COLORADO – On Friday April 12th, the Marijuana Enforcement Division (MED) released a Notice informing the industry of “multiple allegations” of licensees illegally bringing hemp derived THC distillate into the regulated market. While there are few details due to this being an ongoing investigation, the Marijuana Industry Group (MIG) commends the MED for taking swift action to protect public safety and preserve the integrity of the regulated marijuana industry.
Truman Bradley, Executive Director of MIG, had this to say, “MIG members are delighted to hear the news. Regulation doesn’t guarantee the absence of bad actors; it does however, provide a means to catch the small percentage of businesses breaking the law. This protects both consumers as well as businesses who play by the rules. Investigations like this prove that a regulated model works.”
Loss of Tax Revenue
This illegal activity also hurts state tax collection and the schools and programs that rely on marijuana tax dollars. Bringing distillate into the market means that the bad actors deliberately circumvent paying the 15% marijuana excise tax. In FY 2021 – 2022 the state collected $120M in excise tax + $288M in marijuana sales tax. For revenue year 2023, the state collected $52.2M in excise tax + $220M in sales tax, a loss of $135M in one year.
Industry Harm
“It’s no secret that the Colorado cannabis industry has fallen on hard times. Any subversion of the legal market punishes all of the small businesses who pay their taxes and meticulously follow the rules. There are certainly other factors that have contributed to the downturn, but at least some of the collapse of the wholesale market may have been caused by bad actors essentially laundering THC.” – Tiffany Goldman, Board Chair, Marijuana Industry Group
Background
Distillate is the refined oil made from marijuana and/or hemp plants. The vast majority of cannabis edibles, vapes, tinctures, and topicals are made from distillate. Unlike oil distilled naturally from marijuana plants, chemists working outside the regulated marijuana market have developed a way to chemically convert hemp derived CBD distillate into THC distillate. That process is potentially harmful to consumers and is illegal to sell in Colorado.
Conclusion
As Colorado was the first state to regulate cannabis, some of the rules and enforcement areas need a fresh look. This is a great example of the enforcement areas that a regulatory body should be focusing on, especially in mature states. While the MED may have been created to prevent diversion from the regulated industry to other (non-legal) states, it’s equally important to make sure that no cannabis comes into the regulated market from illicit sources, especially products that can harm consumers.
