Regulatory Noncompliance and License Revocation
In a decisive ruling, Missouri’s Administrative Hearing Commission denied Delta Extraction’s appeal for license renewal after an extensive cannabis product recall in 2023. The commission cited an “implicit culture of lax compliance” within the company.
Commissioner Carole Iles released a 137-page decision after a three-day hearing, concluding that Delta violated state law by mixing hemp-derived THC concentrate from other states into Missouri-grown marijuana products.
Core Compliance Failures
Delta was found guilty of several critical violations, including:
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Security Breach: Failure to notify law enforcement after a server containing surveillance footage was stolen from their facility.
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Unauthorized Operations: Allowing a contractor, previously charged with drug conspiracy, to run the facility on weekends without a state-issued identification card.
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Record-Keeping Issues: The contractor used another employee’s ID to access the state tracking system, bypassing regulatory safeguards.
Delta’s Defense and Regulatory Rebuttal
Delta argued that hemp-derived THC-A should be regulated similarly to other non-intoxicating cannabis compounds, like CBD. However, Commissioner Iles ruled that THC-A becomes intoxicating through the same process, regardless of whether it is derived from hemp or marijuana. Therefore, all THC must originate from licensed Missouri facilities and be tracked from seed to sale.
Illegal Partnerships and Production Practices
The ruling outlined how Delta partnered with Jason Sparks and Conte, an Oklahoma-based marijuana brand. Sparks supplied unregulated THC-A oil, which was mixed at Delta’s facility every weekend.
Key issues included:
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Unregistered Labor: Up to 20 temporary workers were brought in without proper documentation.
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Unauthorized Facility Use: Sparks operated the facility despite being denied an agent ID due to a felony conviction.
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Tracking Failures: Neither Sparks nor Delta maintained accurate visitor logs or operational records.
THC-A Misclassification and Financial Implications
Understanding THC-A: THC-A is present in both marijuana and hemp but is non-intoxicating until heated (decarboxylated). Delta claimed compliance by including licensed Missouri-grown cannabis in their batches. However, Iles rejected this interpretation, highlighting that most THC in these products originated from unregulated hemp.
Financial Stakes: According to Iles, Delta produced over 1,100 liters of THC distillate oil, equivalent to nearly 80 million 10mg doses, valued at approximately $14 million. The state confiscated Delta’s extraction equipment, and SND, Sparks’ company, is seeking $5 million in damages, with arbitration scheduled for next month.
Broader Regulatory Implications
This case raises serious questions about:
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The state’s ability to regulate hemp-derived intoxicating products.
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Security and compliance standards within Missouri’s cannabis industry.
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Legal interpretations of THC-A sourcing regulations.
Final Thoughts: A Turning Point for Cannabis Compliance
The Delta Extraction case underscores the importance of strict regulatory adherence in Missouri’s cannabis industry. With multimillion-dollar stakes and public trust on the line, companies must ensure transparent operations, proper documentation, and compliance with all state regulations.
The outcome of the upcoming SND arbitration may further define the future regulatory landscape for cannabis businesses in Missouri.