California cannabis regulators’ fraud case against testing lab unravels

California cannabis regulators failed to prove accusations of THC potency inflation and fraudulent pesticide and mold testing brought against a prominent commercial cannabis lab whose license they suspended in April 2025, an administrative law judge found late last month.

But despite the unraveling of the state Department of Cannabis Control’s case against BelCosta Labs – and the judge’s finding that the agency’s actions were  “unduly punitive” – the business remains closed and will likely never reopen, BelCosta CEO Myron Ronay told MJBizDaily.

In the meantime, the DCC’s handling of the case, one of the most high-profile examples of a state cannabis regulator cracking down on an allegedly unscrupulous testing lab, is fueling doubts among state operators as well as other testing labs in DCC’s ability to rein in problems and rebuild consumer and industry trust, several observers told MJBizDaily.

Did a California cannabis testing lab inflate THC potency and clear moldy cannabis for sale?

Amid a crackdown on cannabis testing labs launched amid nationwide accusations of routine potency inflation and unreliable pesticide and contaminant testing, the DCC alleged BelCosta committed seven violations.

These included accusations that BelCosta put public health at risk when it “released failed samples for retail sale” and inflated the “(t)otal THC” potency of two flower samples by more than 10%,” the DCC alleged at the time.

It was at least the fifth California testing lab to lose a permit over alleged THC potency inflation or sloppy lab practices.

But in BelCosta’s case, the lab fought back.

And the DCC showed “insufficient evidence to establish that BelCosta reported unreliable test results for Aspergillus and cannabis potency” or that “BelCosta passed any sample containing a pesticide,” according to a July 24 decision from Administrative Law Judge Cindy Forman.

Forman ordered BelCosta’s permit restored on a probationary basis.

The DCC did prove that BelCosta failed to immediately upload one client’s certificate of analysis (COA) for lack of payment, employed one lab technician without proper credentials, allowed too many employees access to the lab’s Metrc track-and-trace database account and failed to follow some standard operating practices.

However, “There is no evidence that BelCosta’s violations involve the knowing or willing violation” of state cannabis law “or its regulations or fraud,” Forman’s decision found in part.

She added: “There was no evidence of actual harm to the public or any consumer.”

The DCC had issued BelCosta only one citation over seven years of operation prior to revoking its permit and denying it a new annual license, Forman found.

Will BelCosta Labs reopen?

The DCC has 100 days to adopt, modify or reject Forman’s order that BelCosta be licensed on a probationary period for three years.

DCC spokesperson Jordan Traverso declined to comment to MJBizDaily, citing “pending/ongoing litigation.”

According to Ronay, the agency has yet to act on Forman’s order, leaving BelCosta in limbo for what could be another three months.

But even if BelCosta does win its permit back, the lab, one of California’s busiest with more than 70 employees, will likely never reopen, he said.

BelCosta’s equipment was long ago sold off, and investors are unlikely to back the business.

“At this point, the industry is just shrinking and not really growing,” said Ronay, referring to steadily diminishing legal legal sales in California.

Ronay also lamented the lack of any retribution beyond possible restoration of his permit.

“Normally when you win a lawsuit, you win damages,” he said. Instead, “They put me out of business,” he added.

What happened to the California DCC’s case against a testing lab?

According to Forman’s decision, the DCC appears to have made some key errors in its investigation.

An agency employee took cannabis product samples from BelCosta after lab inspections and “placed them in a non-sterile Ziplock bag inside a personal backpack and then placed the backpack in the trunk of his vehicle,” according to Forman’s findings.

He then “transported 30 BelCosta samples in his car to (a) police station, where they were stored in an evidence locker for 25 days” before reference testing at a state-run lab, wrote Forman. She added that “neither the police locker nor the car trunk was temperature controlled.”

The agency also waited months before testing the samples taken from BelCosta for the presence of mold, Forman found.

Exposure to heat and oxygen, such as in a locker or trunk, can affect THC potency, lab experts told MJBizDaily. And both the long delay and “non-sterile” handling could have introduced mold, they added.

Operators who reviewed Forman’s decision called the DCC’s handling of the situation “amateur hour.”

“To me it’s similar to how the (New York Office of Cannabis Management) screwed up their inversion investigation last year,” said one prominent California operator, who requested anonymity for fear of retribution from DCC.

The operator was referring to the collapse of an investigation into a licensed processor’s alleged smuggling of illicit cannabis into New York’s estimated $1.8 billion annual market, which prompted the December resignation of New York’s cannabis czar.

“It should have been so easy,” the operator continued.

“There are well-established processes for investigating and prosecuting this type of thing that protect the rights of the accused and also catch people for doing the wrong thing.”

“In both cases it seems that it was amateur hour, which is not okay when the stakes are this high.”

Chris Roberts can be reached at chris.roberts@mjbizdaily.com.