Starting next month, a cannabis multistate operator won’t sell anything tested by two licensed commercial laboratories, including one major national chain, after Arizona health regulators flagged repeat problems.
A top buyer for Phoenix-headquartered Story Cannabis, which operates cannabis stores in four states and has 11 locations in Arizona, told clients Sept. 10 that the company will reject marijuana tested by Kaycha Labs and Level One Labs, the Arizona Republic reported.
Arizona health regulators fined Florida-based Kaycha Labs $88,500 last year after inspectors discovered more than a dozen alleged “deficiencies,”including problems with the lab’s potency testing and pesticide and microbial detection methods.
Subsequent inspections later in 2025 and earlier this year discovered a “dilution problem” with THC potency tests that would have “skewed results” as well as failed testing for a pesticide, the Republic previously reported.
That’s shaken confidence in the lab enough for Nikole Samuelson, Story’s Arizona buyer, to tell suppliers to choose another lab if they want to sell at Story.
Are cannabis companies dropping problematic cannabis testing labs?
Samuelson also mentioned Level One Labs, which state cannabis regulators said earlier this year was fudging potency results, the Republic reported.
“Given the multiple compliance violations and concerns related to the testing at Kaycha and Level One, we will no longer accept products tested by either laboratory with a Certificate of Analysis test date on our after October 1, 2026,” Samuelson wrote in a Sept. 10 email, according to the newspaper.
Jason Vedadi, Story Cannabis’ CEO, verified the email, according to the Republic.
A representative from Level One blamed recent problems on software glitches and “human error” and predicted that Story would reconsider its boycott, the newspaper reported.
Kaycha, which has locations in nine states and touts itself as the largest testing company in the U.S., did not comment to the Republic.
What went wrong with cannabis testing at Kaycha Labs?
Arizona regulators have found fault with Kaycha about a half-dozen times now.
Several alleged violations noted by Arizona’s Department of Health Services (DHS) in its April 2025 “report of findings” were “double repeat findings” also cited by the agency during inspections in 2023 and 2024, according to violation notice.
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Among Arizona’s DHS findings were that Kaycha:
- Kept incomplete or “inconsistent” records for the collection and transportation of samples.
- Reran potency sampling “per client request, without a scientifically valid reason to do so,” and used a separate “method file” from other samples to process the unidentified client’s product. Those retests were “biased high.”
- Used a “limit of quantification” in lab tests for pesticides and mold that was “25 times the (maximum allowable concentration)” under state law.
- “(D)id did not maintain a log for all samples that tested ‘Detected’ for Aspergillus and Salmonella.”
- Used a dilution factor for detecting pesticides that would have allowed tainted product to pass testing and be sold.
While watchdogs and other critics have repeatedly sounded the alarm over unreliable cannabis safety and potency testing – and regulators have taken action in some states – this is a rare example of a marijuana company publicly parting ways with a lab, the Republic reported.
