State hemp rules are squeezing Austin shops. Where the city's own plan for sales near schools fits

Austin hemp retailers say months of new state rules have cut deep into their business, the Austin Chronicle reported on Oct. 29. One South Austin shop closed its storefront and moved online after losing thousands of dollars a month. The owner of a downtown store told the paper business fell 80%, and that he cut staff and hours and added products like kratom and coffee.

Most of the rules come from the state and federal governments, not City Hall. But the city is writing its own rules on where nicotine products can be sold near schools, and hemp has come up in that work.

What changed

According to the Chronicle:

• March 2026: The Texas Department of State Health Services imposed new hemp rules, including much higher licensing fees and a ban on products containing THCA.
• In court: The Texas Hemp Business Council, an industry group, sued state agencies. Two Travis County district judges blocked some of the changes, but the state appealed and the Texas 15th Court of Appeals reinstated the rules while the case goes on. Oral arguments are set for Dec. 8.
• Delta-8 and others: After the Texas Supreme Court ruled that the health department can classify certain hemp-derived THC compounds as controlled substances, retailers have not been allowed since July 31 to sell products with Delta-8, Delta-10, THCP and similar cannabinoids. Only products under the 0.3% Delta-9 THC limit are allowed. The department did not answer the paper's questions about enforcement.
• Federal ban: A provision in last year's federal spending bill aimed at the hemp loophole in the 2018 Farm Bill is set to take effect in mid-November. Industry members told the Chronicle they expect it to be delayed.
• Medical program: The state added 12 distributor licenses for the Texas Compassionate Use Program, which the Department of Public Safety oversees.

What our records add

Hemp came up at City Hall in April. The city's plan to stop new tobacco and vape shops from opening near schools began with a May 2025 council resolution. When Austin Public Health staff presented their recommendations to the council's Public Health Committee on April 1, Council Member Ryan Alter asked whether they had considered including hemp-derived products. Staff said they had not, because hemp is not a tobacco product and the resolution asked about tobacco and nicotine.

Alter said the city could act proactively now and loosen rules later, and asked staff to be ready if the council wanted to include hemp. He also asked whether the city could treat sales to children as a public nuisance.

The city's lawyers weighed in. In an Oct. 16 report to the council, staff said the City Attorney's Office advised that the council could limit hemp sales near schools through zoning and could declare illegal sales a public nuisance, though how that would work still needs study. Our story on that report covers the proposed 1,000-foot buffer and the more than 600 existing stores that would be allowed to stay.

The city's health department has also warned about some products sold alongside hemp. Our story on the drop in opioid deaths covers the health officials' warning about concentrated kratom products.

What's next

• Mid-November: The federal hemp provision is set to take effect unless Congress delays it.
• Dec. 8: The 15th Court of Appeals hears arguments on the state's March rules.
• Fall or winter: City staff expect the tobacco buffer to go to a joint hearing of the Planning Commission and council. Whether hemp is included would be up to the council.
• January: The Texas Legislature returns. The industry sees the Nov. 3 election as decisive for that session, the Chronicle reported.