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From The Lab

The Compliance Risks Cannabis Brands Overlook After Products Leave the Lab

A cannabis product can pass laboratory testing, meet manufacturing standards, and have the documentation to demonstrate its quality. But what happens when that product leaves the lab and enters the marketplace?

That was the question Sheri Tarr, chief advisor of regulatory consultancy 68 Partners, raised at the recent Cannabis Quality Conference in Washington, DC.

Tarr acknowledged that her presentation on packaging, labeling, and marketing compliance was aimed more at cannabis brands than at the laboratory, quality, and regulatory professionals in the room. But she wanted them to understand where compliance goes next, after their work is done. And that’s where cannabis businesses may be overlooking some of their greatest regulatory and legal risks.

Packaging, advertising, social media, customer testimonials, and even conversations between budtenders and consumers can create problems for an otherwise compliant product.

Tarr brings an unusual perspective to the subject. A self-described “recovering lawyer,” she previously worked in pharmaceutical sales and marketing, ran a division at Pfizer, and later became a plaintiffs’ attorney, suing pharmaceutical companies over product liability and regulatory violations.

She’s seen the commercial side of regulated products from both sides of the courtroom.

 

When Packaging and Marketing Become Compliance Problems

Tarr joked that she doesn’t always get an enthusiastic reception when discussing packaging and labeling compliance.

“Usually I’m in front of people that are like, God, do I sit here and listen to why I can’t put a holographic giraffe on my packaging and labeling?”

But the rules governing how cannabis products are presented to consumers are extensive. She pointed to New York’s packaging, labeling, marketing and advertising regulations, which she said run approximately 135 pages, in 10-point type.

And those are just the state requirements.

Tarr emphasized that regulators examine the overall impression a company creates through its packaging, imagery, messaging, and promotional materials.

A company doesn’t necessarily have to make an explicit medical claim to create a problem.

Tarr described working with a company selling a topical product that wanted to use before-and-after photographs showing improvements in psoriasis. The company argued that it wasn’t actually saying the product cured or treated the condition. It also planned to include the standard disclaimer that the product wasn’t FDA-approved and wasn’t intended to diagnose or treat disease.

Tarr wasn’t persuaded.

“You just sent me materials that show a before and after with psoriasis, without psoriasis,” she recalled telling the company. “You don’t have to say, this cures, treats.”

Nor would a disclaimer solve the problem.

“You can’t hide behind a disclaimer,” she said.

The example illustrates how easily a marketing team can cross into medical claims without recognizing it. A photograph, testimonial, or comparison may communicate something that the company deliberately avoided putting into words.

And regulators don’t necessarily evaluate those elements separately. They consider the overall message consumers receive.

 

Claims Don’t Stop at the Label

One of Tarr’s strongest warnings concerned the many places where companies communicate with consumers.

“Claims live everywhere, and the brand owns all of it,” she said.

A brand’s compliance exposure doesn’t end with its approved packaging or advertising copy. Its website, social media accounts, promotional videos, customer testimonials, and sales presentations all contribute to the claims being made about its products.

Tarr pointed to companies that publish customer testimonials describing relief from serious medical conditions, then argue that the statements came from consumers rather than the company.

But once a business selects a testimonial and publishes it on its own website, it has adopted that message.

“Congratulations, you’re responsible,” Tarr said.

She also warned against relying on disclaimers to distance a company from statements it has chosen to promote. The issue becomes more complicated as brands work with influencers and third-party marketers, particularly when promotional content moves quickly across social media.

Tarr urged companies to pay closer attention to the Federal Trade Commission (FTC), which oversees advertising claims and can scrutinize misleading representations even when those claims don’t appear on a product label.

An audience member raised another interesting question: Could posting published scientific research about terpenes on a cannabis company’s website be considered an implied product claim?

Tarr acknowledged that she didn’t have a definitive answer. Even legitimate scientific research can raise questions about how it’s presented, particularly if consumers could interpret it as evidence of a product’s therapeutic benefits.

The challenge isn’t limited to preventing outright falsehoods. Companies also need to consider whether their imagery, language, and testimonials imply benefits that haven’t been substantiated.

 

Budtenders Are Part of the Compliance Equation

Tarr also raised another concern: What happens when a consumer walks into a dispensary and asks for help choosing a product?

In the pharmaceutical industry, sales representatives receive extensive training on what they can say about a drug, how to discuss its benefits and risks, and when to refer questions to medical professionals.

As a plaintiffs’ attorney, she deposed hundreds of pharmaceutical sales representatives, examining what they were taught and whether they understood the evidence supporting the products they promoted.

She sees a parallel in cannabis, where budtenders and dispensary employees often serve as the primary source of product information for consumers.

During the presentation, an audience member asked how a budtender should respond when a customer describes a headache, pain, or difficulty sleeping and asks which product might help.

Tarr acknowledged that there isn’t an easy answer.

Budtenders face pressure to sell products, but many don’t have scientific or medical training. They may also receive product education from third-party sales trainers who lack a regulatory background.

“The training becomes really, really critical,” she said.

Tarr cautioned that brands, dispensaries and the companies providing sales training all have responsibilities in how products are represented to consumers.

And she expects more attention to be paid to what happens inside dispensaries.

She predicted that plaintiffs’ lawyers and regulators would eventually emerge from their “orange-carpeted cubicles from the 1980s,” start visiting dispensaries, listen to sales conversations, and examine packaging and labels firsthand.

“They’re going to do it the old-fashioned way,” she joked. “We’re gonna have a visit.”

Her concern isn’t that budtenders shouldn’t help customers. It’s that the industry needs better training and clearer boundaries around product recommendations and medical claims.

 

Building a Commercial Compliance System

So how can cannabis companies manage compliance across packaging, advertising, websites, sales teams, and multiple state markets?

Tarr pointed to a system commonly used in the pharmaceutical industry: medical, legal, and regulatory review of promotional materials before they reach the marketplace.

At Pfizer, she said, promotional materials went through a review process involving multiple departments.

“Nothing went out the door until all of those people were aligned.”

She recommends applying similar oversight to cannabis marketing, particularly as companies expand into additional states with different requirements.

Her approach centers on what she calls the three C’s of compliance: controlled, centralized, and consistent. Companies need a system to approve promotional materials, track where those materials are used, and withdraw or replace them when necessary.

That becomes increasingly important for multistate operators managing different labels, advertising requirements, websites, and sales teams.

Consistency alone isn’t enough, however.

“You don’t want consistently bad,” Tarr joked.

The information also needs to be accurate and supported by evidence. She urged companies to avoid embellishing product claims and instead market what they can substantiate.

“Say what your COA says,” she advised, referring to the certificate of analysis.

Tarr also emphasized documentation. Companies should be able to show what evidence supported a claim, who approved it, and how decisions were made.

“Build a record you want someone else to read,” she said.

Regulators, attorneys, investors, or prospective buyers may eventually examine that record.

Tarr encourages cannabis businesses to think about compliance as part of their long-term planning. Her “build to exit” approach reminds companies that the decisions they make today, including how they manage marketing claims and document approvals, could come under scrutiny during an acquisition, investment review, or lawsuit.

“We want to be treated normally, we want to be mainstream, then we have to act that way, right?”

How LEEF Brands Is Building Its Cannabis Business for the Next Market

Micah Anderson has spent nearly three decades in California cannabis, beginning as a cultivator in Mendocino County and eventually becoming CEO of publicly traded LEEF Brands.

Today, the company is focused on building a large-scale cannabis supply chain that combines outdoor cultivation with concentrate manufacturing. Its strategy centers on controlling production costs, securing clean biomass, and preparing for a future in which cannabis products may move across state and international borders.

LEEF has invested in Salisbury Canyon Ranch in Santa Barbara County, where Anderson believes the climate, cultivation economics, and location, which helps minimize pesticide drift, give the company an advantage. Meanwhile, LEEF has paused its expansion in New York to give that market more time to mature.

In this interview with Cannabis Industry Journal, Anderson discusses the economics of producing concentrates, why LEEF brought cultivation in-house, lessons learned in New York, and how the company is preparing for potential changes in federal cannabis policy.

 

Why LEEF Brought Cultivation In-House

 

CIJ: LEEF started as a concentrate company. What led you to invest in such a large cultivation operation?

Anderson: We found that the success of our business came from pairing low-cost, high-quality outdoor cultivation with a larger concentrate business.

When we didn’t own the cultivation site, it was hard to predict our business, both from a margin standpoint and a supply chain standpoint. That’s why we brought it in-house.

We’re really a supply chain company. Right now, we supply concentrates. Could we eventually move into flower? Absolutely. We’ve thought about turning some of our acreage into flower production, but we haven’t done that yet.

We built the entire farm around supplying our concentrate business.

CIJ: How much of an advantage does outdoor cultivation give you in terms of production costs?

Anderson: Our cost to produce a pound is under $10 at this point.

With indoor cultivation, if you’re treating it as biomass for extraction, the economics don’t work. You’re looking at $200 to $300 per pound, sometimes higher. You can’t make money at those price points. You have to turn that into a flower product.

We treat cultivation like agriculture. We row-crop, farm organically, and use seeds rather than clones.

We’re always trying to keep quality as high as possible while keeping our cost of goods as low as possible. We can’t control where the California market is on pricing, but we can control our production costs.

 

Building a Cleaner Cannabis Supply Chain

 

CIJ: You’ve been outspoken about pesticide contamination in cannabis. How did that influence where you established Salisbury Canyon Ranch?

Anderson: When we first started the company, I was really focused on pesticides and GMOs. Initially, I approached it from a moral standpoint. I felt the cannabis industry should adopt strict standards and promote them.

Over time, we realized California had a significant problem with pesticide drift. About 60% to 70% of the material we try to purchase in California fails for pesticides when concentrated.

We purchased one of the largest cultivation sites in California and built it from the ground up. We chose the location carefully to mitigate pesticide drift as much as possible.

So far, it’s worked.

I think this is one area where strict regulation actually protects the industry. I’m against a lot of the regulations and taxes we deal with, but pesticide standards are something we should support.

We encounter farms that have spent an entire year growing a crop, only to have it fail testing at the very end. It’s devastating for those cultivators, but I don’t think the answer is to weaken the standards.

CIJ: Are you seeing other cannabis businesses place more emphasis on securing cleaner supply chains?

Anderson: Absolutely. We’re getting inbound interest from brands involved in pesticide recalls or negative publicity that want to clean up their supply chains.

One of the challenges with outdoor cultivation is that many farms were established in counties that approved cannabis licenses early. Some of those locations weren’t necessarily selected with pesticide drift in mind.

California has a massive agricultural industry. If you’re cultivating in a wind corridor near conventional agriculture, contamination can become an ongoing problem.

You have to be selective about where you build these cultivation operations.

We’re also thinking about future markets. We want to build a supply chain large enough to support our business while meeting the standards required to export to Germany, South America, Brazil, or other markets.

 

Why LEEF Paused Its New York Expansion

 

CIJ: LEEF operated in New York for approximately a year and a half before pulling back. What happened?

Anderson: We entered New York because several of our California clients were expanding there and had difficulty finding the right ingredient suppliers.

We purchased a license and built a small extraction lab. We kept our capital expenditures low by moving equipment from our earlier California operations into New York.

Our plan was to buy biomass from local cultivators, extract it, and supply the brands we already worked with.

But we ran into the same issue we had previously solved in California. There wasn’t enough cultivation material available to support our business at the scale we needed.

The pricing also didn’t make sense.

Cultivators were getting $700 per pound for their material, and we needed to purchase biomass at something closer to $150 per pound to make the extraction economics work.

We started seeing pricing compression, and our supply chain wasn’t structured correctly because we didn’t integrate cultivation into the business.

Earlier this year, we received a significant investment, and the investors agreed that we should finish building our California operation before putting more capital into New York.

We still have our license and our lab in New York. We haven’t abandoned the market.

CIJ: Do you still see New York as an attractive cannabis market? What needs to improve?

Anderson: I think New York is going to be a huge market. The entire region has tremendous potential.

But you need retail. You need stores throughout the boroughs and municipalities so consumers can access products.

You also need cultivation and manufacturing capacity that matches the size of the market.

If you have too much product, prices collapse. If you don’t have enough, prices remain too high.

When prices are too high, you also create an incentive for products to enter illegally from other states, which puts additional pressure on the licensed market.

These are problems that occur in nearly every new cannabis market. It takes time for supply, demand, and pricing to work themselves out.

CIJ: You also compared cultivation performance between California and New York. What did you find?

Anderson: We partnered with a cultivator in New York and grew approximately one acre using our genetics and standard operating procedures.

At the same time, we grew the same genetics using the same procedures in California.

The New York crop dramatically underperformed in pounds per acre. We also had significantly lower extraction yields.

California has an agricultural advantage because of its climate. That’s why so much of the country’s agricultural production takes place here.

I think California will become very important in both domestic and international cannabis supply chains.

 

Preparing for Interstate and International Commerce

 

CIJ: If cannabis can eventually move across state lines, how could that change the economics for multistate operators?

Anderson: We’ve been having conversations with large multistate operators that have invested millions of dollars in cultivation and manufacturing infrastructure outside California.

Some of those companies have production costs that are several dollars per gram higher than ours.

What happens when California can ship products into those markets at a price they can’t come close to matching?

They may find it makes more economic sense to purchase ingredients from a California supplier than to continue operating expensive cultivation facilities in every state.

One company we spoke with operates in nearly every major market outside California. They could potentially pay us twice what we’re currently receiving for our products and still save money compared with producing them in-house.

There are other considerations, of course. Those facilities employ people, and jobs could be affected. I’m sympathetic to that.

But I believe businesses need to prepare for the possibility that interstate commerce changes how cannabis is produced and distributed.

State-by-state vertical integration largely stems from federal prohibition. If cannabis could move through the country like other agricultural products, companies wouldn’t necessarily build their infrastructure the way they have.

CIJ: Do you expect international exports or interstate commerce to open first?

Anderson: I think international commerce happens first.

We’re looking at different markets, but not every country allows concentrates, and some of the international markets are relatively small compared with the domestic U.S. market.

We’re doing a lot of work to prepare for international opportunities, but we’re not building a business that depends on those opportunities becoming available.

If they happen, that’s great. If they don’t, we still need a successful business in California.

I also think interstate commerce will take time. States are going to want to protect their existing industries, and there will likely be legal challenges.

We’re preparing for that possibility rather than assuming it will happen on a particular timeline.

 

Why LEEF Uses Seeds Instead of Clones

 

CIJ: At Salisbury Canyon Ranch, you’re growing from seed rather than clones. Why did you choose that approach?

Anderson: There are a couple of reasons, starting with cost.

We work with experienced breeders in California and primarily use feminized seeds. We run autoflowering varieties in the spring and full-term varieties in the fall.

Seeds can cost anywhere from 8 to 20 cents, sometimes 40 cents each. A clone might cost $2 to $4.

When you’re cultivating at our scale, that’s a significant difference.

The other issue is plant health. Hop latent viroid and Fusarium are concerns, and some of those problems can come from mother plants used repeatedly to produce clones.

We want to protect the soil at Salisbury Canyon Ranch. I consider that soil one of the most valuable assets on our balance sheet.

We do work with other cultivators who use clones successfully and have strong procedures to manage those risks. But for our operation, growing from seed makes sense right now.

It also helps that we’re primarily growing for extraction rather than finished flower.

 

Concentrates, Product Preservation and Market Demand

 

CIJ: Concentrates can present storage and preservation challenges. How do you manage those issues when supplying other manufacturers?

Anderson: It depends on the concentrate.

Cold-cure rosin and certain hydrocarbon fractions benefit from refrigeration, but many concentrate products don’t have those same requirements.

A lot of concentrate sales are in distillates, live resin, vape products, beverages, and tinctures.

I use the analogy of shipping grapes versus shipping wine.

Both come from the same agricultural product, but grapes have a much shorter shelf life. Wine can be stored and transported for much longer.

Flower has some of the same preservation challenges as grapes. Bulk concentrates generally have a longer shelf life, which can be an advantage for distribution and eventually exports.

Once a concentrate is formulated into a finished consumer product, the shelf life may change depending on that formulation.

 

Hemp, CBD and Future Business Opportunities

 

CIJ: LEEF originally developed a CBD consumer products business. Are you considering returning to that market?

Anderson: When we started the company, we were actually a consumer packaged goods business rather than an extraction company.

We created LEEF Organics around pesticide-free, non-GMO ingredients and a health and wellness philosophy.

We had products in Nordstrom, Marriott properties, and Four Seasons hotels. The line included CBD balms, tinctures, soaps, and other products.

When COVID hit, many of those retail locations shut down. At the same time, our California cannabis business was growing rapidly.

We made the decision to focus on cannabis extraction and completing our cultivation operation.

We still have the CBD brand, and we’re actively working on plans to relaunch LEEF Organics in the first or second quarter of 2027, potentially through both hemp and regulated cannabis channels.

That’s a business I’m personally passionate about.

CIJ: You also have permission to cultivate hemp at Salisbury Canyon Ranch. What would determine whether you move forward?

Anderson: We have a 100-acre hemp permit from Santa Barbara County.

We know how to cultivate hemp and extract cannabinoids. The question is whether it makes business sense under the regulations that eventually take effect.

There is so much uncertainty around the Farm Bill, rescheduling, and federal hemp policy that we’re being cautious about committing additional capital.

We’re working on GMP compliance and DEA licensing preparations, so we’re ready if opportunities develop.

But we don’t want to spend millions building something on regulations that could change.

Our business needs to succeed in California regardless of what happens federally.

CIJ: How do you think cannabis and hemp should be regulated in the future?

Anderson: I think we should stop treating them as two completely different industries.

If someone wants a CBD product, growers should be able to produce CBD-dominant genetics. If they want THC products, growers should be able to cultivate THC-dominant plants.

The important regulatory question should be the amount of THC in the finished product, rather than forcing farmers to destroy crops because plants exceed a particular THC threshold.

Once cannabis is extracted, it’s an ingredient. You can use different amounts of that ingredient depending on the product you’re manufacturing.

I think there could be a system where low-dose products are available through mainstream retail and higher-dose products are sold through more controlled channels.

The success of hemp beverages demonstrates the demand for cannabinoid products outside traditional dispensaries.

I’d like to see the industry become easier for consumers to access while maintaining important protections, particularly around pesticides and product safety.

 

Building a Business That Can Survive Today’s Market

 

CIJ: California remains an extremely difficult market. What gives you confidence in LEEF’s long-term strategy?

Anderson: California is brutal. It’s been an eight- or nine-year knife fight, and we’ve come close to going out of business more than once.

The regulations are too strict, and the taxes are too high.

But we’ve survived, and I feel confident about our position today.

California still has tremendous brand recognition, agricultural advantages, and decades of cannabis cultivation knowledge.

We’ve built our business around producing high-quality concentrates at a low cost and controlling our supply chain.

We’re preparing for interstate commerce, international exports, and changes in federal regulation, but we’re not depending on any of them.

We have a growth strategy for California and New York that we believe can work under the current market structure.

If those other opportunities open up, we’ll be ready.

Cannabis Has a Water Activity Standard. Why Aren’t States Using It?

Cannabis flower sold in regulated markets across the country is routinely being dried below an existing national standard, according to a new analysis of nearly 145,000 laboratory samples.

The report, produced by the American Trade Association for Cannabis and Hemp (ATACH) with FTI Consulting, analyzed samples from 10 states. Average water activity fell below the range established by ASTM International’s D8197 standard in every state studied. In nine of the 10 states, at least 75% of samples tested at or below the bottom of that range.

ASTM D8197 calls for dry cannabis flower to maintain water activity between 0.55 and 0.65, a specification intended to protect both product quality and microbial safety.

The standard is not new. ASTM first published D8197 in 2018, and the specification was later incorporated into the National Institute of Standards and Technology’s Handbook 130, which establishes uniform laws and regulations for weights and measures. The cannabis provision was added in 2023.

Yet adoption of the standard by state cannabis regulators has been inconsistent, according to ATACH.

“Water activity sounds technical, but the stakes aren’t,” said Chris Lindsey, vice president of policy and state advocacy at ATACH. “Without a consistent standard, consumers get a worse product, patients face avoidable risks, and states leave real money on the table.”

 

Water Activity Is Not the Same as Moisture Content

Although the issue is often described in terms of moisture, water activity and moisture content are not the same measurement.

Moisture content measures how much water is present in a product. Water activity measures the water that is available to support chemical reactions and microbial growth.

ASTM’s standard sets both an upper and lower limit. Flower with water activity above 0.65 can create conditions favorable to mold and other microbial growth. Below 0.55, flower becomes more susceptible to physical damage and breakage during handling and storage.

Maintaining water activity within the range is also intended to preserve the characteristics of the flower during storage and distribution. Excessive drying can contribute to terpene loss and produce flower that is brittle and harsher to inhale.

Cannabis Industry Journal has previously examined the development of ASTM cannabis standards, including D8197 and its companion standard, D8196, which establishes procedures for measuring water activity in cannabis flower.

ASTM says water activity can be tested throughout the supply chain, from the completion of drying through merchandising.

 

Why Is So Much Cannabis Below the Standard?

The findings raise another question: Why is so much regulated cannabis being dried below 0.55 in the first place?

Cannabis cultivators have to control moisture carefully enough to prevent microbial growth while also meeting state testing requirements. Drying flower further can reduce the risk of mold or yeast developing before a product reaches the consumer, but the ATACH data suggest flower is routinely ending up below the range established by ASTM.

The report’s state-by-state analysis found the problem was not limited to one market or regulatory system. Average samples were below the ASTM range in all 10 states examined.

The findings also come as microbial contamination continues to trigger cannabis recalls. California’s Department of Cannabis Control recall database includes numerous flower and pre-roll recalls involving Aspergillus species. ATACH reported that 67% of California’s mandatory cannabis recalls between September 2024 and December 2025 cited Aspergillus.

Colorado presents a similar concern. According to the report, 61% of the state’s cannabis health and safety advisories between 2019 and 2025 involved mold or yeast.

Water activity control does not eliminate microbial contamination that is already present. ASTM D8196 describes water activity as a quality-control measure intended to prevent microbial growth and proliferation, not a kill step.

 

Overdrying Also Reduces Sellable Weight

There is an economic cost to drying flower below the standard as well.

Cannabis flower is sold by weight, and removing additional water reduces the amount of finished flower available for sale.

FTI calculated that a pound of cannabis flower dried from 0.65 to 0.45 water activity loses approximately 18 grams. Applied across commercial production, those grams add up.

FTI modeled the potential impact in five states and estimated that maintaining flower within the ASTM range could generate an additional $24.4 million in annual producer revenue in Arizona, $27 million in Colorado, $34.1 million in Massachusetts, $27.8 million in Missouri and $18 million in Nevada.

The analysis estimated corresponding annual tax revenue of $5.3 million in Arizona, $5 million in Colorado, $5.6 million in Massachusetts, $4.8 million in Missouri and $4.1 million in Nevada.

Those figures are modeled estimates, not documented losses. But they illustrate how drying practices can affect both cultivator revenue and state tax collections when flower is sold by weight.

 

A Standard Already Recognized by NIST

ASTM’s Committee D37 on Cannabis developed D8197 through the organization’s consensus standards process. ASTM currently maintains a growing collection of cannabis and hemp standards, covering areas including cultivation, laboratory testing, processing, packaging, and quality management.

The water activity specification eventually made its way into NIST Handbook 130.

The current handbook states that when unprocessed cannabis is offered for sale or ownership is transferred, water activity should be 0.60, plus or minus 0.05, in accordance with ASTM D8197. It also directs users to ASTM D8196 for the procedure used to determine water activity.

That puts the accepted range at the same 0.55 to 0.65 established by ASTM.

NIST Handbook 130 is designed to promote uniformity in weights-and-measures laws and regulations among states. Cannabis regulation, however, largely sits outside the traditional weights-and-measures system.

According to ATACH, state weights-and-measures agencies commonly incorporate NIST guidance, while cannabis regulatory agencies are not necessarily required to do the same. The result is that a nationally recognized specification for cannabis flower can exist without being uniformly incorporated into state cannabis regulations.

ATACH is calling on states to adopt the standard.

Doing so would raise several questions for regulators and cultivators, including when water activity should be measured, how long flower must remain within the specified range, and how compliance should be enforced as product moves from cultivation through packaging, distribution and retail.

ASTM D8197 covers more than the initial drying process. The organization says maintaining the specified water activity throughout the supply chain, from the completion of drying through merchandising, is important to preserving safety and quality.

For an industry that has spent years debating testing requirements and product safety state by state, the ATACH findings point to a different problem: a cannabis standard has already been developed and nationally recognized, but much of the flower being sold in regulated markets is still falling outside it.

From The Lab

Cannabis Testing Is Broken Across State Lines. State-Run Testing Is the Real Fix

State regulators are spending unnecessary time and money trying to police a private testing model that fails to protect consumers.

From Maryland’s newly launched CSQ CLEAR audit pilot to New York’s shutdown of Lexachrom Analytical Laboratory, Michigan’s historic license revocations of Viridis Laboratories, and New Jersey putting out RFPs to audit its testing ecosystem, regulators remain stuck in an endless game of whack-a-mole. More regulations cannot fix a system where private labs rely on growers to stay in business. As long as testing facilities compete for commercial clients, lab shopping, moisture manipulation, and THC inflation will remain standard operating procedure.

 

A History of Tampering: The High-THC Payday

The industry has called out lab shopping for years. Cultivators steer their business toward testing facilities willing to report higher THC percentages, driven by consumer hyper-fixation on potency. Adding an extra 5% or 10% to a Certificate of Analysis (COA) drastically raises wholesale crop value. If one lab refuses to play ball, the grower simply takes their testing batch down the street.

To hit those inflated numbers, labs rely on a few standard tricks:

  • Baking Out Moisture: Over-drying flower samples before testing reduces water mass, automatically driving up the THC ratio on paper.
  • Manipulating Calibration Baselines: Technicians alter standard reference values on testing equipment so samples appear significantly stronger by comparison.
  • Fudging Sample Weights: Labs extract 0.3 grams of flower but log 0.2 grams in the software, forcing the system to divide the total THC mass by a smaller weight to inflate the final percentage.

 

The Pay-to-Play Problem: Why States Should Take Over Testing

Regulators have issued fines, suspended licenses, and pulled operating permits for years, yet bad behavior persists across state lines. Multi-lab audits, cross-testing pilots, and state contract RFPs show just how much public money states are burning to babysit private facilities—building complex forensic networks and hiring outside consultants just to catch bad data after the fact.

It makes no sense to spend tax dollars policing a system when changing the model fixes it instantly.

Bringing compliance testing directly under state authority removes the financial incentive to cheat. Under a state-operated model, cultivators pay standard state fees to fulfill mandatory testing requirements. Private deals, profit margins, and lab competition disappear overnight. Instead of throwing tax dollars at endless oversight, states streamline product safety and turn required compliance testing into a self-sustaining, revenue-generating function for the state.

 

Playing Catch-Up Across the Country

Enforcement sweeps and regulatory expenditures in individual state markets prove that auditing private labs is just playing catch-up:

  • New Jersey: The Cannabis Regulatory Commission recently issued a competitive RFP for a Biannual Cannabis Testing Program Assessment, allocating government resources to analyze and evaluate the reliability of its commercial testing framework.
  • Michigan: The Cannabis Regulatory Agency revoked licenses and permanently banned the owners of Viridis Laboratories following long-running allegations of potency inflation and unreliable safety tests that previously triggered a $229 million product recall. To regain control, Michigan spent state resources to build its own state reference lab.
  • New York: Regulators forced the closure of Lexachrom Analytical Laboratory after an audit uncovered systemic data integrity violations, triggering market-wide product recalls for untested inventory.
  • Maryland: Regulators launched the CSQ CLEAR cross-testing pilot to benchmark retail flower against state reference labs in an effort to identify statistical outliers.
  • Multistate Revocations: California, Arizona, and Massachusetts have repeatedly suspended or revoked testing permits over falsified logs, moisture manipulation, and sample tampering like dusting flower with THC distillate.

 

Looking Ahead

Programs like Maryland’s CSQ CLEAR pilot and New Jersey’s testing assessments will continue collecting data, but audits only diagnose the symptom. Until states stop spending money on reactionary policing and move compliance testing directly under state authority, the private lab market will continue to privilege high THC numbers over scientific truth.

What Does Cannabis Rescheduling Mean for Hemp Beverages?

On April 23, 2026, the Department of Justice placed FDA-approved marijuana products and marijuana products subject to qualifying state medical licenses into Schedule III of the Controlled Substances Act.

But the bigger hurdle- whether recreational marijuana should move from Schedule I to Schedule III- is still being decided.

The Drug Enforcement Administration wrapped up its administrative hearing on July 15, and the parties have now filed their final briefs. DEA itself is arguing that marijuana no longer meets the requirements for Schedule I and should be moved to Schedule III.

So what happens next? And perhaps more importantly for the hemp beverage industry, could Schedule III provide another path for THC beverages if Congress moves forward with its new restrictions on hemp?

The answer is more complicated than it might appear.

 

Where Rescheduling Stands Today

The current rescheduling process dates back to 2023, when the Department of Health and Human Services recommended moving marijuana from Schedule I to Schedule III after conducting a scientific and medical review.

The DOJ proposed moving forward with the change in May 2024, but the administrative process stalled.

President Trump revived the effort in December 2025 when he directed the attorney general to expedite rescheduling. The administration then took an unusual two-part approach in April.

First, DOJ immediately placed FDA-approved marijuana products and marijuana subject to qualifying state medical licenses into Schedule III.

At the same time, it restarted the administrative process that could eventually move all of marijuana into Schedule III.

DEA held hearings from June 29 through July 15. The agency and opponents of rescheduling have now submitted their final arguments.

In the DEA’s final brief, the agency argued that marijuana no longer qualifies for Schedule I because it has a currently accepted medical use in the United States and can be used safely under medical supervision.

 

What Happens Next?

Chief Administrative Law Judge Derek Julius is expected to review the hearing record and issue a recommended decision.

That recommendation is important, but it isn’t the final say.

The case then goes to DEA Administrator Terry Cole, who will ultimately determine how the agency proceeds. DEA could issue a final rule moving marijuana to Schedule III, keep it in Schedule I, or potentially take another approach supported by the administrative record.

Even a final Schedule III rule may not end the fight. Opponents have raised procedural and legal challenges throughout the proceeding, making federal litigation a real possibility.

There is no firm deadline for Julius to issue his recommendation or for DEA to publish a final rule.

What we do know is the testimony is finished, final briefs are in, and the DEA is now supporting the move to Schedule III.

 

Schedule III Is Not Federal Legalization

This is where the implications for hemp beverages come into play.

Moving marijuana to Schedule III would be a major federal cannabis policy change, but it would not legalize marijuana nationwide.

Schedule III substances remain controlled under the Controlled Substances Act. Manufacturing and distributing marijuana outside federally authorized channels would remain prohibited.

It also would not automatically authorize marijuana to be sold as an ingredient in conventional foods or beverages.

Congressional Research Service has previously noted that moving marijuana to Schedule III would not make marijuana-infused foods or dietary supplements federally legal. The Controlled Substances Act does not authorize recreational marijuana simply because the substance sits in Schedule III rather than Schedule I.

That leaves THC beverages in an interesting position.

 

Hemp and Marijuana Still Follow Different Legal Paths

Today’s hemp beverage market exists because Congress removed hemp from the Controlled Substances Act in the 2018 Farm Bill.

If a cannabis product meets the federal definition of hemp, it isn’t a controlled substance under the CSA, which has provided the loophole for hemp-derived THC beverages to exist “legally.”

Rescheduling marijuana does not change that.

Federal regulations implementing the April Schedule III order specifically exclude material that meets the legal definition of hemp from the marijuana and naturally derived delta-9 THC substances placed into Schedule III.

In other words, hemp doesn’t become Schedule III because marijuana does.

 

The November Hemp Changes Complicate the Picture

Under legislation enacted last November, the new definition uses total THC and establishes a limit of 0.4 milligrams of total THC per finished container. Once those changes take effect, the intoxicating hemp beverages currently on the market would no longer be legal hemp under federal law.

The Senate added language to the continuing resolution spending bill that would delay most of those changes from November 12 to December 11, although the House still needs to vote.

Unless Congress changes the underlying law, the industry could therefore find itself facing two developments at roughly the same time: marijuana moving toward Schedule III while many hemp-derived THC beverages lose their status as federally legal hemp.

 

What Rescheduling Could Change for Hemp Beverages

Some states are already moving hemp-derived THC beverages into regulated alcohol or cannabis distribution channels. If the hemp ban succeeds, these products will disappear, and the industry will have to decide whether it wants to continue the fight for a federally legal hemp pathway or transition into state cannabis systems.

 

A Bigger Role for the FDA

Schedule III could also bring more FDA involvement and make it easier to conduct the research regulators need to evaluate cannabis products.

More research could provide better data on dosing, impairment, pharmacokinetics, and safety. That information could eventually support pathways such as a Generally Recognized as Safe (GRAS) determination or food additive approval for cannabinoid ingredients used in beverages.

FDA involvement would not necessarily mean the agency would oversee every aspect of THC beverages. They have authority over ingredient safety and federal food law, while the Alcohol and Tobacco Tax and Trade Bureau (TTB) regulates areas such as alcohol beverage formulas and labeling. A future federal framework for THC beverages could similarly divide responsibility among agencies, although Congress has not yet established what that framework would look like.

Even if a federal pathway for THC as a beverage ingredient eventually emerges, getting those products into a national market presents another challenge.

The FDA pathway has its own limitations. An FDA-approved cannabinoid drug may be able to move through interstate commerce, but that is very different from allowing THC as an ingredient in a conventional beverage. Rescheduling does not resolve how a THC beverage would comply with federal food and drug law or what regulatory pathway would allow it to be sold nationally.

Cannabis attorney Kelly D. Fair, principal at Crestwood Strategies, said a beverage operating within a state cannabis program would still be subject to that state’s cannabis laws, including seed-to-sale tracking and restrictions on interstate marijuana sales. Creating a national market would require additional changes at the state level and potentially interstate compacts.

Dawson Hobbs, executive vice president of government affairs for the Wine & Spirits Wholesalers of America, said a federal TTB framework could include producer permits, manufacturing and bottling standards, label approvals and other requirements already familiar to the alcohol industry. He also cautioned that whichever agency is given oversight would need the funding and manpower to implement and enforce it.

Several questions remain: Who has primary regulatory authority over these products? What federal framework governs manufacturing and distribution? Can they move across state lines? What testing, labeling, and age-gating standards apply? And how does a conventional beverage containing a controlled substance fit within existing federal food and drug law?

 

The Last Mile

For the hemp beverage industry, the next few months require keeping an eye on two federal tracks.

On one side is the DEA, where the administrative law judge must issue his recommendation. The final decision then rests with the Attorney General, who has the authority to approve, modify, or reject the rescheduling determination.

On the other hand, Congress is deciding whether to delay, revise, or replace the hemp restrictions scheduled to take effect later this year.

Schedule III would be an important change in federal cannabis policy that could provide a potential fallback pathway for hemp beverage brands if the hemp ban is ultimately enacted. If the hemp ban succeeds, these products will disappear, and the industry will have to decide whether it wants to continue the fight for a federally legal hemp pathway or transition into state cannabis systems.

Kelly D. Fair said Schedule III would not automatically allow THC beverages to move across state lines. A beverage operating within a state cannabis program would still be subject to that state’s cannabis laws, including seed-to-sale tracking and restrictions on interstate marijuana sales. Creating a national market would require additional changes at the state level and potentially interstate compacts.

Despite the uncertainty, many industry leaders involved in discussions on Capitol Hill remain optimistic that the pieces are beginning to move in the right direction.

From The Lab

What Food-Safety Teams Should Ask a Cannabinoid Supplier

By Vaughn Hartung
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The cannabinoid industry has historically focused heavily on manufacturing compliance: GMPs, certificates of analysis, potency testing, contaminant testing, traceability, and state licensing. Those systems are important, and Floraworks has invested significantly in them. But when you begin evaluating an ingredient through established food and dietary supplement frameworks, you realize that manufacturing compliance is really just the starting point.

Floraworks has spent the last several years evaluating cannabinol (CBN) as a mainstream food and dietary ingredient. The biggest lesson was that being a compliant cannabinoid supplier and having a qualified ingredient are two very different standards. The first answers, “Did this batch pass its COA?” The second answers a much larger question: “What evidence supports the safety and identity of this ingredient for its intended use?”

 

Start With a Better Question

“Is CBN safe?” is the start of a larger scientific discussion. Specifically, safe at what exposure, under what conditions of use, for what population, and supported by what evidence?

Established frameworks such as GRAS and the New Dietary Ingredient (NDI) pathway are built to answer that kind of question. We have spent significant time evaluating CBN for both. Working through these frameworks requires a much more complete picture of an ingredient than the cannabinoid industry has historically had to develop.

Here is how I would evaluate a cannabinoid supplier from a quality perspective.

 

1. Verify the Quality Foundation

Start by separating basic supplier qualification from ingredient qualification. Absolutely verify the quality-management system, GMP status, traceability, analytical testing, specifications, and manufacturing controls. Those remain essential. Then go further.

 

2. Ask the Supplier to Define the Ingredient

CBN is a defined molecule. A commercial ingredient is more than the name of its principal constituent. How it is manufactured, its purity, its specifications, its impurity profile, and its consistency all matter when you are connecting scientific evidence to the material consumers will actually receive.

Ask the supplier to define the ingredient precisely. Ask how it is manufactured, what controls exist around potential impurities and degradation products, and whether stability data supports the specification.

There are multiple ways to produce and purify cannabinoids. From a scientific perspective, you need to understand what the resulting ingredient is, what else may be present, and whether the evidence represents that ingredient.

 

3. Connect the Evidence to the Commercial Material

The value of the evidence depends on the ability to connect it to the commercial ingredient. If toxicology is conducted on one material, clinical research on another, and the commercial ingredient has materially different specifications, it becomes much harder to understand what the evidence actually supports.

Ask whether toxicology research was performed on the commercial ingredient or a representative test article and if the findings are available for review.

Serious ingredient development has to start with chemistry and manufacturing: defined specifications, analytical methods, control over the manufacturing process, an understanding of impurities and contaminants, and enough consistency to know that the material sold today remains representative of the material. For Floraworks, standardization is crucial to our ingredient supply.

 

4. Understand Intended Use and Exposure

Dose, intended use, and consumer exposure are fundamental. What is the proposed serving amount? How frequently will it be consumed, in what types of products, and by what population? What is the resulting anticipated daily intake? What daily exposure does the supplier believe the evidence supports, and how did it reach that conclusion?

The same ingredient could be used at very different concentrations and frequencies across product categories. A safety conclusion developed around one set of conditions shouldn’t automatically be extrapolated to every other possible use. More is not necessarily better. Our current GRAS evaluation is built around specifically defined intended uses and exposure conditions for that reason.

 

5. Evaluate the Safety Package as a Whole

Ask what toxicology research has actually been conducted, and what peer-reviewed evidence exists.

Floraworks own safety program includes GLP toxicology work and genotoxicity evaluation. Our 90-day repeated-dose oral toxicology study established a no-observed-adverse-effect level (NOAEL) of 400 mg/kg body weight per day in an oral exposure model. One of our biggest lessons has been to avoid viewing a single number as the safety story. A NOAEL has to be interpreted in the context of the study design, the test material, intended human exposure, the broader peer-reviewed scientific literature, and other available safety information.

Working through a formal safety assessment demonstrates what the evidence supports, where it is limited, and where additional testing may be warranted. The customer-focused question that shapes our research program is: “What additional research needs to be performed to better inform the consumer?”

 

6. Keep Safety and Efficacy Distinct

Pre-clinical research and ingredient safety are distinct but complementary topics. Pre-clinical research determines the end use, dosing, tolerability, and potential benefit. Safety studies address topics such as suggested dosage, repeated use, and tolerability. Chemistry and manufacturing establish identity and consistency. Where benefits are claimed, they should be supported by appropriate evidence.

 

7. Ask Which Regulatory Framework Supports the Use

Finally, ask what regulatory framework the supplier believes supports the intended use and what work has actually been done to evaluate that position.

GRAS relates to the safety of a substance under its intended conditions of use in food. The NDI framework addresses new dietary ingredients intended for use in dietary supplements. The evidence can overlap substantially. The regulatory context and the questions each framework addresses are distinct. Floraworks has evaluated both pathways in parallel, and we are still working through those processes.

 

What the Answers Tell You

Are you buying an ingredient with unknown origin that comes with a generic COA from a broker, or working with a supplier that is developing qualified market-ready ingredients?

Non-intoxicating cannabinoids should ultimately be evaluated using established safety frameworks wherever those frameworks can appropriately apply. That gives regulators, manufacturers, brands, and consumers a common scientific language for evaluating these ingredients.

 

Where the Industry Needs to Go

Cannabinoids need to stop being treated as siloed products from other food and dietary ingredients. There exists a wide diversity of molecules in cannabis sativa, and we are only beginning to understand their specific therapeutic value. That scientific interest increases our responsibility to characterize and develop these molecules properly.

Our current industry should have clearly defined ingredients, controlled manufacturing processes, reproducible specifications, appropriate toxicology research, scientifically justified exposure levels, and regulatory strategies appropriate to the intended use.

FloraWorks began as a cannabinoid specialist. Increasingly, the FloraWorks team and I have had to think like a traditional ingredient company, a food-safety organization, and a scientific development company at the same time. I believe that is where the broader cannabinoid industry ultimately needs to go.

 

From The Lab

Here Is What to Expect at the Upcoming Cannabis Quality Conference

This year’s Cannabis Quality Conference is being held alongside the long-running Food Safety Consortium, bringing cannabis quality professionals into the same room as food safety experts and creating an overlap between the two industries as they work through many of the same quality, testing, traceability, and safety challenges.

That overlap is particularly relevant as cannabis moves toward a more medical and federally regulated framework. The industry will need to upgrade its operations to meet higher standards, and food safety has spent decades developing many of the systems cannabis is now being asked to build.

The cannabis industry has largely operated without required GMP or cGMP certification, as most state regulatory models do not mandate it. Federal policy is now pointing toward greater oversight. In April, the U.S. Department of Justice rescheduled marijuana as a Schedule III drug, a change expected to bring increased FDA involvement in setting standards and providing regulatory oversight.

The conference takes place October 21–23 at the Crystal Gateway Marriott in Arlington, Virginia, alongside the 15th annual Food Safety Consortium, as the industry begins preparing for what greater federal oversight could mean for cannabis quality and manufacturing.

 

Building Quality Into the Manufacturing Process

Antoinette Duncan, CEO of Duncan Life Sciences, is the opening keynote speaker for this year’s Cannabis Quality Conference. Duncan has spent two decades working in quality systems across the pharmaceutical, medical device, and cannabis industries, including with MSOs such as Green Thumb Industries.

Her keynote, “Good Enough for Mom: Building a Culture of Quality in Cannabis Manufacturing,” focuses on helping employees see SOPs as part of their day-to-day work. The idea is to make the procedures second nature so employees can operate on autopilot, rather than treating SOPs as paperwork or as something the quality department checks after the fact.

That can be a challenge in cannabis, where many employees are coming into regulated manufacturing for the first time.

 

What’s on the Agenda

The Cannabis Quality track covers a lot of ground, with a strong lineup of industry experts covering quality systems, lab testing, certification, food-safety crossover, and safety science. Here’s a look at some of the sessions and the issues they’ll cover.

Two sessions look at quality management systems from different angles. Alex Hearding, founder of Red Wolf Risk, works with individual companies to identify their specific gaps and develop SOPs to address them, drawing on ISO 9001, GACP, and EU-GMP readiness concepts. Ron Potochar, of D.L. Newslow & Associates, takes a standards-based approach, outlining established standards such as GMP, HACCP, ISO 17025, and GLP, and showing how to apply them throughout a cannabis operation.

Lab testing dives into yeast and mold testing across six state cannabis markets. Graham Antoszewski, market data analyst for the Maryland Cannabis Administration, presents research showing that yeast and mold testing standards vary widely from state to state in action limits, testing protocols, and reporting practices. That raises questions about whether compliance results reflect actual contamination or inconsistent lab and regulatory practices.

His study benchmarks testing data from six state markets against a statistical model built on how microbial contamination naturally behaves. He finds that states with higher action limits tend to produce data that lines up with those natural patterns, while states with lower limits show signs of data censoring and other reporting artifacts. Overly strict thresholds can restrict cultivators and make the underlying test data harder to trust, undermining consumer protection.

New York’s laboratory oversight program gets its own session. Victoria Pretti, a research scientist and manager at the state’s Office of Cannabis Management, walks through how New York’s lab testing rules evolved as the state moved from medical cannabis in 2014 to adult-use legalization in 2021, and how the contaminants regulators worry about changed along the way. She covers how labs get permitted and renewed each year, how OCM inspects them, from record audits to multi-day on-site visits, and how the agency verifies a lab’s results back to the source, sometimes called “cradle-to-grave” traceability.

Darwin Millard, technical director at Cannabis Safety & Quality (CSQ), looks at certification and market access, including the certifications available to cannabis and hemp operators and what they can open up in markets like the EU. He covers the difference between process and product certifications, what operators should look for when evaluating certification bodies, and how certifications such as cGACP can help cannabinoid producers meet European market requirements. He also looks at dietary supplement certification and what it can mean for hemp-derived CBD products seeking access to major U.S. retailers.

Cannabinoids entering the food and supplement supply get their own panel, bringing together Vaughn Hartung, co-founder and CSO of FloraWorks, along with food-safety auditors and regulatory and quality leaders. The panel examines what it takes for a cannabinoid supplier to meet the same standards as any other food or dietary ingredient supplier. It also digs into whether existing GRAS and New Dietary Ingredient frameworks are enough to evaluate non-intoxicating cannabinoids, or whether more clarity or guidance is needed.

Nikki Sasher, M.S., M.B.A., PCQI, looks at air, an often-overlooked part of cultivation facilities. Her session covers how airborne particles and microorganisms move through grow spaces and how facility design, filtration, and monitoring can affect both plant health and compliance outcomes.

On the science and safety end, Shawna Vreeke, director of toxicology at True Terpenes, walks through how the company built the cannabis industry’s first in-house toxicology program and contributed to ASTM International’s safety standards for vape ingredients. More recently, the company brought in an independent inhalation toxicologist with FDA-regulated product experience to audit the program and stress-test the science behind how it evaluates ingredients.

Another session covers a biological potency assay from CannaMetrix. Chief scientific officer Kristofer Marsh presents a cell-based assay built on human endocannabinoid receptors that measures how cannabinoid and terpene compounds behave biologically, not just what a chemical composition test shows. He’ll walk through data on the assay’s specificity and reproducibility, and how it can be used in product development and strain selection.

Morgan Keefer, a senior laboratory accreditation professional specializing in cannabis testing compliance, quality management, and ISO/IEC 17025 standards, leads the Friday session “Breaking Silos for Cannabis, Learning from Food.” Food has struggled with disconnects between agencies like USDA, FDA, and CDC, the same disconnect cannabis faces with USDA, FDA, and DEA. Food addressed inconsistent lab testing accuracy through proficiency testing, a fix cannabis is now working through too. Worker safety improved in food over time, but Keefer notes it’s still a significant challenge in cannabis and hemp. The same recall and root-cause-analysis problems that show up in food are showing up in cannabis as well. The panel brings in perspectives from ASTM D37, CSQ, a compliance testing lab, a lab assessor, and a worker safety advocate.

Mary Lou Bosco, of AIM North America, looks at how a strong audit and compliance ecosystem, internal audits paired with independent third-party ones, helps cannabis operations catch gaps before regulators do and build trust with investors and consumers. She also looks at supplier management and how to hold suppliers to the same standards as the business itself. She sees audits as a way to strengthen the business rather than just satisfy regulators.

The Food Industry Has Been Working on This for Decades

The Food Safety Consortium brings decades of experience in risk management, corrective action, traceability, audits, and food-safety systems to the same event, making the crossover with Cannabis Quality valuable for both industries. Its program includes sessions on adaptive food-safety systems, FSMA traceability, root-cause analysis and CAPA, audit effectiveness, and the use of data and technology in food safety, along with training in areas such as FMEA and the FSPCA Food Traceability Rule.

Cannabis companies already have systems for cannabinoid potency, plant-derived contaminants, cultivation-to-manufacturing traceability, and rules that shift from state to state. What they don’t have is a food-safety regulatory framework built for a medically regulated world that complies with federal standards.

Food safety has spent decades working through many of the same issues cannabis is now facing. Having the two tracks together gives both industries a chance to see where they can learn from each other, where their systems can complement each other, and where they can work together.

Learn more about the Food Safety and Cannabis Quality Conference taking place in Washington, D.C this October.

Can You Reconstruct Your Cannabis Inventory Without the State System?

By Adrian A. Holguin, J.D., M.B.A.
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For years, California’s licensed cannabis operators have tagged plants, scanned packages, reconciled inventory, and paid for the privilege, on the understanding that Sacramento was using the data to identify diversion. On August 4, an Orange County Superior Court judgment confirmed what many operators complained about for years: the system was not flagging irregularities as the law requires. That same month, New Mexico showed the rest of the country how quickly a state can replace the system that holds an operator’s compliance history.

Put those two stories together, and you get one of the most important operating facts in this industry: the state’s seed-to-sale system is not your internal control system. It never was. And the period when irregularities were not being objectively flagged may be ending.

Start in California.

On August 4, an Orange County Superior Court judge entered final judgment in HNHPC v. Department of Cannabis Control, a case brought by the parent company of the retailer Catalyst that had been grinding through the courts for close to five years. California law requires the state’s track-and-trace database to flag irregularities for investigation. The court found that DCC’s system, run on Metrc, doesn’t do that. It generates enormous volumes of reports and raw transaction data, and then state analysts review it by hand, without any written definition of what an “irregular transaction” is. The judge gave DCC six months to establish objective criteria, so the system can flag suspicious activity on its own.

That made operators angry, and it’s understandable. The other end of all that compliance labor was manual analyst review without objective criteria.

But here is the part that should make operators act. The judgment gives DCC six months to establish objective criteria for flagging irregularities. That does not guarantee that automated flags go live on day 181, and an appeal could affect the timing. Operators should plan for more scrutiny and changes that may shape how current and historical records are interpreted. Do not assume that old data is beyond review simply because it was not automatically flagged when it was entered.

Now go to New Mexico.

New Mexico’s BioTrack agreement was set to expire September 15, and the Cannabis Control Division says it could not secure an extension. The state awarded a replacement contract on January 28 to Albuquerque-based Real Time Solutions. The first operator-facing dates arrived August 10, with a fuller schedule on August 14. BioTrack shut down transfer functionality for non-retailers on August 25, and retail access ended September 4. That was fifteen days from the first dates to the first shutdown. Existing BioTrack user accounts did not transfer automatically, and only data reflected in BioTrack at migration would move. Operators sought emergency relief; the court allowed the rollout to proceed while the matter continued, and the state says transition planning began in 2024.

The obvious question is whether other states should copy New Mexico. The new system is free to licensees, with no per-tag fees and no monthly subscriptions, and the state selected the vendor partly for that reason. My answer is yes on the money and no on the method. Per-tag fees are a tax on compliance, and every state that charges them should be embarrassed by New Mexico’s price. But changing a system of record on roughly two weeks’ notice is not a model other states should copy. It is a stress test. Operators who can produce their own inventory record without logging into the state portal are keeping proper accounting records.

Here is the common thread. California’s system has not been doing what the law requires and now faces a court-ordered deadline to establish objective criteria. New Mexico changed systems on a compressed schedule. In both cases, the operator’s exposure comes down to one question: can you reconstruct your own records without relying exclusively on the state’s software?

I spend a good share of my time doing exactly that, usually after something has already gone wrong, and it has taught me three things.

One. The state system is a reporting obligation. It should not be your only bookkeeping system. What came in, what went out, what was destroyed, who signed, what the scale said, and why an adjustment was made should exist in a form you control and can hand to an auditor, buyer, insurer, or judge when it is needed.

Two. Reconcile on a cadence, and write the explanation at the time. Weekly is a practical baseline for many operations, while higher-risk workflows may need daily review: physical count versus your internal system versus the state system, with every variance explained and initialed. When I rebuild a company’s records after the fact, the problem is almost never the number. It is the missing note that would have explained the number. A 3% harvest variance may have an ordinary operational explanation if it was documented the day it happened. The same 3% looks like an unexplained irregularity if the first explanation appears in a deposition.

Three. Someone else is about to define “irregular.” Get ahead of them. You already know what objective criteria are likely to examine because they are what a good auditor examines: inventory adjustments, waste and destruction events, rejected or returned transfers, package-count changes, and yields outside the norm for a cultivar or room. Document the reason for each of those the day it happens, with a name attached. When the state’s criteria arrive, you should be reading them against a paper trail that already exists instead of building one backward.

A word about automation, because everyone asks, and because it can make this better or a great deal worse.

Where it helps: pulling nightly exports from the state system, running the three-way reconciliation, flagging your own outliers before the regulator’s system does, and preparing a first draft of a variance note from data already in the system for a manager to verify and sign. Used that way, automation can produce a cleaner audit trail while reducing routine labor.

Where it hurts: automating a process nobody can explain. If your team can’t articulate why a package gets adjusted or when waste gets logged, a tool that does it faster doesn’t fix the process. It produces a larger pile of unexplained adjustments, each with a timestamp and a user ID that will look very intentional to whoever reads it later. Automation is a photocopier. It makes more of whatever you feed it.

Track-and-trace vendors come and go, agencies get sued, courts set deadlines, and the operator is always the one left holding the records – or not holding them. I spend most of my time fixing operations and some of it testifying about failures that were not fixed in time. The line between those two groups is rarely the business model or the state. It is whether the company maintained a complete internal record and reconciled it to the state system.

State systems change. Scrutiny tightens. Make sure your own record can tell the story before someone else tells it for you.

 

Are Acidic Cannabinoids the Next Frontier for Product Innovation?

By Pam Chmiel
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While the cannabis industry has made significant strides in incorporating minor cannabinoids into product formulations, a vast number of therapeutic compounds remain largely unexplored. Researchers and cannabis physicians have been experimenting with acidic cannabinoids for several years with promising results, but the broader industry is only now beginning to catch up. As extraction technologies improve and research advances, more acidic cannabinoids are appearing in new product formulations.

“People are more and more focused on acidic cannabinoids now because, before, we did not have the advanced extraction technology to isolate them in a highly purified form, and now we do,” said Hemant Kumar Bid, PhD, program director for the Master of Science in Biotechnology at Morehouse School of Medicine, where he focuses on medical cannabis.

“The plant produces cannabinoids in their acidic form,” Bid explained. “These acids are the precursors to neutral cannabinoids such as CBD and THC.”

Among the acidic compounds, Bid has a particular affinity for cannabigerolic acid (CBGA), often referred to as the “mother of all cannabinoids.”

“In the scientific world, we call it the stem cell,” he said. Stem cells are extremely powerful because they can develop into many different types of cells in the body. CBGA works in a similar way in the plant.

CBGA is the foundational precursor molecule from which the plant synthesizes other major cannabinoids. In the glandular trichomes of the cannabis plant, enzymes convert CBGA into THCA, CBDA, and other downstream compounds that later become THC, CBD, and CBG when heat triggers decarboxylation.

Bid noted that emerging research suggests that acidic cannabinoids may possess unique therapeutic properties and operate through molecular mechanisms distinct from those of their neutral counterparts (e.g., THC, CBD). Some early findings indicate that these compounds may even outperform their decarboxylated forms. For example, he cited research from Johns Hopkins University suggesting that acidic cannabinoids may demonstrate significantly higher bioavailability in some formulations.

Scientific understanding of the endocannabinoid system is also expanding rapidly. Early research focused primarily on CB1 and CB2 receptors and two endogenous ligands, anandamide and 2-AG. Today, scientists recognize that the system is far more complex.

“Initially, people thought CB1, CB2, and the two molecules were the only triggers,” said Bid. “But that is not the case. It is the whole ocean now. There are so many receptors, signaling molecules, and enzymes that we still have yet to discover.”

One of the biggest obstacles to harnessing acidic cannabinoids is their chemical instability. Exposure to heat, light, oxygen, or simply the passage of time causes decarboxylation. In this process, THCA converts to THC, CBDA to CBD, and CBGA to CBG, making it difficult to preserve the original acidic molecules.

 

Emerging Research on Acidic Cannabinoids

A recent scientific review published in the National Library of Medicine highlights the therapeutic potential of the four primary naturally occurring acidic cannabinoids: THCA, CBDA, CBGA, and CBCA.

Rather than acting primarily through CB1 receptors like THC, these compounds appear to influence a wide range of molecular targets. Researchers have observed activity across several biological pathways, including serotonin receptors (5-HT1A), inflammatory enzymes such as COX-2, PPARγ nuclear receptors involved in metabolic regulation, TRP ion channels, and intracellular calcium signaling systems. Some studies also suggest interactions with enzymes linked to neurodegenerative disease, including BACE-1 and cholinesterases.

This multi-target activity has led scientists to explore acidic cannabinoids across several therapeutic areas. In neurodegenerative disease models, they have been shown to reduce amyloid-beta accumulation, regulate calcium signaling in neurons, decrease neuroinflammation, and improve learning and memory performance in animal studies. In inflammation models, THCA and CBDA demonstrated COX-2 inhibition and PPARγ-mediated anti-inflammatory activity, reducing joint swelling and cartilage damage in arthritis research.

Early oncology studies have also identified anti-migratory and anti-proliferative effects in aggressive cancer cell lines, along with signaling pathways associated with anti-metastatic activity. In epilepsy models, CBDA has been shown to increase seizure thresholds, particularly when formulations improve central nervous system exposure.

Researchers note that pharmacokinetics remain one of the major hurdles. Acidic cannabinoids tend to absorb quickly but often exhibit short half-lives and relatively limited brain penetration due to the carboxyl group in their molecular structure. As a result, formulation science and delivery systems may be just as important as the compounds themselves.

Although human clinical trials remain limited, advances in stabilization, encapsulation, and delivery technologies are beginning to make these fragile compounds easier to study. As a result, scientists increasingly believe that preserving cannabinoids in their native acidic form could open the door to a new generation of targeted cannabinoid therapeutics.

 

Doctors Prescribing Acidics

One of the well-known cannabis physicians paving the way for understanding treatments is Dr. Bonni Goldstein. She started her cannabis medicine practice, Canna-Centers, in California in 2011, and later added Goldstein Wellness, an educational platform designed to educate healthcare professionals.

Long before the surge of interest in CBD sparked by Charlotte Figi’s story, Goldstein had been exploring acidic cannabinoids in her clinical work. In the early years of her practice, she began experimenting with THCA, particularly in pediatric patients whose parents were seeking non-intoxicating options. At the time, very little clinical data existed on acidic cannabinoids, but anecdotal results suggested that THCA could offer therapeutic benefits without the psychoactive effects associated with THC.

The pediatric side of her practice expanded significantly after the CNN documentary featuring Dr. Sanjay Gupta aired, highlighting the remarkable impact CBD treatment had on Charlotte Figi, a young patient with severe epilepsy. While some evidence suggested that seizures and autism exhibit high levels of neuroinflammation, “We didn’t really know a lot about CBDA then, but there was evidence in preclinical studies that these compounds may reduce inflammatory signaling, which then leads to fewer seizures and unwanted behaviors in children who have autism,” said Goldstein.

“Everyone’s endocannabinoid system expression level is different,” she explained, noting that cannabinoid therapies frequently require individualized approaches to dosing and formulation. There is no standardized dose or standardized medicine for cannabis.

Goldstein likes to layer cannabinoids in her treatment depending on the patient’s unique needs, since everyone is different and responds differently to treatment. She added that CBD interacts with over 75 targets in the brain and body, whereas CBDA is more selective; it has its own targets, but also overlaps with CBD.

Goldstein has recently been incorporating CBDA into patients’ regimens who have seizures because there is some evidence of its anticonvulsive properties. She cited a small study of 14 kids with autism in Australia, claiming that a CBDA-dominant botanical formulation achieved significant success for 93% of participants. “It’s a very small study, but it’s very promising,” she said. She has also begun layering CBGA into her treatments due to its anti-inflammatory and anticonvulsant potential.

As clinicians and researchers continue to explore acidic cannabinoids, physicians are beginning to consider how these compounds may fit into tailored treatment strategies for specific medical indications.

 

Product Development Challenges

Acidic cannabinoids are minor cannabinoids, meaning the plant naturally produces them in relatively small amounts. Extracting meaningful quantities often requires significantly larger volumes of biomass.

Gene editing technologies may offer a potential solution, though they entail both scientific and economic trade-offs. Techniques such as CRISPR-Cas gene editing allow researchers to manipulate genes involved in cannabinoid biosynthesis, potentially increasing the plant’s production of specific acidic compounds.

“We have the power of CRISPR-Cas technology, which is a very advanced gene editing technology,” said Bid. “We can manipulate genes encoding acidic cannabinoids, overexpress them, and create hybrid plants that produce larger quantities for research.”

“However, when you manipulate nature’s backbone, it becomes disturbed and weakened,” Bid explained. “The plant can become more susceptible to fungi, bacteria, mold, and mildew.” A manipulated plant may remain viable for only five or six generations before failing entirely, creating a significant challenge for patients and clinicians trying to replicate their formulations.

There is one notable advantage. Acidic cannabinoids are more polar than their neutral counterparts. This can make them easier to formulate into certain delivery systems and may improve bioavailability compared with their fat-soluble neutral counterparts. Lower doses could also make products more affordable for patients or consumers.

 

Extraction Technologies

The volatility of acidic cannabinoids has made them difficult to extract and preserve.

“The trick is to avoid heat and use a cold process,” Bid explained.

Many solvent-based extraction systems, including ethanol, CO₂, and hydrocarbon systems, can be adapted to operate at very low temperatures; however, mechanical extraction methods produce higher-quality, full-spectrum results while preserving acidic compounds.

“The most popular method is mechanical expression, such as rosin or ice water hash,” Bid said. “With ice water extraction, there is no heat involved so that acidic cannabinoids can be retained in a carefully controlled environment.”

Essentia Scientific, where Bid serves as a scientific advisor, uses large-scale aqueous washes to solubilize acidic cannabinoids directly from plant material. The process involves sequential filtration steps to remove suspended solids and produce a clarified extract.

More advanced technologies are also entering the field. Cryogenic extraction and ultra-low-temperature processing systems are being developed specifically to preserve temperature-sensitive cannabinoids. Another emerging approach is alkaline leaching, a greener technique that extracts acidic cannabinoids at a high pH. This method avoids lengthy drying steps that can accelerate decarboxylation.

Additional innovations include crystallization and encapsulation technologies. In crystallization processes, acidic cannabinoids are stabilized within structured lattices such as crystalline salts or sugar alcohol matrices.

One company working in this area is LipidBond, which holds patents on an encapsulation system designed to protect cannabinoids from light, oxygen, and heat. The technology uses nanoencapsulation strategies that are common in pharmaceutical development but relatively new to cannabis processing. By packaging cannabinoids inside nanoparticles, the system can help stabilize the molecules and potentially increase bioavailability by enabling them to cross the blood-brain barrier.

“If I have a client who wants 75 percent acidic compound and 25 percent non-acidic compound, I have a formula for that,” said Bobby Lafferty, Chief Technology Officer at LipidBond, who designed the company’s processing equipment. “It is essentially a matter of adjusting temperature and pressure. Once you can pinpoint those variables, you can control the exact decarboxylation rate.”

Lafferty says extensive research and development have helped the company understand how cannabinoids interact during processing.

“We have done so much R&D that we know how everything works together,” he said. “If I look at a COA and see 28 percent THC or 30 percent CBD, I can design the compound around that profile.”

The system functions as a microemulsion platform that maintains full-spectrum plant components.

“Our process is essentially an emulsion system,” Lafferty explained. “Not nano emulsions but micro emulsions that are extremely stable. When you keep the plant full spectrum, there are fibers and other natural compounds that act as emulsifiers and help prevent cannabinoids from falling out of suspension.”

In addition, the increasingly common practice of flash freezing and processing fresh frozen cannabis immediately after harvest is helping preserve cannabinoids and terpenes in their original acidic form.

 

Shelf Stability Requires Cold Storage

Even after extraction, maintaining the stability of acidic cannabinoids remains challenging because they naturally decarboxylate over time.

Researchers are also developing formulation stabilizers specifically for acidic cannabinoids. One patented composition, according to Bid, combines an acidic compound with a pharmaceutical-grade solvent to achieve room temperature stability for nearly 24 months.

“Advanced low temperature extraction, gentle processing, and stabilization strategies are what will drive success for future acidic cannabinoid formulations,” said Bid.

Several companies are already exploring stabilized acidic cannabinoid formulations, suggesting the next wave of cannabis product innovation may focus on preserving the plant in its raw biochemical state.

As extraction technologies improve and stabilization techniques advance, acidic cannabinoids may represent one of the most promising frontiers in cannabis product innovation.

 

 

 

The $3 ‘Cover Charge’ Cannabis Retailers Are Leaving on the Table

By Brett Harris
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Imagine every customer who enters a dispensary paying the business an additional $3.

No new entrance fee. No increase in cannabis prices. No additional foot traffic required.

The retailer simply captures about $5 in accessory sales per customer, with an average gross margin of roughly 60%. That produces approximately $3 in additional gross profit from a person who already walked through the door intending to make a purchase.

Across hundreds or thousands of transactions, that $3 begins to look less like incidental revenue and more like a meaningful response to the cannabis industry’s profitability problem.

Yet most dispensaries remain a long way from that goal.

The industry has spent years debating how to increase traffic, protect cannabis margins, and compete against discounting. Meanwhile, it routinely allows customers to leave the store without everything they need to consume the products they just bought.

Accessories often represent only 1% to 2% of dispensary revenue, according to internal LuvBuds data, even though they are legal consumer products with some of the strongest margins available to retailers. The issue is not that customers do not want grinders, batteries, cones, trays, storage products, cleaning supplies, or glass. Most stores have not made those products visible, accessible, or easy to purchase.

 

Customers should not need a second stop

A flower customer may need a grinder, lighter, pipe, or rolling papers. A vape customer may need a compatible battery. Someone investing in premium flower may benefit from proper storage. Anyone who regularly uses glass eventually needs cleaning supplies.

These purchases should be part of the same transaction.

Traditional retailers understand this instinctively. Shoe stores sell socks and laces. Electronics retailers sell chargers and protective cases. Grocery stores place complementary products together to increase basket sizes. It is a tried-and-true strategy because making customers visit a second business is bad retail.

Cannabis developed differently. Dispensaries became highly sophisticated at managing regulated products while treating the tools used to consume them as someone else’s problem. When stores do sell accessories, the products are often placed behind glass, scattered near the register, or selected haphazardly instead of based on actual sales performance.

That approach leaves revenue on the table and creates a disappointing customer experience. When a shopper cannot find a basic accessory at the dispensary, the retailer sends that person to a smoke shop, convenience store, or online seller to complete the transaction.

Dispensaries already acquired the customer and earned their trust. They should be able to complete the purchase.

 

The opportunity is measurable

The results change quickly when retailers treat accessories as a managed category.

Across more than 120 stores participating in our merchandising and inventory programs, accessory sales have increased by at least 80%, with some locations recording gains of up to 300%.

That growth does not come from attracting a different kind of customer. It comes from bringing the right products onto the sales floor, presenting them coherently and keeping them in stock.

A successful accessories category does not require turning a dispensary into a sprawling head shop with hundreds of bongs. Most stores can capture the majority of the opportunity with approximately 40 to 50 carefully selected products.

The exact assortment should vary. An urban adult-use store, a neighborhood medical dispensary, and a tourist-focused retailer have different customers. Each should identify the products that sell consistently, maintain appropriate inventory levels, and eliminate the dead stock taking up valuable space.

The objective is not abundance. It is disciplined availability.

A $500 piece of glass probably does not belong in every dispensary. A dependable $10 or $25 piece might. Customers may not expect an enormous wall of specialty products, but they reasonably expect to find a battery, grinder, cone, or basic pipe where they purchase cannabis.

 

Displays cannot succeed without execution

Merchandising matters, but a display by itself will not solve the problem.

Products must be replenished. Sales velocity must be tracked. Underperforming items must be replaced. Budtenders must understand what is available and how it fits into the customer’s purchase.

The cannabis industry frequently underestimates the importance of that final point. Budtenders remain enormously influential, but many receive extensive education about flower, concentrates, and edibles with almost no guidance about the accessories that support those purchases.

The recommendation does not need to feel like an aggressive upsell. It can be as simple as asking a vape customer whether they have the correct battery or reminding a flower customer that proper storage can help protect the product they are buying.

That is service, not pressure.

Retailers also need someone to own the category. When responsibility is loosely spread among store managers, buyers, and frontline staff, inventory gaps appear, and displays deteriorate. Vendor-managed inventory can help, but only when the retailer and vendor remain accountable for keeping the program functioning at the store level.

The opportunity is straightforward, but the execution must be consistent.

 

A category is moving toward the dispensary

There is also a larger shift occurring outside cannabis retail.

Smoke shops have historically captured much of the accessory business, but many now depend heavily on product categories facing increasing regulatory pressure, including flavored nicotine vapes, intoxicating hemp products, and kratom. Those regulatory decisions are threatening profit centers that have historically supported their broader merchandise selections.

In Denver, where LuvBuds is headquartered, a flavored-nicotine ban that took effect Jan. 1 affected approximately 575 retailers. One smoke-shop owner told Denver7 that flavored nicotine had accounted for roughly $750,000 in annual sales — about half of her business. Whatever one thinks of these policies, the retail consequences are real.

Dispensaries have an opportunity to reclaim the cannabis-specific portion of that market.

They already possess the customer relationship, the relevant product knowledge, and the controlled retail environment. They do not need thousands of products or cases filled with novelty glass. They need the core assortment that solves the needs of most customers most of the time.

Accessories will not fix every structural problem facing cannabis businesses. They will not change tax policy, produce federal banking reform, or reverse wholesale compression.

But retailers cannot build their plans entirely around reforms they do not control.

They can control what is displayed in their stores. They can control whether essential products are in stock. They can train employees to complete the customer’s purchase. And they can capture an additional stream of high-margin revenue from traffic they already have.

In an industry where profitability often feels dependent on Washington, state regulators, or the next market cycle, earning another $3 in gross profit from the customer already standing at the register is a decidedly practical place to start.