MINNEAPOLIS – The state is charging a Twin Cities retailer with selling illegal, non-compliant cannabis in its stores. It is the first time that regulators have taken this step.
The Minnesota Office of Cannabis Management (OCM), the agency charged with overseeing the upcoming legal market for adult-use recreational cannabis and existing hemp-derived THC products, is suing Zaza, which has stores in Minneapolis and St. Paul, for selling illegal flower, vapes and pre-rolls that in some cases were 70 to 75 times the legal limit.
It is legal to sell hemp flowers, which by definition contain no more than 0.3% THC, the compound that produces a high, on a dry weight basis. Anything more than that is marijuana, which businesses cannot do without a state license – which has not been issued
OCM asks a court to order the destruction of the non-conforming products at the defendant’s expense.
WCCO sent an email to Zaza Friday morning and received no response. Later, WCCO reached the owner by phone, who answered and said he would not answer questions.
The lawsuit states that regulators conducted an inspection in September because consumers complained about illegal products. In one case, according to court documents, someone was trying to purchase a hemp-derived drink when he saw an employee “take out a pot from behind a counter and openly sell illegal cannabis flower to other customers.”
When asked about the illegal sales, the worker responded, “We give the people what they ask for,” the lawsuit said.
The state also accuses Zaza of hiding its illegal products from inspectors.
“The OCM’s inspections confirmed not only that Defendant sold illegal cannabinoid products, but that Defendant attempted to conceal his unlawful sales,” the filing said. “For example, during the OCM’s initial inspections of a related cannabinoid retailer, one employee stopped the OCM inspector while another removed the illegal products in a backpack from the store through the back door.”
Jason Tarasek, a cannabis attorney for Vicente LLP, said a “gray market” often exists in states where there is a lag from the time of legalization to the opening of licensed dispensaries. Minnesota is no different, he said. The state legalized its use and possession last August, but the dispensaries are not expected to open until next year.
“Once we establish a regulated, licensed market, it will take some time to push out those gray companies, but eventually it will happen,” Tarasek said. “They’re going to fade away because consumers, I think, when given a choice, want to know that their product has been tested, that they can trust what’s on the label and that it’s safe.”
If a judge rules in the state’s favor, it could disqualify Zaza from operating a cannabis business for five years.
A spokesperson for the Office of Cannabis Management said in an email that in the past four months of inspections, just over 5% of businesses evaluated sold illegal cannabis flower.
Since inspections began last year, regulators have destroyed more than 35,000 units of non-compliant hemp-derived cannabis products valued at more than $900,000. Enforcement against flowers began in March and since then the state has seized and destroyed nearly 200 pounds of them, worth more than $607,000.
Steven Brown, CEO of Nothing But Hemp, which produces hemp-derived THC products, said bad actors who don’t follow the rules are hurting the entire hemp industry. One of his storefronts is down the street from St. Paul Zaza, and he said customers sometimes asked why his store didn’t sell flowers.
“It’s really frustrating,” he said. “And I think it’s also frustrating and confusing for the customer, because down the street they hear something completely different: ‘This is legal, we can do this.’”
Caroline Cummings
