The state of Michigan is tackling an ongoing problem in the legal marijuana market.
On Wednesday, the Cannabis Regulatory Agency issued a formal complaint against Mount Morris marijuana processor Sky Labs LLC for allegedly using out of state hemp powder from Colorado and converting it to marijuana-based distillate under the guise of plants grown in Michigan.
The complaint also is the state’s first major attempt to crack down on illicit market products coming in from out of state and being passed off to consumers as marijuana grown within the state’s boundaries.
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Sky Labs manufacturers the popular vape brands Bossy and Flight.
The CRA alleges Sky Labs purchased 130,000 grams — nearly 287 pounds — of THCa isolate, which is a heavily-concentrated powder derived from hemp that when heated can be converted into a form of THC comparable to the psychoactive ingredient found in marijuana.
A regulated processor using THCa powder must have a hemp operators license in Michigan to comply with the state’s regulations. Sky Labs does not.
It’s also against regulations to use out-of-state product in the Michigan marijuana market.
It’s unclear from the state’s complaint how concentrated the THCa powder from Colorado was. If the powder contained more than 0.3% THCa, the shipping and receiving of that product would violate federal drug trafficking laws.
Denise Pollicella, founder and managing partner of Cannabis Attorneys of Michigan and attorney for Sky Labs, declined to comment on the allegations at this time.
The CRA alleges the THCa powder from Colorado was shipped to the house of Sky Labs’ manager in January and converted using decarboxylation to make 123,000 grams — or 271 pounds — of THCa distillate that is used in vapes and edibles.
Sky Labs then allegedly stored the illicit product on site for nearly two months before entering it into the state’s marijuana tracking system in March as THCa powder purchased from another processor in the state of Michigan. Sky Labs registered a total of seven THCa packages with the tracking system from that third-party processor, including the three documented by the state.
That unnamed processor, however, confirmed to the CRA that Sky Labs did not purchase the THCa from their operation.
Representatives from Sky Labs told state investigators the THCa was entered into the system by mistake.
The CRA plans to issue a fine and may potentially seek to revoke Sky Labs’ processor licenses. Sky Labs has 21 days to request a hearing to answer the allegations.
This is also not the first time Sky Labs has allegedly run afoul of state regulators.
The CRA fined Sky Labs $20,000 in 2021 for not reporting accurately its vape inventories and for using banned chemicals.
In June 2022, the processor allegedly distributed edible gummies labeled as not containing any psychoactive THC, but CBD, a non-psychoactive ingredient found in hemp. An employee gave 20 milligrams of the edibles to their four-year-old child, which did in fact contain THC, resulting in the hospitalization of the child, according to a notice by the CRA.
Last year, Sky Labs was slapped with a $100,000 fine for its products again failing compliance testing and potentially using illicit product from unknown origins.
Also last year, The CRA issued a recall of more than 15,000 vape cartridges produced by Sky Labs and sold to more than 59 dispensaries. The vapes allegedly contained banned pesticides and fungicides.
The CRA attempted to revoke Sky Labs’ license before, but failed to convince a judge.
To combat illicit product in the market, the CRA is planning to open its own reference testing lab in 2025, after receiving a $4.4 million earmark from the state budget.
In June, the CRA banned the use of MCT oil, usually coconut oil, in distillate, which could potentially have adverse health effects.
