On a recent weekday afternoon, a dark-haired man wearing an old flannel coat walked into the Dino Mart convenience store in downtown North Hollywood. He perused the shelves before landing on a mini-fridge filled with colorful cans near the potato chip aisle.
As he bought a drink and was leaving the store, California Alcoholic Beverage Control Supervisor Esmeralda Reynoso watched him through the windshield of an unmarked sedan parked outside. Ta.
Soon, she received a text message from a shopper saying, “Can of THC found.”
He was an undercover detective working for Reynoso’s agency, ABC, which issued the alcohol license to Dino Mart. Shortly after he left, a team of agents swooped in to conduct a more thorough search of the store.
The operation targeted so-called “intoxicating cannabis” drinks, which were banned in September under state of emergency regulations because they contain the compound THC, which is known to make cannabis users feel stoned.
Gov. Gavin Newsom said the regulation would effectively outlaw any product containing detectable levels of THC, except those sold in state-licensed dispensaries, including THC and other substances derived from hemp. He said it was necessary to protect the public from beverages, gummies and other products. About 30 other natural and synthetic chemicals known as cannabanoids. Before the statewide ban, the product was available at small corner stores and large chain retailers, but similar products sold at licensed pharmacies are subject to additional taxes and quality control testing. are.
Cannabis companies say the governor cast his net too wide. They say the ban applies to drinks containing “microdoses” of just a few milligrams of THC, as well as products containing primarily CBD, THC’s non-intoxicating relative popular with pain and cancer patients. , which purports to wipe out harmless products.
California Alcoholic Beverage Control Supervisor Esmeralda Reynoso discovered illegal beverages containing THC during a raid on the DinoMart in North Hollywood on November 14, 2024. State officials are aggressively enforcing new rules for alcoholic beverages. Since the ban was imposed in September, thousands of cans have been seized from licensed liquor stores across the state.
(Genaro Molina/Los Angeles Times)
In the two months since the rule took effect, companies in and out of California have laid off employees and shut down operations in the state, with some economic research firms reporting more than $1 billion in annual revenue. It has completely transformed the market for hemp and CBD products. Manufacturers have been forced to discard thousands of products that are now illegal.
ABC agents searched Dino Mart in North Hollywood and found several cans of Cheech & Chong’s Orange Dream and Cycling Frog’s Ruby Grapefruit THC seltzer on display, as well as milk crates in a storage room. I found it piled up.
In total, agents seized more than 200 cans of product and gave store manager Augustin Martinez a printed notice of the emergency regulations.
“We just found out this is illegal. We didn’t know because no one sent us any notice or anything,” Martinez said. “We’ve been selling them for over a year now.”
ABC Deputy Division Chief Matthew Hyder (right) counts and itemizes illegal beverages containing hemp-derived THC discovered during a raid on DinoMart in North Hollywood on November 14, 2024.
(Genaro Molina/Los Angeles Times)
Similar scenes have played out repeatedly in recent weeks. From Sept. 24 to Nov. 10, state regulators seized 5,318 illegal hemp products from 102 different stores, according to ABC data.
Within days of the ban taking effect, an industry group called the US Hemp Roundtable and several companies filed a lawsuit against the California Department of Public Health. They argued that the agency had failed to successfully demonstrate an imminent crisis requiring emergency regulation.
Last month, Los Angeles County Superior Court Judge Stephen Govich denied the plaintiffs’ request for a temporary restraining order to halt enforcement of the order, but the case remains pending.
The Governor’s Office directed ABC to inquire about the status of the emergency regulations and their enforcement. The agency’s director, Joseph McCullough, said in an emailed statement that retailers in the state have been “overwhelmingly compliant” with the new rules.
“I’m extremely proud of the work our agents do every day to keep these dangerous products off our shelves,” McCullough said. “I would also like to acknowledge the excellent work of our team in providing information to our licensees before engaging in enforcement action.”
Ajay Narain, CEO of Beacon Beverages, which specializes in cannabis-derived THC and CBD-infused mocktails, said his Bay Area-based company has seen a 35% increase in revenue since the regulations went into effect. The number of employees decreased and four employees were laid off, he said.
“The losses are significant and we are truly demoralized,” he said in an email. “It strikes me that Newsom banned it completely without doing the obvious thing of requiring consumers to be 21 or older to purchase hemp drinks and enforcing responsible packaging that doesn’t appeal to children. is completely incomprehensible.”
On November 14, 2024, ABC officers seized merchandise from Jetstream Liquor in North Hollywood. Earlier this fall, Gov. Gavin Newsom enacted emergency rules to regulate the so-called addictive hemp industry, which produces a wide range of products containing THC.
(Genaro Molina/Los Angeles Times)
Many in the legal cannabis industry have traditionally opposed making hemp products intoxicating, citing competition for market share, but Jonathan Black, chief executive officer of industry giant Cheech & Chong’s Global Holdings, based in Danville, said: The CEO said a recent summit in Sacramento led to the proposal for a legal solution. It has received wide support from both sides. They hope to present the idea to state lawmakers in January, when California’s 2025 legislative session begins.
“We are committed to a comprehensive proposal to submit to the Governor and the State Legislature to benefit both hemp and hemp, increase tax revenue to the state, ensure compliance standards for both, and protect the industry at the same time.” We’re working on a bill that will protect people on time and protect consumers,” Black said. His company is among those suing over the state’s ban.
Jim Higdon, a member of the U.S. Hemp Roundtable and co-founder of Cornbread Hemp Co., based in Louisville, Kentucky, said that until the law changes, California will not be able to sell illegal high-THC products or fake psilocybin. He said the priority should be to eliminate illegal pharmacies and smoking shops. Mushroom chocolate bar.
“If I were in government, the main focus of enforcement would be on illegal cannabis dispensaries and unlicensed smoke shops in the illicit market,” he said. “That’s where teenagers are getting these products.”
A Pew Research Center study released in February showed as many as 1,100 illegal marijuana stores operating in Los Angeles County. The sheriff’s office says it only intercepts two to four illegal stores a month, and many reopen within days of closure.
But at least the drug enforcement efforts have been successful, said ABC Deputy Director Matthew Hyder.
“We’ve seen a pretty steady decline in the number of non-compliant and still selling illegal drinks,” he said as officers loaded seized drinks into the back of a pickup truck outside Dinomart. “I’ll be able to do it,” he said. “We have two goals: to ensure public safety and to make sure our stores are compliant. We are not here to close stores. No. … We need to send the message that this is illegal.”
The sudden change is frustrating Jake Block, CEO of Venice Beach-based low-THC beverage maker Cann. Block said the company’s products were popular at Erewhon supermarkets even before Newsom’s ban. He said the drink was sold at all 140 Bevmo stores in California.
Block estimated Can has sold millions of dollars worth of products this year and expects sales of $15 million in 2025.
ABC Superintendent Esmeralda Reynoso (right) and ABC Deputy Director discuss the seizure of illegal beverages containing intoxicating marijuana discovered during a raid at Dino Mart in North Hollywood on November 14, 2024. Mr. Matthew Heider.
(Genaro Molina/Los Angeles Times)
“We were going to have a lot of growth in California at the end of this year and into next year, and that’s gone,” he said. “If these laws are not amended in the coming months, we will be forced to exit the market.”
Newsom’s emergency ban will remain in effect until March, when the restrictions will be lifted unless replaced with a permanent version.
Alexa Steinberg, a general counsel at the Los Angeles-based law firm Greenberg Glusker, represents several companies in the hemp, CBD and cannabis space. She said customers were “waiting with bated breath” to see what happens.
“If it becomes permanent, many brands will effectively disappear,” she says.
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