Colorado Marijuana Official Acknowledges Illegal Hemp Products in Licensed Market Are Far More Widespread Than Publicly Known
- Colorado’s Marijuana Enforcement Division (MED) acknowledges that illegal hemp-derived THC products in the state's licensed marijuana system are far more widespread than publicly reported, with volumes "larger than we can quantify."
- Chemically converted hemp-derived THC products, often cheaper than marijuana-derived THC, are being used illicitly in vapes and edibles, creating unfair competition and a major challenge for regulators.
- MED struggles to enforce regulations effectively due to unreliable seed-to-sale tracking data, limited investigative resources, and a regulatory gray area allowing hemp product manufacturing for export.
- Efforts to strengthen oversight, including emergency rules and legislative reforms like the failed Cannabis Consumer Protection Act, have stalled, with plans to revisit regulation proposed for 2027.
An official with Colorado’s Marijuana Enforcement Division (MED) has privately acknowledged that illegal hemp-derived products being sold through the state’s licensed marijuana system appear to be far more widespread than regulators have publicly detailed.
During a recent virtual meeting with representatives from Colorado Leads, a marijuana industry trade group, Kyle Lambert, deputy senior director of MED, said the volume of hemp-derived products showing up in the marijuana system is “larger than we can quantify”, reports ProPublica.
The discussion centered on chemically converted hemp-derived THC products, which industry officials say are being used in place of marijuana-derived THC in some vapes, edibles and other manufactured products sold through licensed dispensaries. Because hemp is often cheaper than marijuana, businesses using it illegally could gain a major price advantage over companies following state law.
Lambert also raised concerns about suspicious entries in Colorado’s seed-to-sale tracking system, telling industry representatives that the scope of unusual transactions “would probably explode your minds.”
Colorado legalized recreational marijuana in 2012 and launched sales in 2014, building one of the nation’s first regulated systems for tracking marijuana from cultivation to retail sale. The system was designed to prevent diversion, protect consumers and ensure products sold at dispensaries were made with legal, tested marijuana.
But regulators told industry representatives that unreliable data in the tracking system has made enforcement more difficult. Some transactions have reportedly listed unprocessed marijuana at unrealistically low values, including a penny or $1 per pound, despite marijuana generally being worth hundreds of dollars per pound on the open market.
Lambert said the agency lacks the resources to fully investigate every suspicious transaction. The Marijuana Enforcement Division has 26 investigators responsible for monitoring roughly 2,100 marijuana businesses.
“We’d love to set up, you know, surveillance on places and track vehicles and see where they come from,” Lambert said. “Did they come from a hemp plant? Did it come from here? Where did it go? We’re not resourced or equipped to do those types of investigations.”
The issue stems in part from the 2018 federal legalization of hemp, which led to the growth of a national market for hemp-derived cannabinoids. Some manufacturers chemically convert cannabidiol (CBD) from hemp into THC, a process that can involve toxic solvents and may leave behind harmful contaminants when not properly regulated.
Colorado has banned the chemical conversion of hemp for products sold in the state, as well as the sale of intoxicating hemp products to residents. However, companies are still allowed to manufacture hemp products in Colorado for export, creating a regulatory gray area that industry officials say has been exploited.
Jordan Wellington, a marijuana industry lobbyist and consultant, told regulators during the meeting that the problem has become widespread.
“This has become pervasive to where it’s, like, half the market,” Wellington said.
He said the use of illicit hemp material has placed pressure on licensed marijuana businesses that follow state rules, calling it “the most important and existential threat we’ve ever faced as an industry.”
Two weeks after the meeting, the Marijuana Enforcement Division told businesses it planned to crack down on companies selling illegal hemp products as marijuana and pursue emergency rules. Those rules have not yet been adopted.
A separate legislative effort to overhaul marijuana testing also failed this year. The Cannabis Consumer Protection Act, filed by State Senator Kyle Mullica (D) and State Senator Marc Snyder (D), would have placed a proposed testing overhaul before voters. The proposal would have changed how marijuana samples are collected for testing and funded a program allowing regulators to randomly test products from dispensaries.
The bill collapsed after disputes over a proposed tax increase on high-THC products and opposition from parts of the marijuana industry. Governor Jared Polis also raised concerns that the measure could create too much regulation.
Snyder said he plans to revisit the issue during the 2027 legislative session.