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Lack of standards, dubious business practices threaten to upend cannabis testing industry

Lack of standards, dubious business practices threaten to upend cannabis testing industry

cannabis testing labs are suffering from issues.

A lack of standards is among the factors plaguing the cannabis testing industry, threatening to undermine consumer confidence in marijuana products and making it harder for some testing businesses to operate, according to industry insiders.

But the problems don’t stop there, testing lab officials and regulators contend.

Some marijuana businesses – such as growers, processors and manufacturers – are shopping around for labs that will give them the results they want to see in the way of THC potency and contaminants, according to industry officials.

Other cannabis businesses are said to be sending in samples of their marijuana that have been adulterated with spray-on cannabis oil or dusted with THC crystals to give the impression of a higher THC content, among other practices.

Regulators, meanwhile, are shuttering testing labs for allegedly reporting results that don’t match up with audits.

Earlier this month, the Washington State Liquor and Cannabis Board (LCB) suspended the license of Praxis Laboratory for allegedly falsifying testing data on more than 1,200 samples of cannabis by providing higher THC numbers than tests actually found.

As it stands now, the Centralia, Washington-based lab is suspended for 180 days effective Dec. 10. While the lab is shuttered, state regulators will seek to permanently revoke its license.

According to an LCB release, “during the investigation the lab owner attempted to destroy evidence of falsified data in an effort to obstruct (the agency’s) ability to conduct a complete investigation.”

Praxis said in a statement to Marijuana Business Daily that the LCB’s decision was “in error and based on inaccurate information.” The lab is appealing the ruling.

In a separate statement to the Washington state cannabis community that was shared on social media, the company said, “This is a clear cut case of agency overreach and libel and we will be pursuing legal action immediately.”

The statement also noted that a disgruntled former employee stole data from the lab, then contacted the regulators.

Regulators elsewhere have shuttered cannabis labs for inaccurate or misleading test results.

In September 2019, the Nevada Tax Commission launched an investigation into marijuana testing labs in the state.

In February 2020, state regulators suspended the license of Certified Ag Labs and fined the business $70,000 for what was described as “inaccurate and misleading” potency in cannabis products that boosted THC levels by as much as 10%.

The lab was allowed to reopen.

A Certified Ag representative told MJBizDaily the company “had some bumps, but our data was plus or minus 10% and we stand behind it.”

Lab shopping

The practice of lab shopping – where cannabis growers or product makers look for a facility that will provide favorable results – has almost put Keystone State Testing out of business, said Dr. Kelly Greenland, CEO of the Harrisburg, Pennsylvania-based marijuana testing lab.

“We have clients who test with us and never come back because their numbers are higher elsewhere,” she said.

In addition to higher potency levels, some cannabis businesses also seek favorable results for contaminants, including microbials and heavy metals.

“There are a few labs out there saying, ‘Tell me what you want it to say, and I’ll put it on the label,’” Greenland said.

Pennsylvania’s regulations are adequate, she said, but they’re not being enforced.

“If you want to make sure this market is safe, you need to have safe regulations and you need to have your enforcement enforce the regulations that you’ve made,” Greenland said.

Testing labs promising quick turnaround times – less than 48 hours, for example – might be cutting corners. Greenland said it’s normal for a lab to take up to 72 hours to return results.

Growers and processors don’t have to try that hard to find good testing labs, according to Greenland.

But she added that often it doesn’t make good business sense to play by the rules, “as messed up as this sounds.”

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12 Cannabis Industry Predictions for 2021

12 Cannabis Industry Predictions for 2021

Cannabis industry predictions for 2021

2020 was a crazy year in more ways than one.

Beside the obvious factor that impacted everybody’s lives for the last 10 months, cannabis has also seen some huge changes. From industry trends to overall growth, 2020 was the most progressive and profitable year for the industry so far.

There were still some lows however, like the MORE Act being passed in the House but stalled indefinitely in the Senate. California has had its fair share of issues with their legal market as well due to bad regulation and local government mishandling.

But we aren’t here to look back on the bad, but to look forward to the future of the industry and everything that may bring. Here are 12 predictions for the cannabis industry in 2021.

1. Cannabis consumption increases

This is probably the most obvious to predict. As more states legalize medical and recreational cannabis or decriminalize the plant, consumption will rise as people gain more safe and legal access to quality cannabis. This includes all forms of cannabis; concentrates, edibles, topicals and others.

2. We still won’t see federal legalization

Considering that the senate currently won’t even vote on a bill that would decriminalize cannabis on the federal level, it is very unlikely that we will see full scale legalization on the federal level in 2021. There’s a chance that we see more legislation passed through the House that will give cannabis businesses better access to banking.

However this will likely also be stalled in the Senate. In short, as long as Mitch McConnell is the Majority Leader of the Senate, don’t expect any sort of federal progress when it comes to cannabis.

3. Rise in popularity of minor cannabinoids in hemp

Cannabidiol, more commonly known as CBD, has seen a massive increase in popularity and use in 2020. Through marketing and education efforts, people have learned of the benefits of CBD and how it is entirely different from THC. This has led to more curiosity about the wide variety of other cannabinoids in hemp and cannabis. CBN and CBG have already begun breaking into the forefront of cannabinoid research with more on the way in 2021.

We’ll see new mixed cannabinoid products that advertise different experiences for the consumer start to become much more popular.

4. Extraction and dosing technology increases

Cannabis extracts and concentrates continue to grow in popularity, with rosin taking over the scene in 2020 as the cleanest and tastiest dabs. 2021 will be no different as the technology for creating extracts advances even more. Solventless extracts will likely remain the most popular for health-conscious and connoisseur consumers, while vape cartridges and pens will stay popular for the average consumer.

It will also become easier to understand the dosing of concentrates, especially with cartridges and dabs. There is currently no widely known dosage for either, just general suggestions from the local budtender or industry blogger.

5. Increased presence of national cannabis industry brands

We’ve seen the rise in popular brands like Cookies and Runtz from California’s recreational market to Maryland’s medical market, and that trend is bound to continue. With the success of these brands, others will try to replicate their marketing style to also become popular nationally.

Cookies and Runtz are likely just more “flavors of the month”, and new products will likely take their place in 2021.

6. US stock market for cannabis

Investors in the US have seen that cannabis is essential and pandemic proof. With the huge boost to industry revenue in 2020, investors will be looking for more ways to invest in the United States cannabis industry. While Canada’s cannabis industry saw much less success than the US in 2020, their model for investing in cannabis stocks could be used a template to implement a similar system in the US.

With so many ancillary (non-plant touching) businesses in the industry and expansion growing every year, there may soon be an investment market for companies that work with the cannabis industry but don’t actually process or touch the plant.

7. Ancillary cannabis business transactions increase

Speaking of ancillary cannabis businesses, transactions for these companies are going to increase in 2021. Equipment supply stores, consulting and marketing firms focused in the cannabis space all will see more sales as more people get into the industry across the country driving a need for more of these businesses.

8. Oklahoma and Mississippi continue to expand

Oklahoma was one of the highest grossing states in terms of cannabis revenue despite being medical only in one of the most red states in the nation. Following their model, Mississippi will likely follow the same path as long as demand is the same.

Oklahoma will continue to hone its market and weed out cheap producers with low quality product that took advantage of an infant market with consumers lacking necessary education to choose better products. We will see a few producers rise to the top in 2021 and become available across the state.

9. Michigan explodes with huge operations

Michigan had a slow start after they legalized recreational cannabis in 2018, however sales have been rising consistently since dispensaries began opening and selling cannabis in late 2019 and through 2020. With Detroit announcing that it will be handing out licenses beginning Summer 2021, we are going to see a massive increase in grow operations and dispensaries in the area.

As the most densely populated area in the state, Detroit is going to launch Michigan into the next phase of its legal industry by the end of 2021.

10. Supply chain for hydroponic and grow industry becomes more limited

Due to shipping complications that arose in 2020 from China, 2021 is likely to be a rough year for the grow industry supply chain. While more people will be growing cannabis than ever before, the supply of the products they need to do it are going to be more limited than ever before as well.

Inevitably the low supply and high demand will lead to increased prices and decreased availability of many fertilizers, lights and media.

11. The exotics hype trend continues

The community of connoisseur cannabis consumers has driven a niche market of exotic and exclusive cannabis strains driven by media marketing campaigns and hype. This trend will continue in 2021 with brands we’ve already mentioned like Cookies and Runtz leading the way.

In states where cannabis is recreational or medical but Cookies and Runtz don’t operate, new breeders will rise with exclusive strains that you can only get from them at a specific dispensary on a specific drop date, increasing hype and demand. These strains will remain the most expensive option on the shelf in terms of flower.

12. More states will legalize cannabis

Following the trend of the last few years, more states are going to legalize cannabis recreationally or medically in 2021. New York is a state a lot are looking toward to make a move in the new year since their neighbor New Jersey approved a legalization ballot in November. With no competing industry, New York is bound to lose a lot of tax dollars to New Jersey’s legal cannabis over the border.

Other states like Pennsylvania and Virginia have had their governors voice support for a recreational cannabis industry more than once in 2020. While these states may have a legalization vote in 2021 it’s unlikely that either will pass in the near future. Other states to follow in 2021 are Connecticut and New Mexico.

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How state marijuana legalization became a boon for corruption

How state marijuana legalization became a boon for corruption

Bribery and corruption in the cannabis industry

By making local officials the gatekeepers for million-dollar businesses, states created a breeding ground for bribery and favoritism.

Jasiel Correia’s star was rising.

The son of Cape Verdean immigrants in the working-class Massachusetts port city of Fall River — famed as the home of Lizzie Borden — Correia was a home-grown prodigy. At 23, he was elected mayor, fielding congratulatory calls from Sen. Elizabeth Warren and Rep. Joe Kennedy.

That was in 2015. Four years later, just a week before his reelection race, federal agents ignominiously led him away from his home in handcuffs and charged him with attempting to extort cannabis companies of $600,000 in exchange for granting them lucrative licenses to sell weed in his impoverished city.

“Mayor Correia has engaged in an outrageous brazen campaign of corruption, which turned his job into a personal ATM,” declared U.S. Attorney Andrew Lelling during a press conference announcing the charges.

The downfall of Fall River’s young mayor wasn’t just a tragedy for the thousands of people who invested their hopes in him: It was emblematic of a rash of cannabis-related corruption across the nation, from Massachusetts to California to Arkansas and beyond.

In the past decade, marijuana legalization for adults over 21 has been passed in 15 states, and another 17 have legalized medical marijuana. But in their rush to limit the numbers of licensed vendors and give local municipalities control of where to locate dispensaries, they created something else: A market for local corruption.

Almost all the states that legalized pot either require the approval of local officials — as in Massachusetts — or impose a statewide limit on the number of licenses, chosen by a politically appointed oversight board, or both. These practices effectively put million-dollar decisions in the hands of relatively small-time political figures — the mayors and councilors of small towns and cities, along with the friends and supporters of politicians who appoint them to boards. And these strictures have given rise to the exact type of corruption that got Correia in trouble with federal prosecutors. They have also created a culture in which would-be cannabis entrepreneurs feel obliged to make large campaign contributions or hire politically connected lobbyists.

For some entrepreneurs, the payments can seem worth the ticket to cannabis riches.

For some politicians, the lure of a bribe or favor can be irresistible.

Correia’s indictment alleges that he extorted hundreds of thousands of dollars from marijuana companies in exchange for granting them the local approval letters that are necessary prerequisites for obtaining Massachusetts licenses. Correia and his co-conspirators — staffers and friends — accepted a variety of bribes including cash, more than a dozen pounds of marijuana and a “Batman” Rolex watch worth up to $12,000, the indictment charges.

Read the full story on Politico

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60 Los Angeles cannabis businesses losing licenses on New Year’s Day

60 Los Angeles cannabis businesses losing licenses on New Year’s Day

los angeles cannabis businesses are losing their licenses after New Year's

At least 57 licensed cannabis companies in Los Angeles are poised to see their business permits yanked by city authorities at the end of the year – with no obvious way to get the licenses reinstated.

The licensees in question – which appear to be a mixture of retailers, distributors and perhaps other business types – represent roughly 14% of the 418 marijuana business permits issued to date by the city, according to the L.A. Department of Cannabis Regulation (DCR).

Although the City Council has a motion pending to give the 57 companies a lifeline, the council is in recess until Jan. 8.

So it’s unclear if the Council would be able to act in time to save the businesses. But even the Council motion itself warns that all of the companies might be forced “out of business” next month.

The situation has many business owners “frantic,” said Jerred Kiloh, president of the L.A.-based United Cannabis Business Association (UCBA).

The situation

At issue is those companies’ annual license renewal applications and fees for 2021, which were due Nov. 2.

The vast majority of licensed cannabis companies in the city paid and got their paperwork in on time, but at least 57 failed to do so.

Under current city law – which was put in place in July 2020 – there’s no way to grant the businesses extra time, a DCR spokesperson noted in an email to Marijuana Business Daily.

“(City code) does not permit DCR to waive late renewals or allow reinstatements,” the spokesperson wrote.

After Dec. 31, 2020, according to the DCR website, all 57 licensees “will be required to cease operations and will not be allowed to engage in commercial cannabis activity until a new application is submitted to DCR and a new temporary approval or license is issued.”

So it appears all 57 will have to start from square one in applying for both local and state permits, a process that could take months, or even years, before those businesses can reopen.

At the moment, there appears to be little that can be done to avert the closures.

“Late renewals and/or reinstatement would require the City Council to amend the Los Angeles Municipal Code,” the DCR spokesperson wrote.

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Illinois cannabis tax revenue nearly surpasses alcohol

Illinois cannabis tax revenue nearly surpasses alcohol

Illinois cannabis taxes

The nearly $23 million in revenue was just a few million less than what the sale of alcohol brought in last month.

Amid skyrocketing demand for legal weed in Illinois, statewide tax receipts from recreational pot sales are now rivaling those from booze.

November’s tax revenues from adult-use cannabis, which reflect the record $75.28 million in sales tallied in October, reached nearly $22.88 million, according to figures released by the Illinois Department of Revenue.

That’s less than $3 million shy of the roughly $25.74 million in taxes collected through alcohol sales last month. That’s the smallest deficit since recreational marijuana was legalized in January.

Pot sales have skyrocketed in the 11 months since the drug was fully legalized, resulting in an almost steady increase in monthly returns for the state, according to a Sun-Times analysis. Taxes have pumped nearly $153 million into the state’s cash-strapped coffers, including nearly $100 million in the past five months.

Why have weed sales — and taxes — increased so much?

First of all, state levies on cannabis are far higher than those tacked on the price of booze (not including local or federal taxes).

On pot sales, the state charges a 6.25% sales tax and an excise tax of up to 25%, depending on the amount of mind-altering THC in what’s being sold.

While there’s no apples-to-apples comparison, alcohol is also subject to the general sales tax of 6.25% and an excise tax of 23 cents per gallon of beer, $1.49 per gallon of wine and $8.55 per gallon of liquor.

That means the state’s share of the price of a joint is much more than its share of the cost of a six-pack of beer. A $15 six-pack, for example, would net 69 cents for the state, while two high-potency joints priced at $16 would generate $5 for the state.

What’s more, pot sales have steadily increased since the program launched Jan. 1 — which was to be expected. But COVID-19 has also played a role, experts said.

The pandemic has “had a big impact on sales numbers,” said Alyssa Jank, an analyst at the Brightfield Group, a Loop-based firm that researches the cannabis industry.

“People have been at home more. People are looking for things to do [and] people don’t have to worry about being functional or capable to go and do stuff. So I think that’s part of it,” said Jank. “I think another part of it is that people have been way more stressed out and anxious this year, so they’re looking for something as a solve for that.”

Meanwhile, tax revenues from alcohol sales have fluctuated and returned to pre-pandemic levels. Though some research suggests consumers are spending less overall because they aren’t paying for the markup at restaurants and bars, total alcohol sales still trump the state’s pot sales totals.

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Detroit to issue recreational marijuana licenses in summer 2021

Detroit to issue recreational marijuana licenses in summer 2021

Detroit — Starting January, longtime city residents will be the first to apply for certification and secure recreational marijuana licenses by the summer, city officials announced Wednesday.

Mayor Mike Duggan and councilman James Tate unveiled a timeline urging residents eager to jumpstart their marijuana business to begin by applying for Detroit Legacy certification opening online Jan. 19. The first licenses could be issued to qualified residents as soon as June.

Tender Jacob Samways, left, lets Gregg Etzel, 67, of Dundee smell some marijuana flowers during the first day of sales of recreational marijuana at Exclusive Provisioning Center in Ann Arbor, Mich. on Dec. 1, 2019.

The city’s long-awaited ordinance for recreational marijuana, which was unveiled in October, guarantees no less than half of all licenses awarded will go to legacy residents.

“It’s by far the most controversial provision,” Duggan said. “The city will not issue a license to any business unless 50% of the licenses in that category are Detroiters. Which means if you’re from outside the city, you can’t get a license unless a Detroiter already has one. We’ll never go below 50%.”

The plan, city leaders say, was crafted to ensure residents disproportionately affected by the nation’s failed “War on Drugs” will have an equitable opportunity to participate in an industry that’s estimated to yield $3 billion in annual sales. In late November, the city council unanimously approved the ordinance.

“It was imperative for us to ensure we right that wrong,” Tate said. “We have individuals who are making a very good living on marijuana today, the same plant that created this situation of mass incarceration around our country in the city of Detroit, so this is an opportunity for us.”

Applicants can qualify for the “legacy” certification if they’ve lived in Detroit for 15 of the last 30 years; lived in Detroit for 13 of the last 30 years and are low-income; or lived in Detroit for 10 of the last 30 years and have a past marijuana-related conviction.

Legacy Detroiters will receive benefits including reduced fees, technical assistance and a six-week period when only legacy Detroiter applications will be reviewed before the rest of the public by the city’s Civil Rights, Inclusion and Opportunity Department.

Legacy Detroiters will be able to purchase city-owned land at 25% of the fair market value and all application fees be slashed to 1% of the total cost.

Detroit officials have announced plans to give certain residents a head start and other assistance in applying for marijuana licenses.

“These are for real Detroiters, those who have roots in the community,” Duggan said. “Or you can qualify as a business legacy, owned and controlled 51% by individuals with the legacy certification.”

Despite the scrutiny they face, “Detroit is ready for this huge lift,” Tate said.

He added it was rare to witness overwhelming excitement about an ordinance but said it’s because “now (residents) have that sense of opportunity and hope.”

How to apply

The adult-use law is expected to go into effect in January and Detroiters can start by reviewing the process at detroitmeansbusiness.org.

Starting Jan. 19, the website will open for applications for legacy certification. Applicants will also need state certification through the Michigan Marijuana Regulatory Agency.

The state requirements include a $6,000 fee with reductions for those involved in social equity programs. Applicants must provide the state information on the company and have a personal background check.

The state process could take two to three months and Duggan said Detroit applicants can begin the city process in January before state prequalifications are complete.

Starting April 1, Detroiters and general applicants will able to apply for licenses through the Buildings, Safety Engineering and Environmental Department.

Legacy Detroiters will be the first applicants reviewed for licenses starting May 1. General applications will be reviewed starting Aug. 1.

City licensing fees will cost $1,000, but only $10 for legacy Detroiters.

“We are going to change the inequity on Detroit versus non-Detroit businesses,” Duggan said. “We’re doing everything we can to create every opportunity for Detroiters to start these businesses.”

The city will license up to 75 adult-use retailers, the same number it allows for medical marijuana provisioning centers. Officials said it amounted to one dispensary every two square miles in the city.

Applicants will need:

  • Detailed business plans
  • Three years of income tax returns
  • Authorizations for background checks
  • Property tax clearances and clearances of any blight
  • An address for the business

Those without an address can obtain a provisional license valid for one year and for information on properties. Detroit officials have said only four of the city’s 46 medical marijuana dispensaries — permitted under a law approved by Detroit’s council in 2018 — are owned by residents.

Mitzi Ruddock, a 40-year-old Detroit single mother with a past marijuana conviction, told The News that having a seat at the table made a difference.

“I and many other Detroiters have sacrificed so much to see the day that brings generational wealth to our children through legal cannabis businesses,” said Ruddock.

Read the full story on The Detroit News

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