Michigan Cannabis Operator Charged with Illegal THCA Import

New Allegations Against Michigan Cannabis Operator Highlight Industry Challenges

New allegations levied against a Michigan marijuana operator underscore the industry-wide challenges of verifying product composites, ensuring accurate lab test results, and the murky business of converting raw cannabis into finished goods.

Complaint Filed Against Sky Labs

Michigan regulators on Wednesday filed a complaint against Sky Labs, a marijuana processing company, accusing it of purchasing vast quantities of unregulated THCA concentrate from outside the state, misidentifying the product in state-mandated tracking records, and various other charges.

Background and Previous Violations

Sky Labs, based in Mount Morris, Michigan, was previously ordered to surrender its medical marijuana processor license a year ago and pay a $100,000 fine for safety violations and the presence of banned chemicals in its vape products, including vitamin E acetate. This thickening agent is banned for inhalation by the U.S. Food and Drug Administration and was linked to the 2019-20 vape crisis that caused 2,800 hospitalizations and 68 deaths.

Unregulated Practices in the Cannabis Industry

The latest allegations highlight a common but often unproven practice in the U.S. cannabis industry: operators purchasing hemp-derived concentrates from other states and incorporating them into marijuana products sold in the regulated market, bypassing track-and-trace requirements and protocols. In this case, a general manager for Sky Labs admitted to purchasing 130,300 grams of THCA isolate from a Colorado business, which was then mailed to a manager’s home in Keego Harbor, Michigan.

Certificate of Analysis Scrutiny

A certificate of analysis (COA) indicated that the product was tested by a California laboratory in January 2024. COAs have faced intense scrutiny recently, particularly after a pesticide scandal damaged confidence in California’s regulated marijuana market.

Eight Counts Against Sky Labs

The Cannabis Regulatory Agency (CRA) listed eight counts against Sky Labs, including:

• Purchasing or transferring marijuana products from an unlicensed operator.
• Obtaining cannabinoids from an unlicensed supplier.
• Failing to provide recorded images with accurate time and date stamps.
• Violating a requirement to include product batch numbers, ID tags, or labels.
• Interfering with or preventing a laboratory from collecting product samples to comply with testing requirements.

Three of the counts were related to breaches in the statewide inventory monitoring system, Metrc, including:

• Accurately entering transactions, inventory, and other information.
• Developing products that were unidentified or improperly recorded.
• Identifying and consistently tracking products in the system.

Potential Consequences

Under state rules, the CRA can suspend, revoke, restrict, or refuse to renew a license or impose a fine related to these counts. Attempts to contact Sky Labs for comment were unsuccessful, and the company’s attorney, Denise Policella, did not respond to inquiries.

Product Impact and Market Presence

Sky Labs manufactures and sells a variety of marijuana products, including edibles, vape cartridges, and multiple flower strains. Its Bossy vape brand is popular in Michigan, generating over $100,000 in retail sales in June, according to cannabis analytics provider Headset.

Previous Regulatory Actions

In 2023, Sky Labs faced full on-site audits and was mandated to provide the CRA with all logs for 12 months following various safety compliance breaches. The CRA blocked the sale of more than $5 million worth of Sky Labs products in April 2022 but did not issue a formal recall. Additionally, in June 2022, the company was involved in an incident where 200-milligram CBD gummies were distributed to employees, leading to the hospitalization of a 4-year-old child who ingested the gummies.