PART I: War on Oils
By Andrew Haftkowycz and Scott Roberts
Brian Hanna, the executive director of the Cannabis Regulatory Agency (CRA) has been a busy guy lately. From advising the DEA on how the federal government should approach legal cannabis nationwide, to bringing down the hammer on cannabis oils in Michigan, Hanna is on a path to make Michigan Marijuana the biggest player in the U.S. and maybe even the world. His work in Michigan cannabis has also caused attention from other states, with rumors of him being recruited to lead up cannabis licensing in states that are just rolling out their programs.
BRIAN HANNA: Cracking down on Conversion Oils
Many big players in the Michigan Cannabis industry are angry, while others are relieved that they can finally compete on a level playing field.
At a recent CRA meeting, attendees expressed concerns over the discovery that some vape cartridges and edibles contained unregulated CBD conversion oil and banned pesticides. The process of converting CBD to THC, which is not subject to the same testing as marijuana, poses potential health risks due to the lack of oversight and scientific research.
The CBD “Grey-Area”
What’s the big deal with CBD conversion oils? The oils are derived from hemp plants (which are federally legal) – meaning Hanna’s CRA doesn’t have the ability to regulate their nationwide production, though CRA does have jurisdiction over hemp products in Michigan. Thanks to this federal treatment, some Michigan cannabis manufacturers have been skirting statewide regulations by converting imported CBD into THC products, and CRA has recently begun cracking down on these companies.
Thanks to this legal grey-area, the CBD conversion process is largely unregulated in most of the U.S.. This lack of regulation means state regulatory agencies don’t test for the presence of contaminants like fungus, heavy metals, and pesticides.
Hanna’s CRA is worried that it cannot make a guarantee to consumers that all cannabis products sold in Michigan are free from safety hazards to its users. This unregulated CBD-turned-THC has the potential to endanger Michigan cannabis consumers by placing potentially harmful unregulated conversion oils into our dispensaries.
This is important because consumers are not in the business of checking whether their vape pen is moldy when they rip it for the first time: they depend on the market and the government to protect them from crappy products, and that’s exactly what Hanna’s CRA is trying to do, by proposing rules to ban the conversion of cannabinoids.
While he is actively advocating for an explicit ban, the CBD to THC conversion oil is already forbidden under Michigan’s cannabis regulations, regardless of whether the final product results in THC or THC-A. The prohibition, however, is not explicit and requires an analysis of the laws and regulations. Michigan defines marijuana as including more than 0.3% THC or THC-A, which means there is no THC-A loophole like you see in other states. This is also why Michigan gas stations aren’t flooded with tons of THC-A “hemp” beverages like in other states.
Michigan rules also only authorize state licensees to produce or sell marijuana, and THC conversion oil is marijuana under state law. Conversion oil, as opposed to distillate extracted by a State of Michigan licensed processor, has THC that is not derived from a State of Michigan licensed facility. This would violate R. 420.103, but it is clear Hanna wants the prohibition to be more explicit.
HANNA: “Destroy All the Oil”
If Hanna’s CRA passes the new rules, all CBD conversion oil (and that means every single unit – will need to be disposed of.
Trashed.
Destroyed…. To the tune of a couple hundred million dollars of product.
Operators will be explicitly prohibited from selling CBD conversion oil products, and CRA may even conduct random tests on distillate to determine whether conversion oil is being used. The CRA is actively enforcing regulations and working to close loopholes that allow hemp-derived THC products to enter the market. CRA also recently announced crackdowns on a couple Michigan licensed processors that allegedly brought conversion oil into the state regulated system. Consumers are encouraged to stay informed and advocate for stricter regulations to ensure the safety and quality of cannabis products.
HANNA vs. Ghost Tags
Hanna’s drive for a national tagging model comes from the CRA’s experience with regulating Metrc, the statewide seed-to-sale marijuana tracking system. Hanna identified that Metrc is a viable alternative to be implemented into a federal legal marijuana tracking model. Federal implementation of Metrc would streamline Michigan’s cannabis economy into an interstate commerce model. With cross border cannabis commerce on the horizon, that would turbocharge Michigan’s cannabis economy, making it a significant marijuana manufacturer, exporter, and innovator, regionally and nationally.
Hanna recently identified “ghost tags” as an enemy of the CRA. “Ghost tags” are a nickname for Metrc plant tags with improper or subversive data to hide the location and amounts of cannabis products operators in the state. “Ghost tags” let cannabis operators get more (and even unregulated/untested) products into state dispensaries. This is common among outdoor operators, which can claim that a certain amount of product originated from a Metrc tag, even though no such product exist or the amount of such product is greatly exaggerated. This phantom product is then used to mask the source of unlicensed product.
The need for a trustworthy interstate tracking and tagging system reinforces Hanna’s war against “ghost tags” in Michigan, to thwart any illegal or criminal schemes to put unregulated (and potentially contaminated) weed into consumer hands.
For cannabis entrepreneurs operating in Michigan, this raises increased scrutiny on your operations. In one instance, a large outdoor cultivator has regularly had MSP helicopters fly over the farm to check that all the Metrc tags correspond to actual plants, as opposed to “ghost” plants. It is crucial for Michigan cannabis operators to not only meet the state minimum compliance standards, but to have internal quality controls that can withstand today’s (and tomorrow’s) cannabis regulations.
It doesn’t take much for one slip-up – one possibly “high” manager – to create a serious CRA violation (possibly carrying criminal penalties). If you are worried that your current cannabis quality controls are lacking, set up a consultation with Scott Roberts Law today to stay ahead of the CRA and to get ahead in the Michigan Marijuana Business.