Colorado Cracks Down on Illegal Hemp-Derived Marijuana Products Amid Safety Concerns

An employee at Kaycha Labs in Denver examines a cannabis sample during testing. The facility specializes in detecting contamination and illegal synthetic compounds in cannabis products. Stephen Swofford/The Denver Gazette

Colorado regulators announced on Monday a major crackdown on companies illegally selling cheaper hemp-derived products as marijuana. The state’s Marijuana Enforcement Division identified widespread regulatory compliance issues that threaten the integrity of Colorado’s marijuana industry—the nation’s first legal retail market.

In an industry bulletin, the agency warned that these issues “present serious risks to public safety, market integrity and the tax revenue framework that supports Colorado’s regulated cannabis industry.”

A joint investigation by the Denver Gazette and ProPublica in January revealed that despite Colorado’s early ban on intoxicating hemp products, the legislature and regulators failed to implement key safeguards used by other states to prevent hemp from entering marijuana dispensaries.

Manufacturers can produce liquid distillates for vapes and edibles from hemp at a much lower cost than from marijuana, giving them a competitive edge. However, regulators are concerned about the use of toxic chemicals to convert nonintoxicating CBD—abundant in hemp—into THC, the psychoactive compound that induces a high. The agency has banned such chemical synthesis due to fears of residual contamination in finished products, posing health risks to consumers.

According to regulatory investigations, agency bulletins, and court testimonies, Colorado manufacturers have exploited gaps in the state’s testing and enforcement systems to continue producing hemp-based products marketed as marijuana, in violation of state law.

In 2024, state investigators discovered that a popular brand of marijuana vapes sold in dispensaries was derived from hemp and contaminated with methylene chloride—a chemical used in the conversion process. The substance is prohibited by Colorado’s marijuana regulators and restricted by the U.S. Environmental Protection Agency due to its links to liver and lung cancer, as well as damage to the nervous, immune, and reproductive systems.

The company behind the contaminated vapes, Ware Hause, surrendered its marijuana license following the investigation. Thanh Hau, the company’s owner, and its legal representative have declined to comment.

Last November, Congress passed a law banning nearly all intoxicating hemp products nationwide, effective this fall. However, the implementation of the ban remains unclear, and hemp manufacturers are actively lobbying to overturn it. In December, President Donald Trump issued an executive order directing his administration to collaborate with Congress on developing regulations that could permit certain hemp products.

In its Monday bulletin, the Marijuana Enforcement Division stated that officials had “identified and investigated evidence” showing marijuana businesses are using illicit methods and banned processes to manufacture products instead of relying on regulated marijuana sources.