Texas Pulls Cresco Labs’ Medical Cannabis License After Scoring Error

The Texas Department of Public Safety has rescinded a conditional medical cannabis license it awarded to Cresco Labs six weeks ago, after the agency acknowledged it applied the wrong scoring formula when ranking applicants for the state’s expanded medical program.

The reversal, announced by DPS on May 8, 2026, stems from a tabulation error in the competitive selection process for the 12 new licenses authorized under a 2025 state law. Cresco Labs Texas LLC is among three companies that lost their conditional awards — and now sits on a backup eligibility list that offers a conditional path to future entry, on no specific timeline.

How the scoring error developed

Texas’s Compassionate Use Program has operated since 2015, allowing licensed dispensing organizations to cultivate, process and sell low-THC cannabis preparations to patients with qualifying medical conditions. For most of the program’s existence, only three companies held licenses. A 2025 state law signed by Governor Greg Abbott directed DPS to add 12 new dispensaries and broadened qualifying conditions — adding chronic pain, traumatic brain injury, inflammatory bowel disease and others — while replacing the old 1-percent THC cap with a per-dose limit.

DPS ran a competitive two-phase selection process. Nine conditional licenses went out in December 2025; three more followed on April 1, 2026, including one to Cresco Labs Texas LLC, assigned to Public Health Region 5.

The problem surfaced after DPS publicly posted applicant score sheets following the April announcement. In August 2025, the agency had published a scoring framework telling applicants that each of four evaluation categories would carry equal weight — 25 percent of the total score apiece. Applicants built their submissions around that structure. When final scores were calculated, however, that equal-category weighting was not applied consistently — a discrepancy DPS acknowledged only after publicly posting the score sheets following its April announcement.

In its May 8, 2026 announcement, DPS said the most equitable course was to re-tabulate all scores using the equal-category weighting it had originally published — the standard applicants were told to expect. Individual committee member scores were not changed; only the formula aggregating them was corrected. Under the revised tabulation, three companies that had not been selected now qualify for conditional licenses. Three that previously held conditional awards, including Cresco Labs, had those awards pulled.

Cresco’s position and what comes next

Cresco Labs is a Chicago-based multi-state operator that runs dispensaries under the Sunnyside brand across eight states. The company disclosed the rescission in a statement on May 11, 2026, calling the original DPS award a reflection of its application’s merits and saying it is evaluating its options to work with the state to protect that original determination.

CEO Charlie Bachtell said the company remains committed to Texas and believes its application should have led to licensure.

“We remain confident in our application’s merits, reflected in the Department’s original award,” Bachtell said. “Cresco Labs has the operational capability, capital position and patient-centered approach to bring Texas patients the high-quality medicine they deserve.”

Cresco Labs Texas LLC has been placed on the TCUP eligibility list — a backup pool DPS maintains under the program’s governing law. Under that law, if any of the 12 conditional licensees fails to fully operationalize within 24 months of receiving final approval, DPS turns to the eligibility list for a replacement. That path exists by design, but it carries no timeline and no priority claim over other companies on the list.

Whether Cresco pursues administrative review or a legal challenge to the corrected tabulation methodology is not yet clear. The company said it continues to engage with DPS, leaving open the possibility of a formal challenge.

Stakes in a closed and restricted market

The DPS error illustrates a recurring vulnerability in competitive licensing for restricted medical cannabis programs. Because Texas caps the total number of dispensing organizations at 15 — three original licensees plus the 12 new ones authorized under the 2025 expansion — each conditional award carries substantial market value. Companies that receive conditional awards routinely begin mobilizing capital and operational planning before final approval issues. Cresco Labs held only a conditional license position and could not yet cultivate, manufacture or sell anything in Texas, but it would nonetheless have been planning its entry from April 1 onward. Six weeks of that planning is now disrupted.

Texas’s medical program remains one of the most restrictive in the country. The state has no adult-use market, and the expansion still closes the sector to any entrant beyond the 15 authorized licensees. For companies that had positioned themselves for entry, a spot on the eligibility list is not equivalent to holding a conditional license.

Texas is managing regulatory friction on multiple fronts in its cannabis sector this year, with a separate legal challenge to state health department rules on THC testing methodology for hemp products working through the courts. All 12 corrected conditional TCUP licensees remain subject to DPS due diligence review of financial suitability, disciplinary history and litigation records before final licenses issue. The program’s first new dispensary openings remain months away at minimum.