture not only shifts compliance burdens onto private industry but also risks disproportionate consequences for small-scale operators, employees, and adult consumers acting in good faith under current law.

Economically, the bill is projected to cost the state significantly more than it will generate. The Legislative Budget Board estimates a negative fiscal impact of over $37 million on General Revenue through 2027, primarily due to lost sales and excise tax revenues. Many businesses are expected to shut down due to regulatory burdens and reduced consumer demand, leading to job losses and further economic contraction, especially in rural and retail-heavy regions where the hemp industry has grown. While the bill authorizes TABC to recoup funds through fees and dedicated accounts, these funds are unlikely to compensate for the overall contraction in economic activity.

Moreover, the bill's attempt to address concerns about underage use could be addressed through more narrowly tailored policies, such as age restrictions, improved labeling standards, and child-resistant packaging, without resorting to an industry-wide prohibition. Instead of incentivizing safer practices and informed consumer choice, SB 3 opts for a prohibition-first model that contradicts recent federal and state efforts to normalize and responsibly regulate hemp products under the 2018 Farm Bill.

In sum, SB 3 unnecessarily restricts individual freedom, severely limits consumer access, punishes legitimate business activity, and expands criminal liability in ways that are inconsistent with sound regulatory practice. While protecting public health is a legitimate concern, this bill’s one-size-fits-all approach inflicts broad economic and civil liberty costs that outweigh its intended benefits. As such, Texas Policy Research recommends that lawmakers vote NO on SB 3 based on both the bill’s substance and its long-term implications for regulatory precedent and economic opportunity in Texas.

• Individual Liberty: The bill substantially limits personal freedom by outlawing the manufacture, possession, and sale of nearly all hemp-derived cannabinoids, including those (like delta-8 and delta-10 THC) that have been legally available and widely used by adults in Texas under federal guidance. The bill raises the legal purchasing age to 21 and criminalizes possession of non-compliant products—even for personal use—exposing individuals to misdemeanor or felony charges for behavior that is not inherently harmful or unlawful under federal law. By banning mail-order delivery and restricting the form and content of products, the bill removes legal and convenient access to products that many Texans rely on for wellness, anxiety, pain relief, or recreational use. These restrictions are not based on individualized harm or safety data but on a blanket assumption of risk, overriding adult decision-making and autonomy. The bill undermines liberty by presuming government, not individuals, should dictate what products people can legally consume.
• Personal Responsibility: The bill erodes the principle that adults should be trusted to make informed decisions about their own health and wellness. Rather than promoting consumer education, accurate labeling, or transparency, the bill prohibits entire product categories—even those with negligible psychoactive effects—without allowing consumers to weigh risks and benefits themselves. This paternalistic approach substitutes regulation for personal accountability. A liberty-oriented framework would rely on informed consent, consumer warnings, and enforcement against fraud or harm, not across-the-board bans, so that responsible individuals can engage in lawful commerce and consumption without government interference unless harm occurs.
• Free Enterprise: The bill imposes substantial and prohibitive costs on Texas entrepreneurs. It establishes a $10,000-per-location licensing fee for manufacturers, a $20,000 annual fee for retailers, and $500-per-product registration fees. These costs are far above what is reasonable for regulatory compliance and will disproportionately harm small businesses, pushing them out of the market in favor of large, well-capitalized firms. Additionally, by banning widely used cannabinoids that are legal under federal law, the bill effectively destroys entire product categories, leading to business closures, job losses, and suppressed innovation in a growing sector. The prohibition on mail delivery further limits businesses' ability to compete or reach customers. These actions run counter to Texas's historic support for open markets and entrepreneurship.
• Private Property Rights: While the bill does not directly seize or limit real property, it does restrict how individuals and businesses can use their own property. Licensed facilities must comply with complex mandates on inspections, labeling, and packaging or risk criminal enforcement, suspension, or license revocation. Law enforcement is granted broad authority to enter and inspect premises, even without clear evidence of wrongdoing, infringing on the right to peacefully use and control one's property for lawful purposes. Furthermore, businesses that previously invested in legal hemp product infrastructure, based on state and federal guidance, will lose their ability to use that property and inventory under the new legal regime, effectively rendering parts of their capital investments worthless without compensation.
• Limited Government: This bill represents a massive expansion of state regulatory authority. It shifts oversight from a public health framework under DSHS to a quasi-law enforcement model under the Texas Alcoholic Beverage Commission (TABC), which is more punitive and inspection-heavy. The bill adds multiple new criminal offenses—including felonies—and gives broad discretion to state agencies to deny, suspend, or revoke licenses, creating an uneven and bureaucratic regulatory landscape. The bill’s new taxes, permit systems, advisory committees, and enforcement mechanisms result in a costly and intrusive government apparatus. Instead of promoting minimal and targeted interventions, the bill establishes a new layer of regulatory infrastructure, undermining the principle that the government should intervene only when necessary to prevent harm or protect rights.