Colorado Marijuana Regulators Admit Illegal Hemp Sales Surpassing Reports

illegal hemp – In a private March meeting reviewed by Denver Gazette and ProPublica, Colorado’s top marijuana enforcement officials acknowledged the scale of chemically converted hemp being sold as marijuana is far larger than the agency has publicly disclosed. Regulators wa

Colorado marijuana regulators told industry representatives in a private meeting that the amount of chemically converted hemp being sold as marijuana is bigger than the state has admitted—and that the system designed to catch diversion and fraud is not working the way lawmakers and consumers were promised.

The admission came during a virtual audio meeting convened in March by Colorado Leads. a marijuana industry trade group. to discuss a problem regulators and businesses describe as having “metastasized.” An audio recording reviewed by the Denver Gazette and ProPublica captured Kyle Lambert. the Marijuana Enforcement Division’s deputy senior director. describing the scope of banned hemp in products sold in Colorado dispensaries.

Lambert said the number of hemp-derived products is “larger than we can quantify.” He told the group the agency feared banned hemp was driving down the price of Colorado marijuana and helping facilitate the diversion of higher-grade marijuana out of the state and into the black market in other states.

He also warned that anomalies in Colorado’s “seed-to-sale” tracking system mean enforcement actions are constrained by unreliable information.. “There’s a lot of really crap data in there that is hard for us to proactively go take action on. ” Lambert said. describing a tool meant to trace marijuana from planting to purchase that. in his view. has become too noisy to police effectively.

The meeting’s message aligns with testing and reporting that the Denver Gazette and ProPublica said found signs of hemp in marijuana vapes sold at dispensaries. The outlets also reported that some hemp-derived vapes were contaminated with a toxic chemical.

Two weeks after the March meeting. the Marijuana Enforcement Division sent a bulletin to industry saying it plans to crack down on companies that illegally sell cheaper and potentially hazardous hemp products as marijuana and that it would pursue emergency rules.. But the enforcement and rulemaking efforts have not yet materialized, and other proposed reforms failed during Colorado’s legislative session.

Colorado lawmakers, who were not present at the March briefing, abandoned a bill that would have put the question of overhauling how marijuana products are tested for contaminants before voters. Investigators found other states adopted stronger safety measures.

In a statement. Marijuana Enforcement Division senior director Dominique Mendiola said the agency has “consistently been proactive in pursuing the necessary rules. legislation and authority to combat this issue.” She added that Lambert was speaking “frankly to highlight the scale and complexity of the problem. ” and that “nominal-dollar transactions do not amount to definitive evidence of non-compliance.” Mendiola said investigations into such transactions require extensive resources and can take significant time.

For industry representatives, the concern is both public safety and market survival.. Jordan Wellington. a marijuana industry lobbyist and consultant. told Lambert and a four-person investigative team that handles the division’s most difficult cases that the substitution of hemp for marijuana has become widespread.

“This has become pervasive to where it’s, like, half the market,” Wellington said. “We’re past Stage 1 cancer of it being, like, one spot. It’s fully metastasized.” He described “rampant” use of hemp and other illicit material as pressure on legitimate manufacturers to cut corners.

Wellington called it “the most important and existential threat we’ve ever faced as an industry.”

The substitution problem traces back to 2018. when Congress legalized hemp—a cousin of marijuana that contains only trace amounts of THC. the compound that produces intoxication.. Federal lawmakers hoped the move would help farmers while also meeting advocates’ arguments that hemp-derived CBD can help with seizures. pain and sleep.

But manufacturers learned to convert CBD into THC using a process that involves toxic solvents.. The resulting products can contain harmful chemicals and can be more potent than THC made from marijuana.. Colorado responded by banning the chemical conversion process and prohibiting the sale of intoxicating hemp products to residents.. Yet manufacturers were allowed to produce hemp products for export to other states. and some companies continued to use hemp inside Colorado because it is cheaper than producing the honey-colored THC distillate used in vapes and edibles.

During the March call. Lambert suggested the state’s tracking system is not equipped to expose the fraud fast enough. and he said the division lacks the resources for deeper surveillance.. The enforcement division employs 26 investigators to monitor roughly 2,100 marijuana businesses, he said, and cannot investigate every questionable case.

“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.”

Lambert also described how reporting strategies appear to undermine tax collection.. He said extensive fraud in sales transaction reporting likely means the state has lost millions of dollars in marijuana excise tax revenue while compliant businesses paid more than their fair share.. Unprocessed marijuana can fetch more than $600 a pound on the open market. Lambert said. depending on the category. but manufacturers often report nominal sales as low as a penny or a dollar a pound.. When pressed, Lambert said businesses typically defended those valuations by saying they had submitted placeholder numbers while still negotiating prices.

A proposed overhaul aimed at cleaning up testing and sampling was introduced after the March meeting.. In April, state Sens.. Kyle Mullica, D-Thornton, and Marc Snyder, D–Colorado Springs, introduced the Cannabis Consumer Protection Act.. The measure would have placed a ballot question before voters this fall to overhaul how marijuana products are tested for contaminants.

Under the bill, private labs would collect marijuana samples for testing required before products reach dispensaries.. Currently. manufacturers select their own samples—an arrangement regulators say companies have exploited by substituting samples that did not match what is sold or by treating samples with chemicals.

The act would also have shifted oversight of safety and testing from the Marijuana Enforcement Division to the Colorado Department of Public Health and Environment, and it would have funded a program in which regulators would randomly collect products from dispensaries to test them for contaminants.

But the legislation collapsed as different segments of the marijuana industry clashed over a provision that would have increased taxes on products with higher levels of THC.. Manufacturers of highly concentrated THC products argued the potency tax would cut into profits while lowering costs for manufacturers of edibles like gummies.. Consumer safety groups. according to the bill’s political opponents. were not satisfied and pushed for a strict cap on potency like Vermont has.

The main industry trade group opposed the measure, and Gov. Jared Polis, through a spokesperson, said he feared the bill would cause too much regulation.

Snyder, a cosponsor of Senate Bill 26-161, said he plans to revisit the issue in the 2027 legislative session. He said he hoped to give regulators more tools to tackle fraud.

“One of the problems in being first, like Colorado was, into the legalizing of cannabis,” Snyder said, “is that you have to learn all the unintended consequences and unforeseen outcomes the hard way.”

Colorado marijuana Marijuana Enforcement Division illegal hemp seed-to-sale tracking hemp-derived THC contaminated vapes Kyle Lambert Dominique Mendiola Cannabis Consumer Protection Act Marc Snyder Kyle Mullica Jared Polis