Nevada is the latest state to crack down on marijuana testing labs in yet another example of the cannabis industry’s increasing awareness of problems related to potency and contaminant testing.
Nevada’s Cannabis Compliance Board (CCB) rejected a motion in late September to dismiss a disciplinary action against Las Vegas-based testing lab Lettucetest, formerly known as Cannex Nevada.
Lettucetest faces the possibility of tens of thousands of dollars in fines, a loss of its license as well as a 10-year industry suspension over allegations it falsely boosted THC potency numbers and allowed contaminated products to pass muster.
“The Nevada Cannabis Compliance Board is taking a bold, yet proper, step in finalizing its proceedings by calling (Lettucetest) forward for a hearing on the charges that were levied against them in 2021,” Will Adler, director of the Reno-based Sierra Cannabis Coalition (SCC), told MJBizDaily via email.
A lawyer representing Lettucetest argues the company has taken steps to fix the problems and that the case should be dismissed.
Nevada’s regulatory crackdown comes as testing labs around the nation confront growing allegations of inflating THC potency numbers, allowing bad product through, and marijuana businesses shopping around for favorable lab results.
Over the summer, Florida regulators targeted several testing labs for compliance violations.
And in July, three medical marijuana patients in Arkansas filed a federal civil lawsuit alleging that four local MMJ companies conspired to defraud customers by lying about cannabis potency testing results.
In particular, the class action lawsuit alleges that a prominent state cannabis testing lab “intentionally inflates the amount of THC in its customer’s flower” on behalf of at least three growers also named as defendants.
Lettucetest next steps
According to Adler of the SCC, Nevada’s cannabis testing regulations are “old” and have not really been updated since the state’s medical marijuana market launched in 2015.
“Coincidentally, this same lack of any substantial update to Nevada’s testing regulations has created regulatory consistency for cannabis lab testing and probably gave the CCB the confidence to follow through on the Nevada Department of Taxation’s previous investigation and ultimate charges against (Lettucetest),” he said.
What’s next for Lettucetest?
That remains unclear, as the state must sign a written order on the motion to dismiss.
Once it does, that will set a date for the adjudication of the disciplinary matter.
Before the Nevada compliance board’s 2021 complaint, which put this case in motion, the state had fined the company twice.
Now regulators want to fine the company $62,500 in addition to the 10-year industry ban.
When the CCB began its investigation, it said it uncovered a pattern of systemic violations.
For example, when a sample would fail a test for contaminants, the lab would retest it and say the sample passed, regulators allege.
State inspectors also said they found more than a dozen alleged violations involving inflated THC potency numbers.
At the Sept. 15 special board meeting about this case, Kimberly Maxson-Rushton, a partner in the Las Vegas office of Cooper Levenson, arguing on behalf of Lettucetest, said it was important to note the allegations date to 2019.
She added that “each of the allegations were remedied by the respondents, either at the time of the 2019 audit, investigation or inspection or immediately thereafter upon the receipt of a statement of deficiencies from the marijuana enforcement board.”
Maxson-Rushton then went on to argue that the board should dismiss the case because the complaint was the same as what was already corrected.
The date for the next hearing has not been set.
Bubbling up
Jim MacRae, who runs a data-analytics firm in Seattle and has close working knowledge of the Nevada market, said he considers the issue of bogus testing results to be “fairly massive consumer fraud” nationwide.
“A lot of people are profiting from it,” said MacRae, who in 2019 conducted an independent analysis of Nevada’s testing-lab sector.
In addition, MacRae said he sees this issue as potentially compromising the marijuana industry from a consumer-safety standpoint.
When companies lie about test results – which MacRae chooses to define as cannabinoid content rather than potency – it becomes a public health issue, he said.
A beer drinker can tell the difference between a 4.5%-alcohol beer and a 6%-alcohol beer, MacRae said, and calibrate their drinking accordingly.
But someone getting cannabis flower that’s labeled 30% THC that’s really 18% THC, or vice versa, has a hard time figuring out what works for them when they’re consuming.
“People should … learn how to moderate their intake appropriately and accurately,” MacRae added.
Given that Nevada is a tourist destination, he added that consumers want their casino tables to be fair, as they should with their marijuana labels.
To fix this problem, MacRae suggests that state regulators should pay close attention to internal information detailing how labs passing and failing businesses.
If, for example, a lab has a very low rate of failures, that’s worth investigating.
“Look at your damn data,” he said.
Another option that is often floated – but hasn’t won widespread industry support – is for states to run their own testing labs to audit test results.
MacRae agreed that could be a viable option.
“There’s absolutely a need for some sort of independent laboratory that’s under (the state’s) control but has no financial interest in the market,” he said.
MacRae also pointed to the success of a program in his home state of Washington, OK Cannabis, under which marijuana retailers self-test products for pesticides and other toxins.
Each participating retailer spends its own money to randomly pull five products off its shelves to test each month.
If a product fails, it’s removed and another product from that company is tested.
If the second test comes back “hot,” all the company’s products are taken off the sales floor and the product provider must pay to show clean test results for all its merchandise for the next six months.
The program disrupted the industry in the state, particularly for extractors and product makers.
“There was a qualitative change in how the industry was doing things,” MacRae said. “Because now, suddenly, someone was looking.”
Bart Schaneman can be reached at bart.schaneman@mjbizdaily.com.
