The Economic Toll of SB 3: How Restrictive Hemp Legislation Could Devastate Texas’ Economy

Texas, as the state anthem says, is “supremely blessed“ as the nation’s second largest economy—in the top ten in the world if it were considered an independent nation surpassing nations like Canada and Russia, with businesses relocations and startups benefitting from low taxes and regulations, economic miracles happen here every day.

 

But, With Senate Bill 3 (SB 3) looming on the legislative horizon, the fate of thousands of businesses, tens of thousands of jobs, and billions of dollars in economic activity hang in the balance. According to a recent report by Whitney Economics, the proposed restrictions on hemp-derived cannabinoids would not only cripple the state’s booming hemp industry but also trigger a chain reaction of economic downturns that would reverberate throughout Texas.

 The Numbers Speak Volumes

The hemp-derived cannabinoid market in Texas is no small enterprise. It generates an estimated $5.5 billion in revenue annually, with retail sales alone contributing $4.3 billion. The overall economic impact of the industry, when factoring in supply chains and related economic activity, is pegged at a staggering $10.2 billion. In addition, the industry provides over 53,000 jobs, paying out $2.1 billion in wages and contributing $267.7 million in state sales tax revenue.

These figures highlight the significant role hemp plays in the state’s economy. Unlike traditional cannabis markets, hemp-derived cannabinoids operate under legal protections established by the 2018 Farm Bill, allowing Texas businesses to engage in interstate commerce. This has led to thriving local supply chains, with most Texas hemp businesses sourcing materials from multiple states while prioritizing in-state suppliers.

 

What SB 3 Would Mean for Texas

If SB 3 is enacted in its current form, the consequences would be severe:

 

6,350 businesses would be forced to close, including retailers, wholesalers, and manufacturers

40,201 workers would lose their jobs, leading to $1.6 billion in lost wages .

A $10.2 billion decline in economic activity, affecting not just hemp businesses but adjacent industries, including agriculture, packaging, and distribution.

A loss of $267.7 million in annual sales tax revenue, directly impacting Texas’ ability to fund essential services.

The bill would effectively outlaw or heavily restrict many of the most popular hemp-derived cannabinoid products, such as CBD, Delta-8 THC, and Delta-9 THC derived from hemp. These products have been a lifeline for many businesses, particularly as consumer demand for alternative wellness products continues to grow.

 

Public Safety vs. Economic Stability: The False Choice

Proponents of SB 3 argue that stricter regulations are needed to address public safety concerns related to hemp-derived cannabinoids. However, the FDA has stated publicly that there is no public safety crisis justifying the outright banning of converted cannabinoids. While concerns about youth access and product consistency are valid, these can be addressed through targeted regulations rather than blanket prohibitions.

The unintended consequences of prohibition-based approaches have already played out in other states. In Oregon, for example, legislative overreach in hemp restrictions led to a $50-75 million annual loss in CBD processor revenues and a disrupted supply chain that impacted multiple industries. Similar legislation in Colorado would have wiped out an estimated $500 million per year in product manufacturing sales had it not been reconsidered.

 

 A Call for Common-Sense Regulation

Rather than stifling an industry that is generating billions in revenue and supporting tens of thousands of Texas jobs, lawmakers should consider alternative approaches:

 

Implementing clear, standardized regulations for product testing, labeling, and age restrictions.

Establishing a regulatory framework that ensures consumer safety while allowing businesses to continue operating.

Working with industry stakeholders to develop practical policies that balance economic growth with public health concerns.

 

Texas has an opportunity to be a leader in the hemp industry rather than a cautionary tale of regulatory overreach. By choosing sensible regulation over prohibition, the state can continue reaping the economic benefits of hemp while addressing legitimate safety concerns.

 

 

The Bottom Line

SB 3, if passed as currently written, would decimate an industry that has become a cornerstone of Texas’ economy. The loss of jobs, tax revenue, and economic opportunity would far outweigh any perceived public safety benefits. As Texas lawmakers deliberate on the future of hemp-derived cannabinoids, they must consider the real-world economic consequences of their decisions.

 

For Texas to remain an economic powerhouse, the path forward must be one of regulation, not eradication.