Texas officials have formally adopted new rules to implement a law significantly expanding the state’s medical marijuana program.

About two months after the Department of Public Safety (DPS) posted the proposed rules—after which point a 30-day public comment period was completed—the regulations were finalized and published in the Texas Register on Friday.

This specific set of rules will increase the number of licensed dispensaries, establish security requirements for “satellite” locations and authorize the revocation of licenses for certain violations.

DPS will ultimately be issuing 12 new licenses for dispensaries across the state. Currently there are only three. The additional licensees will go through a competitive process, with officials prioritizing Texas’s public health regions to optimize access.

The first round of licenses will be awarded to nine of 139 applicants who submitted their forms during an earlier application window in 2023. DPS will select those nine licensees on December 1. The 2023 applicants that didn’t receive a license, as well as any new prospective licensees, will have another shot at getting their license during a second round where awardees will be announced on April 1, 2026.

The finalized rules also lay out security parameters for dispensaries with satellite locations approved by the department, including mandates to “designate an enclosed locked area within the satellite location where low-THC cannabis product is stored that provides reasonably adequate security against theft and diversion” as well as “designate an individual, or a limited number of individuals, with responsibility for and with the authority to enter or control entry” into those secure areas.

Additionally, they specify policies allowing regulators to revoke licenses for violations such as not having cannabis products available within 24 months of a license issuance, failing to “promptly and accurately fill prescriptions” and not “continuously” producing cannabis “in a manner consistent with the level of demand for the licensee’s product.”

DPS received two comments on the rules when they were up for public review, but no changes were made based on the feedback.

In addition to increasing the number of dispensaries in the state, the law signed by the governor also expands the state’s list of medical cannabis qualifying conditions to include chronic pain, traumatic brain injury (TBI), Crohn’s disease and other inflammatory bowel diseases, while also allowing end-of-life patients in palliative or hospice care to use marijuana.

That policy change is automatically adopted via the enacted statute, so it took effect on September 1 without further rulemaking.

Also in line with the state’s medical cannabis expansion law that Gov. Greg Abbott (R) signed, the state Health and Human Services Commission (HHSC) proposed rules last month to let physicians recommend new qualifying conditions for cannabis and to create standards for allowable inhalation devices.

—
Marijuana Moment is tracking hundreds of cannabis, psychedelics and drug policy bills in state legislatures and Congress this year. Patreon supporters pledging at least $25/month get access to our interactive maps, charts and hearing calendar so they don’t miss any developments.

Learn more about our marijuana bill tracker and become a supporter on Patreon to get access.
—

Meanwhile, Department of State Health Services (DSHS) recently adopted a set of emergency rules meant to prevent the sale of intoxicating hemp products to people under 21.

After similar restrictions were implemented by the Texas Alcoholic Beverage Commission (TABC) late last month, DSHS announced that they’ve moved forward with the policies changes that comply with the governor’s recent executive order on hemp.

Meanwhile this month, the head of the Texas Department of Agriculture (TDA) pushed back against a GOP senator’s “incorrect assertions” about the state’s regulatory compliance with federal hemp laws. But he also signaled that changes may be coming to measure “total THC” to determine the legality of hemp products in a way that some stakeholders worry could negatively impact the industry.

After the legislature failed to pass a controversial bill to ban hemp products containing THC during two special sessions following the governor’s veto of a similar measure earlier this year, Abbott signed the executive order to impose certain restrictions on the market.

Separately, a recent survey from a GOP pollster affiliated with President Donald Trump found that Texas Democratic and Republican voters are unified in their opposition to the hemp ban proposal.

Image element courtesy of AnonMoos.

Once relatively easy to break into, the cannabis industry now demands a leaner and more conservative approach to financial management, along with precise forecasting and a great deal of patience. There are inherent risks, regulatory uncertainties, and financial challenges faced by new market entrants and established operators alike. As the market continues to mature, so will your needs and approach.

Let’s take a look at some best practices for cannabis business start-ups within today’s landscape.

Structure, Build-Out, and Expectations

First, consult with your attorney and CPA regarding the type of business you’ll run in the context of the overall market. Will you be operating a cannabis dispensary or manufacturing entity? Are you a cultivator or a delivery service? Will you be vertically integrated?

While you might have a general idea of the structure for your business, financial and legal guidance on related taxation and liability can help refine your strategy to ensure the most profitable and sustainable operations.

As you map your entry into the cannabis space, you’ll first want to invest in some market analysis. Your market analysis should include research and data on market size, licensing policies of your particular municipality/state, competition, growth potential, and consumer preferences.

For retail, it should define the relevant population of your chosen market and provide insights into buying behavior for that demographic, the median household income, and the type of dispensary population growth that has occurred within a 5-, 10-, and 15-mile radius. For wholesale, consider strains, competition, and market saturation.

In addition to a market analysis, a start-up will need accurate cash flow projections, which should include revenue assumptions and financing, along with your timeline. If possible, benchmark assumptions against others in your particular market.

With the market analysis in hand, you can develop revenue projections. Consider your potential monthly purchaser base and its estimated spend. Of customer spend, what would be a realistic product breakdown? How do your intended SKUs compare with your competitors? 

Finally, build detailed expense assumptions that include everything from furniture and fixtures to staffing, advertising, construction and renovation, professional services, taxes, facility maintenance, insurance, security, IT, and utilities. Keep in mind that the most successful start-ups are taking a cautious and conservative approach to their build-outs and are properly capturing costs to ensure they meet day-to-day business obligations.

Data and KPIs

Like all businesses, cannabis operations need to consistently capture data and maintain good books. Data capture can be conducted through technologies, including your inventory tracking, point of sale, accounting, and accounts payable systems. This process can then be systematized to provide the reports and analytics you need to monitor trends on the fly.

Next, identify Key Performance Indicators, or KPIs, and track their performance along with budget to actual on a post-build-out and ongoing basis. Ask yourself, do we have a realistic forecast that we could continually reassess? Solid preoperational numbers and forecasts are critical both at the point of operation and at set milestones, such as the first six, 18, and 24 months. This helps not only to refine business strategy but also to answer your investors when asked for a realistic breakeven point.

Data is crucial during the preoperational phase because it drives accurate management assumptions. It will also be critical in managing investor expectations. Consider one seemingly simple decision for a retail operator: Do we need a 1,000- or 10,000-square-foot store?

From this, you will need to determine how much of that space would be committed to sales, which may not be tax-deductible, and to inventory storage, which may be tax-deductible. Once you decide this, you will need to determine the number of employees required to run lean yet profitable operations.

Under these circumstances, what would be your estimated build-out costs? How much would you pay for rent? What’s the timing of various cash flows? Only with accurate data could you make the right determinations and measure the success of those decisions over time.

Using your initial data markers, you can then build out scenarios that allow you to visualize various options. For instance, see how results would look assuming a high-, mid-, and low-revenue operation. Likewise, you could model results under a high-salary/low-revenue versus a low-salary/high-revenue projection, as well as model against available benchmarks.

Note that if you have multiple lines of business, some of your data points will correlate. So, a combined dispensary and delivery business, for instance, could enjoy greater efficiencies. As you build out your plan, look closely for potential opportunities.

Another area where data is essential is inventory management and your business strategy around that. Use data to determine your best-selling strains, for instance, or those offering the greatest net margin potential. Keep in mind that, while one strain might be popular with consumers, the benefits to producing it could come at a price. So, evaluate whether it works to your advantage to continue with production or pivot to a less expensive strain.

Nearly one in five middle-aged adults acknowledge consuming cannabis, according to data published in the American Journal of Preventive Medicine.

Investigators affiliated with Columbia University in New York analyzed results from the Health and Retirement Survey — a nationwide survey of older adults.

Researchers reported that 19 percent of adults aged 50 to 64, and six percent of adults over the age of 65 acknowledge having consumed cannabis products within the past 12 months. The findings are consistent with data published in July in the Journal of the American Medical Association, as well as with separate data provided by AARP, finding that rising percentages of middle-aged and older adults are consuming marijuana products.

The study’s authors also reported that 75 percent of respondents favored the use of medical cannabis, a finding that is also consistent with prior surveys, and that many older adults use cannabis therapeutically without consulting directly with their physician.

“It is not surprising that a growing percentage of adults consider cannabis to be a viable option in their later years,” NORML’s Deputy Director Paul Armentano said. “Many middle-aged and older adults struggle with pain, anxiety, restless sleep, and other conditions that cannabis products can mitigate. Many older adults are also well aware of the litany of adverse side-effects associated with available prescription drugs, like opioids or sleep aids, and they see medical cannabis as a practical and potentially safer alternative.”  

Separate survey data published last year in the Journal of Primary Care & Community Health determined that most older adults hold positive perceptions about cannabis, and several recent studies show that marijuana use is frequently associated with quality of life improvements among seniors.  

An abstract of the study, “Epidemiology of cannabis use among middle-aged and older adults in the United States,” appears in the American Journal of Preventive Medicine. Additional information is available from the NORML Fact Sheet, ‘Cannabis Use by Older Populations.’