Regulators issue strict warning to cannabis companies over money transfers, security and more
- Colorado’s Marijuana Enforcement Division (MED) is actively investigating issues related to inventory tracking and hemp inversion, warning that suspicious activities such as below-market cannabis transfers and mislabeling threaten public safety and market integrity.
- Hemp inversion—illegally converting hemp-derived cannabinoids like CBD into THC—is strictly prohibited, with past enforcement including license suspensions for violators; the MED emphasizes compliance and targets bad actors to maintain a level playing field.
- Despite most cannabis operators being compliant, the MED views failures in accurate tracking, record-keeping, and surveillance as serious patterns requiring ongoing scrutiny to safeguard consumers and the industry.
- The MED conducted extensive investigations in 2023, including product safety and youth access checks, and recently updated testing requirements to detect hemp-derived contaminants, reflecting ongoing efforts to adapt enforcement to market challenges and criticisms.
Marijuana regulators are warning the industry’s cultivators, manufacturers and sellers that they will investigate any perceived issues with the state’s inventory tracking system and signs of hemp inversion — two concerns they say threaten public safety and the integrity of Colorado’s legal market.
In mid-April, the Marijuana Enforcement Division (MED) issued a bulletin outlining its enforcement priorities and, while they are not new, spokesperson Kyle Boyd said certain issues, such as inversion — using cannabinoids like THC and THCA from hemp to make regulated marijuana products — can be difficult to investigate. The bulletin puts operators on notice that regulators are monitoring inventory tracking and anything they consider suspicious activity.
That includes marijuana transfers between cultivators and manufacturers that are priced below market averages, “in some cases as low as $1,” the bulletin states; transfers that are mislabeled or misrepresented in the tracking system; and cannabis concentrate transfers from retail companies to medical ones, which regulators say constitutes an attempt to avoid paying an excise tax.
Additionally, regulators reiterated that hemp inversion is strictly prohibited. That includes any synthetically-made cannabinoids, such as CBD from hemp that has been chemically converted into THC. In 2021, the agency suspended one company’s license for three years for inverting hemp into marijuana products.
Boyd said by email that the majority of Colorado’s cannabis operators are compliant, but the division is working to identify and weed out bad actors who create an unlevel playing field, introduce public safety concerns, and drain valuable resources.
“Failure to meet basic regulatory requirements, such as accurately tracking source material, maintaining proper transfer records, or having functioning surveillance, will not be dismissed as simple oversight. Instead, we view such deficiencies as evidence of a concerning pattern and practice that warrants our continued attention,” Boyd said. “Any deviation from the standard practices a reasonable business would implement to mitigate its own legal and operational risks warrants our close attention.”
How contaminated weed gets by Colorado’s strict cannabis testing guidelines
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