Happy Clouds is one of the best all-around smoke shops in Austin: fair prices, a wide-ranging inventory, and a friendly atmosphere. My favorite thing about it, though, is the logo: a big, puffy cumulus cloud with an arching smile and eyes that are the perfect pink. It is a seriously lovable cloud – one that you want to give a high-five to… if it had arms.
So I’m unsurprised to learn that the owner of Happy Clouds Smoke Shop had once been the president of the Fine Arts Student Council at the University of Texas and graduated with a 4.0 GPA. Zack Smith remembers asking his college advisor what his first post-art-school career move should be and being told to work at a gallery, but a $10-an-hour job wasn’t a financially realistic option for the local kid with a lot of student loans. So Smith took a gamble and took on the lease of a run-down smoke shop on Montopolis Drive.
A decade later, Happy Clouds has six locations and close to 30 employees.
“It’s been a journey,” Smith says, in his decidedly chilled-out inflection.
When Happy Clouds opened, it just sold glass and grinders and products associated with the cannabis culture, but the 2018 Farm Bill’s passage opened the door for a variety of profitable hemp products – first CBD, then Delta 8 THC, and ultimately the immensely popular THCA. A new legislative effort – Senate Bill 3, touted by Lt. Gov. Dan Patrick and sponsored by Sen. Charles Perry – now seeks to ban all forms of THC in Texas.
“We have tons of people coming in every day to buy a preroll, sometimes three times a day, so we’ve seen a huge ramp up in our business,” reports Smith. “We’ve been able to grow from all the THCA sales and open a new location this year on Guadalupe Street near campus and give raises and great bonuses to our employees at the end of the year. If a ban on THC was passed, it would be a tremendous blow to us because it would literally be about a 50% cut in sales.”
Smith says his business undergoes inspections from multiple state departments and goes over and above what’s required to retail safe, quality hemp products. Their best-selling product is Happy Clouds branded hemp flower that has been full panel lab tested; they also recently rolled out a hash rosin, which Smith painstakingly sourced and ensured for legal compliance.
“So while I’m over here seeing what kind of products I can make, this could all end in a couple months,” Smith says. “Happy Clouds would probably survive a THC ban because we’re pretty diversified and beloved in the community, but think about all the businesses that opened up more recently or ones where THCA is their entire business – they’re not going to make it and they’re still going to be on the hook for a lease.”
Nicholas Mortillaro, a cannabis business consultant and president of the Austin Charter for Hemp Industry Leaders of Texas, expects to see thousands of empty storefronts if SB 3 passes.
“I think a lot of operators are going to go bankrupt and it’s not only going to affect those small businesses, but property developers,” Mortillaro predicts. “Some of the government leadership in Texas are going to realize how big of a mistake this is when they get blowback from the owners of large commercial real estate whose bottom line will be impacted by those bankruptcies – because it’s the only way these companies will be able to get out of their leases.”
Mortillaro – also a managing partner for the Amsterdam-style coffee shop chain Lazy Daze, which includes locations in South Austin and Pflugerville – hopes that Texas legislators will continue to support hemp’s economic growth instead of pushing sales to the illicit market. Pointing to a 2023 economic analysis by Whitney Economics, he says that the direct sale of hemp-derived cannabinoids in Texas is generating $8 billion annually and employing 50,000 people. Many of those workers come from the 7,500 licensed hemp retailers, of which he believes 5,000-7,000 are mom-and-pop stores that would be decimated by the passage of SB 3. From his perspective, President-elect Trump signed the 2018 bill to create a robust hemp industry and Texas’ business-friendly environment has helped that mission succeed.
Before becoming a partner in Lazy Daze, Mortillaro had already launched and sold a cannabis business in Massachusetts – a full adult-use state, but one with a lot of red tape that made opening such a business cost millions and take years.
“I’ve been able to build a company in Texas in half the time, for a fraction of the money,” he reveals. “It’s one of the most equal open market states in the country. I would hope that our lawmakers would embrace that and be leaders nationwide in policy rather than taking Texas backwards to be among the most restrictive markets.”
For Texas legislators who’d like to see the reality of hemp retail, Mortillaro encourages them to come down to a Lazy Daze location when session begins next week.
“They’ll see it’s not a sketchy drug den. It has an experienced staff. You have adults getting five milligrams in their coffee, opening their laptops, and going to work on a Monday,” he says. “It’s nothing crazy. The sky hasn’t fallen. There’s not kids in there. It’s actually pretty boring and normal, the same way it isn’t breaking news when someone buys a beer in a convenience store. It’s just people who want to enhance their wellness, improve their lifestyle, alleviate pain, stress, and anxiety, and go about their lives without the changing legal status of products that have shown to be safe.
“These businesses are already thriving and to take that away, when Texas is known for being a business-friendly state, I would bid them to make sure we don’t become like California,” he continues. “I would think that Lt. Gov. Patrick and Sen. Perry, being conservatives and being supportive of open capital markets, would not want that to happen. They should be proud of our history of agriculture and support the freedom of an adult’s right to choose what they put in their bodies as well as the robustly safe and regulated industry we already have here.”
This is continuing coverage of the potential impact of SB 3, a proposed ban on all THC. For background on the legislative effort, see the previous edition of The Austin Chronic.
This article appears in January 10 • 2025.