A senior official within Colorado’s Marijuana Enforcement Division (MED) has privately acknowledged that the state’s illegal hemp market is significantly larger than publicly disclosed, posing an “existential threat” to the regulated cannabis industry. Kyle Lambert, the MED’s deputy senior director, stated in a March meeting with industry representatives that the volume of chemically converted hemp products being sold as marijuana is “larger than we can quantify.” This assessment aligns with testing conducted by The Denver Gazette and ProPublica, which found evidence of hemp in marijuana vapes sold through licensed dispensaries.
The Scale of Hemp Diversion and Market Impact
The issue stems from the 2018 federal legalization of industrial hemp, which contains only trace amounts of tetrahydrocannabinol (THC). While federal lawmakers aimed to support agriculture and provide access to non-intoxicating cannabidiol (CBD), manufacturers subsequently developed methods to chemically convert CBD from hemp into intoxicating THC using toxic solvents. These converted products can be more potent than traditional marijuana and may contain harmful chemicals.
Colorado was among the first states to prohibit the in-state sale of intoxicating hemp products derived from chemical conversion. However, manufacturers are permitted to produce these products for export. Industry insiders indicate that some companies within Colorado continue to use cheaper hemp-derived distillates instead of marijuana to produce vapes and edibles. During the private meeting, Jordan Wellington, a marijuana industry lobbyist, described the situation as having “fully metastasized,” suggesting it affects approximately half of the market. He asserted that the widespread use of hemp and other illicit materials pressures compliant manufacturers to compromise standards, representing a significant threat to the industry’s integrity.
Regulatory Oversight and Enforcement Challenges
Colorado’s “seed-to-sale” tracking system, designed to monitor marijuana production and sales from cultivation to retail, was intended to prevent diversion and ensure product safety. However, MED regulators conceded during the March meeting that this system is not effectively deterring fraud. Lambert noted that the extent of suspicious transactions in the system “would probably explode your minds,” indicating substantial data anomalies that hinder proactive enforcement.
The alleged widespread fraud in sales transaction reporting is also believed to result in millions of dollars in lost marijuana excise tax revenue for the state. Manufacturers have reportedly declared nominal sales prices, sometimes as low as a penny or a dollar per pound for unprocessed marijuana, which can otherwise fetch over $600 per pound on the open market. The MED, with 26 investigators overseeing approximately 2,100 marijuana businesses, faces resource limitations in adequately investigating these cases.
Legislative Efforts and Roadblocks
Following the internal discussions, the MED issued a bulletin indicating plans to address companies illegally selling hemp products as marijuana and to pursue emergency rules. However, these rules have not yet been implemented, and broader reform efforts failed during the recent legislative session.
In April, state Senators Kyle Mullica and Marc Snyder introduced the Cannabis Consumer Protection Act (Senate Bill 26-161). This bill proposed a ballot measure to overhaul marijuana product testing, aligning Colorado with other states by:
- Mandating private laboratories to collect marijuana samples for pre-market testing.
- Shifting oversight of safety and testing from the Marijuana Enforcement Division to the Colorado Department of Public Health and Environment.
- Funding a program for regulators to randomly collect and test marijuana products from dispensaries.
The legislation ultimately failed due to internal industry disagreements over a proposed potency tax on highly concentrated THC products, as well as dissatisfaction from consumer safety groups who advocated for stricter potency caps. Governor Jared Polis also expressed concerns about potential over-regulation. Senator Snyder has indicated an intention to revisit the issue in the 2027 legislative session, aiming to provide regulators with enhanced tools to combat fraud within the regulated market.
Disclaimer: This article is for informational purposes only and does not constitute medical advice. Hemp Gazette does not provide medical recommendations, diagnoses, or treatment plans. Always consult a qualified healthcare practitioner before making any decisions regarding your health or any medical condition. Statements concerning the therapeutic uses of hemp, cannabis, or cannabinoid-derived products have not been evaluated by Australia’s Therapeutic Goods Administration (TGA). Medicinal cannabis products in Australia are accessed via prescription pathways under TGA regulation.
