Federal Lawsuit Challenges Texas THC Rules

Estimated Time to Read: 12 minutes

Editor's Note: This article has been updated to include additional analysis of the federal complaint, including the plaintiffs' due process arguments, the four legal claims presented to the court, the scope of the requested injunctive relief, and additional context regarding the alleged economic impacts described in supporting declarations filed with the lawsuit.

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On July 31, 2026, Texas began enforcing new rules that significantly changed the legal status of many hemp-derived THC products across the state. As Texas Policy Research (TPR) explained when those rules took effect, the changes did not originate from new legislation passed during the regular or special sessions. Instead, they stemmed from Department of State Health Services (DSHS) rulemaking that was ultimately upheld by the Texas Supreme Court earlier this year after years of litigation.

The practical effect was immediate. Many products that had been openly sold throughout Texas for years suddenly became subject to criminal penalties under the state's controlled substances laws, creating substantial uncertainty for retailers, manufacturers, distributors, and consumers.

That uncertainty quickly moved from the marketplace into federal court.

Only hours after the rules became enforceable, three members of the Texas hemp industry filed a lawsuit in the United States District Court for the Southern District of Texas seeking to block the state's enforcement of the new rules. The complaint raises significant questions regarding federal preemption, interstate commerce, and the constitutional limits of state regulatory authority. Regardless of how one views hemp policy itself, the case is poised to become one of the most consequential legal challenges affecting Texas's hemp industry since the Legislature legalized hemp production through House Bill 1325 (HB 1325) in 2019.

Federal Lawsuit Seeks to Halt Texas's New THC Rules

The lawsuit was filed by Thomas Monti, Lifted Liquids, Inc., and The Happy Cactus Apothecary LLC against Interim DSHS Commissioner Imelda Garcia, Attorney General Ken Paxton (R), Galveston County Criminal District Attorney Kenneth A. Cusick, and Galveston County Sheriff Jimmy Fullen in their official capacities.

Rather than seeking monetary damages, the plaintiffs ask the court to declare the challenged rules unlawful and prohibit state officials from enforcing them. Along with the complaint, they requested both a temporary restraining order and a preliminary injunction to prevent continued enforcement while the litigation proceeds. Those requests represent the lawsuit's most immediate objective. If granted, emergency relief could temporarily suspend enforcement of the challenged rules before the court reaches a final decision on the merits. If denied, the July 31 regulations will likely remain in effect throughout much of the litigation.

Obtaining that relief is no simple task. Federal courts generally require plaintiffs seeking a temporary restraining order or preliminary injunction to demonstrate a substantial likelihood of success on the merits, irreparable harm if relief is denied, that the balance of equities favors an injunction, and that granting relief serves the public interest. Those questions will likely be addressed before the court fully considers the broader constitutional claims presented in the complaint. While emergency motions often receive expedited consideration, the underlying litigation itself could continue for many months or longer depending on appeals and the complexity of the constitutional questions involved.

Notably, the plaintiffs are not asking the court to invalidate every aspect of Texas's hemp regulatory framework. Their requested injunction is narrowly tailored to prevent enforcement of the challenged Schedule I definitions against hemp products containing no more than 0.3 percent delta-9 THC while leaving Texas free to continue enforcing generally applicable laws governing licensing, labeling, age restrictions, adulteration, product testing, and other consumer protection requirements.

The Lawsuit Argues Texas Conflicts With Federal Hemp Law

At the center of the complaint is the plaintiffs' contention that Texas' new THC regulations conflict with federal law. The plaintiffs contend that Congress settled the legal status of hemp when it enacted the Agriculture Improvement Act of 2018, commonly known as the 2018 Farm Bill. That legislation removed hemp, including hemp-derived tetrahydrocannabinols meeting the federal definition of hemp, from the federal Controlled Substances Act. Congress also established a nationwide regulatory framework governing hemp production and interstate commerce.

The plaintiffs argue Texas followed that federal approach the following year when lawmakers enacted HB 1325. According to the complaint, Texas intentionally incorporated the federal definition of hemp into state law, meaning Texas's statutory framework should be interpreted consistently with federal law.

The lawsuit argues that the DSHS departed from that legislative framework by administratively interpreting Texas law to once again treat certain hemp-derived cannabinoids as Schedule I controlled substances. According to the plaintiffs, the agency effectively recreated criminal prohibitions that neither Congress nor the Texas Legislature enacted.

Although much of the public discussion has focused on the lawsuit's federal preemption arguments, the complaint raises four separate legal claims. The plaintiffs seek a declaratory judgment that qualifying hemp products remain lawful under federal law, argue the regulations are unconstitutionally vague under the Fourteenth Amendment's Due Process Clause, contend the rules are preempted by the 2018 Farm Bill and the Supremacy Clause, and assert they impose an unconstitutional burden on interstate commerce. Together, those claims ask the federal court to evaluate not only whether Texas' rules conflict with federal law, but also whether they provide adequate constitutional notice before criminal penalties may be imposed

While those claims overlap in several respects, each asks the court to evaluate a different constitutional or statutory question. That disagreement forms the basis of the lawsuit's federal preemption claim. Under the Supremacy Clause of the United States Constitution, federal law generally controls where state law conflicts with federal law in areas where Congress has acted. The plaintiffs argue that because Congress expressly legalized hemp meeting the federal definition, Texas cannot prohibit those same products through administrative rulemaking. The complaint also raises claims under the Dormant Commerce Clause. Congress possesses constitutional authority to regulate interstate commerce, and courts frequently scrutinize state laws that interfere with products moving lawfully across state lines. According to the plaintiffs, Texas's interpretation creates precisely that problem by prohibiting products that remain lawful under federal law and are legally produced and transported elsewhere in the country.

If the federal court reaches these constitutional questions, its analysis could have implications extending well beyond Texas's hemp industry, particularly for other states attempting to regulate products that exist within a comprehensive federal statutory framework.

The complaint also devotes significant attention to its Due Process claim. The plaintiffs argue the challenged regulations fail to provide objective standards for determining whether certain cannabinoids qualify as "naturally occurring" under the agency's interpretation. According to the complaint, neither existing laboratory testing nor certificates of analysis can reliably distinguish naturally occurring cannabinoids from those produced through conversion, leaving businesses, consumers, laboratories, and law enforcement without a clear method for determining which products remain lawful. The plaintiffs argue that uncertainty renders the regulations unconstitutionally vague by failing to provide fair notice before criminal penalties attach.

This Lawsuit Raises Questions Beyond Hemp

Although the immediate dispute involves hemp-derived THC products, the litigation also highlights broader questions about how significant public policy decisions should be made in Texas.

Texas Policy Research has consistently argued that major regulatory changes affecting large segments of the economy should generally occur through legislation enacted by elected representatives rather than through years of administrative interpretation and litigation. Whether one supports stricter regulation of intoxicating hemp products or prefers a more permissive marketplace, the process by which those policies are established matters.

The Legislature has spent several years debating hemp policy. During the 89th Legislature (2025), lawmakers considered Senate Bill 3 (SB 3), which would have prohibited consumable hemp products containing THC. That legislation ultimately passed both chambers before being vetoed by Governor Greg Abbott (R), who instead called for a regulatory approach that would better distinguish between lawful hemp products and products presenting legitimate public safety concerns.

Meanwhile, litigation surrounding the DSHS's 2021 rulemaking continued through the Texas court system. Earlier this year, the Texas Supreme Court concluded that DSHS possessed statutory authority to adopt the challenged definitions under existing Texas law. That decision resolved an important question of state administrative authority but did not address whether those rules are consistent with federal law or the United States Constitution.

The newly filed federal lawsuit asks an entirely different set of questions. Rather than challenging the agency's authority under Texas statutes, it argues the resulting rules conflict with federal law and constitutional protections governing interstate commerce. Those issues now move from the Texas judiciary into the federal court system.

Regardless of the eventual outcome, the case illustrates how unresolved legislative debates can evolve into years of regulatory interpretation followed by prolonged litigation. That uncertainty affects not only government agencies, but also businesses attempting to comply with changing legal standards and consumers trying to understand what products remain lawful.

Potential Policy Implications for the 90th Texas Legislature

Even if the federal courts ultimately resolve the constitutional questions raised in this lawsuit, lawmakers are likely to revisit hemp policy during the 90th Texas Legislature, which begins in January 2027.

One issue will likely involve legislative clarity. Rather than relying on administrative interpretation, legislators may seek to more precisely define which cannabinoids are lawful, establish clearer concentration thresholds, distinguish between intoxicating and non-intoxicating hemp products, or create more detailed statutory standards governing manufacturing and retail sales. Regardless of the preferred policy outcome, clearer statutes generally reduce uncertainty for regulators, businesses, law enforcement, and consumers alike.

The litigation also underscores the importance of regulatory certainty. Businesses invest, hire employees, sign leases, and enter long-term contracts based upon the expectation that legal requirements will remain reasonably predictable. Extended periods of uncertainty can discourage investment regardless of whether the ultimate policy is more restrictive or more permissive.

The federal complaint illustrates that uncertainty through detailed declarations submitted by the plaintiffs. Those filings describe cancelled orders, returned inventory, workforce reductions, projected revenue losses, disruptions to interstate supply chains, and concerns about customer confusion, all of which are offered to support the plaintiffs' request for emergency injunctive relief. While those allegations have not been tested in court, they underscore the practical consequences that prolonged regulatory and legal uncertainty can have for businesses attempting to comply with changing rules.

The case may also renew discussion regarding the appropriate role of administrative agencies in making policy decisions with substantial economic consequences. Agencies play an essential role in implementing laws enacted by the Legislature, but significant questions often arise when broad policy changes emerge primarily through regulatory interpretation rather than new legislation. That broader separation of powers debate extends well beyond hemp policy alone.

Finally, Congress itself continues considering revisions to federal hemp policy as part of future Farm Bill negotiations. Any significant federal statutory changes could once again require Texas lawmakers to revisit state law, regardless of how the current litigation concludes. In that respect, the present lawsuit may resolve only one chapter of a policy debate that continues evolving at both the state and federal levels.

Why This Lawsuit Matters Beyond THC Policy

Public opinion regarding hemp-derived THC products varies considerably. Some Texans believe stronger restrictions are necessary to protect public health and prevent intoxicating products from reaching minors. Others argue adults should remain free to purchase federally lawful hemp products without additional state restrictions.

The federal lawsuit does not require the court to resolve that policy debate. Instead, it asks whether Texas implemented its chosen policy in a manner consistent with federal law and constitutional limitations.

Texas Policy Research has consistently maintained that durable public policy is generally best developed through the legislative process, where proposals receive public hearings, amendments, recorded votes, and accountability to voters. Courts exist to interpret the law, while administrative agencies are responsible for faithfully executing statutes enacted by the Legislature.

Whether one ultimately supports or opposes tighter regulation of hemp-derived THC products, the case serves as a reminder that process matters alongside policy. Constitutional safeguards, separation of powers, and legislative accountability exist precisely because they establish predictable rules for making public policy that extend beyond any single issue.

Looking Ahead

The federal lawsuit marks the beginning of another significant chapter in Texas's ongoing debate over hemp-derived THC products. In the coming weeks, the court will first determine whether emergency relief should be granted. If the plaintiffs obtain a temporary restraining order or preliminary injunction, enforcement of portions of the July 31 rules could be paused while the litigation continues. If emergency relief is denied, the regulations will likely remain in force unless a later court order changes their status.

Regardless of those early rulings, the constitutional questions presented in the complaint are unlikely to disappear quickly. Appeals to the United States Court of Appeals for the Fifth Circuit remain possible regardless of which side prevails in the district court, and the issues raised concerning federal preemption and interstate commerce could ultimately attract broader national attention.

Importantly, the lawsuit does not ask the federal court to decide whether Texas should prohibit intoxicating hemp products as a matter of public policy. Instead, the plaintiffs repeatedly emphasize that the court's role is limited to determining whether the challenged regulations comply with federal law and constitutional requirements. That distinction reflects the broader separation of powers questions surrounding the case. Legislatures establish public policy, administrative agencies implement enacted law, and courts resolve legal disputes over whether those actions remain within constitutional and statutory limits.

For Texas policymakers, the lawsuit demonstrates that hemp policy remains far from settled. Between continuing federal uncertainty, future legislative proposals, administrative implementation, and ongoing judicial review, the legal framework governing hemp-derived cannabinoids will likely continue evolving for years to come.

As Texas Policy Research has consistently argued, lasting public policy is generally strongest when it is clearly debated, carefully drafted, and enacted through the legislative process rather than emerging through years of regulatory interpretation and litigation. Whatever the outcome of this case, the questions it raises will likely shape the next phase of Texas hemp policy well beyond the current lawsuit.

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