A Denver district court judge ruled against a cannabis cultivator’s request to force Colorado to immediately overhaul the state’s cannabis testing rules and seemed ready to rule for a complete dismissal of the case, after a full day in court Wednesday arguing over whether the state is living up to its obligation to protect marijuana consumers.

The decision effectively keeps state cannabis regulators from being compelled — for now — to crack down on the alleged illegal use of hemp-derived THC distillate in the state’s legal marijuana supply chain.

The lawsuit raises concerns about the legitimacy of Colorado’s legal cannabis market, once seen as an industry gold-standard. Depending on how pervasive the use of the synthetic, hemp-derived THC products, cannabis consumers could be at risk of exposure to the highly-toxic chemicals used in the banned, but untested, THC conversion process, industry insiders earlier said. 

District Court Judge Jill Dorancy’s ruling came despite testimony from witnesses that lent support, at least in part, to the allegations made by the plaintiff in the case, Mammoth Farms, a Saguache-based cannabis cultivator.

Witnesses described evidence that cheap, low-THC hemp has been chemically converted, through the use of methylene chloride, into a high-THC distillate that has found its way into edibles and vaporizer cartridges in the state’s legal cannabis market. Trace residues of the highly toxic solvent have been found in some independent tests, according to two cannabis testing facilities, and twice the state has taken regulatory action against manufacturers using the chemical.

David Mathis, the owner of Denver-based Bona Fide Laboratory, said he found methylene chloride in an April 2024 sample, submitted by an extraction company that was later found by the Colorado Marijuana Enforcement Division to have been using the process.

The state acknowledged at least two investigations that turned up the use of the process during agency investigations. And even though the process is prohibited, the chemical is not tested under the state’s rules — one of the main changes sought in the lawsuit. Methylene chloride has been banned for most uses by the EPA due to the significant danger it poses to public safety if ingested.

Mathis also countered claims by the state that adding methylene chloride to the battery of cannabis tests would come with a sizable cost. He estimated that the test might add only a few dollars. He said the current equipment required for other state-mandated tests would be able to test for the chemical.

Justin Trouard, owner of Mammoth Farms, testified that he personally observed how chemically converted hemp-derived THC products have flooded the state’s legal cannabis market. Because hemp is much cheaper to grow than marijuana — and the chemical conversion process far less costly than traditional extraction — Trouard said bad actors in the industry are using synthetic THC to cut corners and increase profits.

He alleged that these products, made with solvents like methylene chloride, are being mislabeled and sold as legal marijuana in vaporizer cartridges, edibles, chocolates, and tinctures. Despite the MED issuing alerts warning about the health dangers of hemp-derived THC, including its link to neurotoxicity and organ damage, Trouard said the agency has failed to meaningfully enforce its own ban on such products.

‘100,000 products went out the door and poisoned people’

Lawyers, witnesses and state regulators also argued during the hearing over whether this process could allow diversion of marijuana out of the state, where the cheap hemp-derived THC products are allegedly being swapped for high-quality cannabis illegally shipped out of state.

Trouard testified that the use of synthetic THC products may be helping to cover up such diversion, because of the lack of testing, the wide price disparity between high-quality cannabis and hemp and the self-reporting of cannabis purchases among cultivators and processors.

He argued the agency could take simple steps to protect the public, such as doing away with the honor system currently in place that allows manufacturers and cultivators to select six samples for submittal to testing labs. It’s common practice in the industry to self-select pristine marijuana THC product for sampling, even as the actual product put out on the market is knowingly filled with contaminants and THC illegally derived from hemp, he stated.

“There are rules that are supposed to prevent you from doing this,” Trouard testified. “But it’s an activity that is widely done.”

“In fact, many other states prohibit self-selected testing,” he added.

He said the public is put at risk. There’s another incentive to perpetuate this fraud, he added. Many cultivators are using THC derived from hemp to mask their diversion of actual marijuana crops outside of Colorado into black markets in states where marijuana has been banned.

He said he personally helped one cultivator uncover one illegal marijuana diversion scheme tied to THC derived from hemp that was perpetrated by a worker that cost the state $500,000 in tax revenue. He said that even after he reported the scheme to state regulators, they were slow to act. He said he reported the perpetrator had been convicted of a felony drug distribution charge, but the state acted slowly and did not suspend his license to work in the marijuana industry until after Trouard filed the lawsuit.

He added that in another instance, state regulators allowed customers in Colorado to be “poisoned” despite receiving clear indications a manufacturer of THC distillate had vape cartridges that had been produced by methylene chloride.

“I would make the quantifiable number 100,000 products, 100,000 products went out the door and poisoned people in that time,” from that manufacturer, he testified.

“I’m saying that by the time the Marijuana Enforcement Division issued an embargo and ordered a recall, the majority of those products had been consumed by the public,” he testified.

State regulators admitted that it’s possible. If true, it would mean bad actors in the state’s legal cannabis industry could be making massive profits, on all ends, while evading state and federal drug laws.

Judge appears ready to dismiss case

Dorancy, the judge, in addition to saying she intended to deny the motion for preliminary injunction, seemed ready to grant the state’s motion to dismiss the case, which would block the lawsuit, barring major amendments and refiling by Mammoth Farms.

She sided with the state, in its position that in order for Mammoth Farms to bring the lawsuit, they would have needed to formally petition the state for specific rulemaking around expanded testing. Mammoth Farms failed to show irreparable harm, she said, and lacked standing under the Colorado Administrative Procedure Act (APA).

She said that what the plaintiff essentially sought is a policy overhaul, but through court action instead of the required administrative process.

And even though Mammoth Farms’ owner tried to bring these matters to the attention of the Colorado Marijuana Enforcement Division on multiple occasions, without going through the formal rule petitioning process, Dorancy said, the plaintiff lacked the right legal standing.

Dorancy pointed out that the plaintiffs could petition the state for the same changes, and then if that failed, then a court could get involved.

State regulators declined to comment on the hearing after it ended, leaving unclear whether the expanded testing sought by Mammoth Farms would be part of any upcoming rulemaking.