Colorado cracks down on illicit hemp cannabinoids entering the legal market. Regulators warn of public safety risks and compromised industry integrity.
In a mid-April bulletin from the Marijuana Enforcement Division, Colorado regulators announced a looming crackdown on companies selling hemp-derived cannabinoids illegally into the legal marijuana market. The agency said it had detected "regulatory compliance issues" that threatened both the public health and the health of the state's legal marijuana industry.
Those issues "present serious risks to public safety, market integrity and the tax revenue framework that supports Colorado’s regulated cannabis industry," the agency said in the bulletin.
The agency pointed in particular to the "inversion of THC and THCA products." Inversion refers to the practice of moving unregulated cannabis (whether hemp or marijuana) into the legal marijuana market and selling it as a licensed, legal product. Such products are falsely sold in legal pot shops as state law-compliant, locally grown products.
"The Division reaffirms that the inversion of THC and THCA products from outside the regulated marijuana industry is a license violation impacting public safety," the agency said. "The introduction of THC and THCA, whether hemp-derived, synthetic, or acquired from entities not licensed by the Division, into the regulated marijuana supply chain is strictly prohibited and poses a threat to public health and safety," it added in bold-face.
Colorado was the first state to legalize marijuana (beating Washington by a couple of hours back on Election Day 2012), and one of the first states to ban the sale of hemp-derived intoxicating cannabinoids. But as the Denver Gazette and ProPublica reported back in January, lawmakers and regulators failed to adopt many regulations that other states have employed to keep hemp products off marijuana dispensary shelves.
Manufacturers can convert the non-intoxicating hemp cannabinoid CBD into THC more inexpensively than growing legal marijuana, but regulators say those operations rely on toxic chemical operations. They banned such chemical synthesis out of fear chemical residues might remain in end-stage products meant for consumers.
They point to a 2024 case where investigators found that a popular brand of marijuana vapes was not only derived from hemp but also contaminated with methylene chloride, a chemical often used in the CBD-to-THC conversion process. Methylene chloride is barred by state regulators and broadly banned by the federal Environmental Protection Agency (EPA) because it is linked to liver and lung cancer and can damage the nervous, immune and reproductive systems.
The maker of those contaminated vapes, Ware Hause, surrendered its marijuana license in the wake of that investigation. It is not the only company to a pay a price for operating outside the law.
"The Division has identified and investigated evidence of inversion of cannabis from outside the regulated market, resulting in recommendations for license revocation and significant fines," the bulleting noted. "These cases often include additional indicators of noncompliance that lead to suspicion of inversion activities. Indicators include the lack of access to video surveillance recordings upon request, lack of video surveillance recordings altogether, lack of accurate tracking of source material or receipt of transfers, and the absence of valid Certificates of Analysis from a licensed testing facility. The lack of compliance with these critical regulatory requirements may create challenges with the Division’s ability to directly prove inversion. However, it provides evidence of licensee efforts to conceal such activity, for which the Division will pursue similar enforcement against licensees.
During its 2025 rulemaking process, the Division modified testing requirements to better identify the introduction of illicit inputs. The Division is also exploring additional modifications to its testing and screening protocols to detect the presence of inverted THC products, as well as directing additional lab testing of products throughout the supply chain as needed," the agency warned. "Any licensee and the employees of any licensee found to be introducing inverted THC or THCA products into the regulated market will be subject to immediate product embargo, and recommendations for license suspension or revocation, significant fines, and referral to law enforcement," the agency emphasized in bold-face.
And there could be more to come. The agency warned in may adopt "new and/or amended regulations and supplemental bulletins designed to promote compliance in the regulated market and ensure clarity on the consequences of violations."
This latest move by the Marijuana Enforcement Division came after marijuana industry representatives met with regulators in March to push for a tougher response to inverted hemp sneaking into the legal marijuana market. They complained that "bad actors" are unfairly driving down prices.