Minnesota’s Office of Cannabis Management (OCM) is going after shops that have begun selling THC products ahead of next year’s official start to the legal adult-use market.
Recently, the state filed a civil action against the owner of Zaza, which has two locations that sell hemp products in the Twin Cities area. The lawsuits allege that employees at both Zaza Grand Ave. in Minneapolis and Zaza Lake St. in St. Paul, which are not licensed to sell adult-use cannabis, were selling vapes, pre-rolls and flower that contained more than the state’s limit of 0.3% THC or THCA for hemp products. Further, the suit alleges that employees attempted to hide the illicit products from inspectors using a backpack.
The legal action, which seeks a court order allowing the state to destroy seized contraband, comes within weeks of the state conducting a lottery for social equity retail licenses. Winners of those lotteries will get the first crack at Minnesota’s emerging adult-use market, while having to contend with competition from existing hemp shops that are possibly blurring legal lines with hemp-derived intoxicants.
Inspections based on consumer complaints
OCM conducted inspections of Zaza’s two facilities in September, in response to consumer complaints and the fact that an affiliated business was illegally selling cannabinoid products.
“The OCM’s inspections not only confirmed that Defendant was selling illegal cannabinoid products, but that Defendant attempted to conceal its unlawful sales,” said an 11-page complaint filed in Hennepin County District Court on Nov. 12. “For example, during initial inspections by the OCM of a related cannabinoid retail business, one of the employees would stall the OCM’s inspector while another would remove the illegal products from the store in a backpack through the backdoor.”
On the same day, OCM filed another lawsuit in Ramsey County District Court against the Minneapolis shop.
The Minnesota legislature reacted to the passage of the 2018 Farm Bill, which legalized hemp-derived cannabinoids nationally, by updating its state-level regulations of hemp. That change, which legalized CBD products, also allowed for the sale of hemp beverages and other products, but limited those items to no more than 0.3 mg of THC, which aligns with the federal standard set by the 2018 Farm Bill.
The state plans to hold lotteries to award 217 licenses in the first week of December. With the license lottery looming along with the anticipated launch of adult-use sales in early 2025, the state is taking a second look at retailers who already sell hemp products.
The state inspected Zaza in August and September after receiving complaints from multiple customers claiming they witnessed illegal transactions at the shops.
“When one member of the public went to Defendant to purchase a hemp-derived drink, they observed employees pull a jar out from behind a counter and openly sold illegal cannabis flowers to other customers,” said the complaint filed against the St. Paul location. “When the complainant confronted an employee about this illegal sale, the employee stated: ‘We’re giving the people what they’re asking for.’”
The inspector found numerous vapes that exceeded the allowable limit of THC. They also found a backpack in a filing cabinet and a trash bag hidden under cleaning products that contained pre-rolls and flower that tested between 16.7% and 20.7% THC, according to the complaint.
The inspectors found more products in a subsequent inspection later in the same day. The state alleged that the business repeatedly used backpacks to store illicit product to make it easier to remove from the premises in the event of an inspection.
OCM seized the discovered vape products and placed an embargo on the pre-rolls and flower. The agency seeks a court order allowing it to destroy the contraband.
“Based on the facts set forth in the preceding paragraphs, the OCM seeks a finding from this Court that the cannabinoid products seized and embargoed by the OCM from Defendant are noncompliant. The OCM further seeks an order that the noncompliant products be destroyed,” said both lawsuits.
“The egregious nature of the violations required the office to escalate our enforcement action,” said Jim Walker, public information officer for OCM. He said if the judge finds in favor of the OCM that there was a violation of the Minnesota State statute, Zaza would be disqualified from obtaining a cannabis license for five years. Additionally, hemp retailers will be required to have a low-THC hemp license next year.
“Similarly, we’ve reminded hemp-derived product retailers that next year, when they seek conversion to a lower-potency hemp edible retailer license, they must be in good standing with the office. This sort of infraction would preclude that,” Walker said.
