Colorado cannabis regulators promise crackdown on hemp THC inversion

Colorado cannabis regulators vowed Monday to take strong action against the illegal practice of introducing hemp-derived THC into the state’s $1.1 billion regulated cannabis market.

The official acknowledgment and promise to act comes after years of criticism and mounting evidence of regulatory gaps that have allowed the practice, known as inversion, to persist.

The MED cited “serious risks to public safety, market integrity and tax revenue” as reasons for the crackdown, and pledged to punish malefactors by suspending or revoking licenses, issuing fines, or referring them to law enforcement.

Is inverted THC a public safety concern?

Allegations of inversion have plagued Colorado’s cannabis market for years.

By chemically converting hemp-derived CBD into THC, manufacturers can produce cheaper distillates for vapes and edibles, often using hazardous chemicals like methylene chloride.

And by using hemp biomass from other states to extract into THC oil, producers can acquire cheaper source product that evades safety standards.

The practice undermines public safety and creates an uneven playing field for compliant operators.

Despite MED’s recent commitment, critics say the agency has been slow to act.

Investigations by ProPublica and The Denver Gazette revealed that regulatory gaps have allowed hemp-derived THC to infiltrate cannabis store shelves, even after Colorado banned intoxicating hemp products.

They also revealed certain telltale signs of illegal conversion that can be revealed through lab testing.

A 2024 case involving contaminated vapes highlighted the dangers, with products found to contain methylene chloride, a chemical linked to cancer and other health risks.

What are Colorado cannabis regulators doing about inversion?

According to the bulletin, MED plans to pursue emergency rules, including updates to its cannabis testing protocols to “detect the presence of inverted THC products” and banned manufacturing methods.

Regulators will also step up enforcement and increase scrutiny of transfers recorded in state track-and-trace databases.

Activity that could be indicative of inversion that will be flagged includes:

• Suspicious transfers between licensees: Cultivators and manufacturers reporting transfers for as little as $1, or miscategorizing transfers to hide “the actual transfer that occurred.”
• Licensees reporting transfers or yields “that exceed typical market activity, a licensee’s historical outputs, or expected outputs from material typically considered waste.”
• Inversion of hemp-derived THC and THCA products, “whether hemp-derived, synthetic, or acquired from entities not licensed” by Colorado regulators. Signs of noncompliance include lack of video surveillance recordings, certificates of analysis, or receipts of transfer.

Such gaps in evidence “may create challenges with the Division’s ability to directly prove inversion,” MED’s bulletin read in part.

“However, it provides evidence of licensee efforts to conceal such activity, for which the Division will pursue similar enforcement against licensees.”

Is inversion costing the state tax revenue?

The MED’s inaction has led to lawsuits from Colorado operators upset with a perceived lack of action.

Last year, Colorado cultivator Mammoth Farms filed a lawsuit alleging that the agency failed to address inversion, costing the state millions in lost tax revenue.

A judge declined to impose new requirements on the MED. The lawsuit was dismissed last year.

Mammoth CEO Justin Trouard claimed that regulators were unable or unwilling to thwart what he alleged was the “blueprint for laundering marijuana” into regulated sales channels.

Specifically, Trouard identified suspicious transfers between licensees as one inversion method.