Regulators Mount Up

State cannabis regulators last week revoked a cannabis business license—the first since recreational-use sales began in 2022—after officials busted the Albuquerque shop earlier this year for having products on hand with California labels. Paradise Distro, according to a final report, had already been warned about having suspicious packaging that suggested the business was bringing in weed merchandise from out of state, an illegal practice on both state and federal levels.

A hearing officer determined in April that Paradise Distro had illegal products in the store, along with tens of thousands in unaccounted-for money. By July 13, Regulation and Licensing Department Superintendent Linda Trujillo made the decision to rescind the company’s ability to sell legal weed. The license revocation came about two weeks after nearly 100 businesses signed a letter asking Trujillo and Gov. Michelle Lujan Grisham to stop issuing licenses until the department could get a handle on the illicit market. Trujillo tells SFR the timing was coincidental and that thanks to a law that went into effect in mid-June, the department can finally start cracking down on businesses selling products that come from other states.

SFR spoke with Trujillo and Cannabis Control Division Legal Counsel Robert Sachs last week about the Paradise Distro case and what’s next for enforcement in the land of legal weed.

This interview has been edited for length and clarity.

SFR: A representative from Schwazze said the latest disciplinary action is a good start. Is this an ongoing effort?

Robert Sachs: We really decided as a division to focus on compliance actions last fall, and really, the process, which we had to follow and still have to follow, requires us to allow due process and really give the licensee who has the alleged violations the opportunity to request a hearing, if they want, to essentially plead their case, to say either ‘I should not be subject to any fines or any disciplinary action,’ or ‘a fair disciplinary action would be XYZ.’ It is a little bit of a lengthy process, we have to give them a sufficient opportunity to request a hearing, then they have 15 to 60 days to schedule a hearing, then a hearing officer has to generate a report. So there are just steps that need to be taken to ensure that due process is met, and that we’re making sure that licensees have the opportunity to plead their case. So yes, in short, to your question. There were and are activities that have been ongoing, and the conclusion of them just kind of takes longer than I think people in the industry would like to see. It was just kind of fortuitous that the decision came around this time that the letter was sent.

Linda Trujillo: It is important to note that the law has been changed. House Bill 384, was passed unanimously and signed by the governor, and it became effective on June 16. Now, cases that we had already in the process, will have to still follow along the same process that they started off with, but with new investigations and complaints that are issued, the Legislature gave us authority to seek a preliminary injunction. So if someone is doing activity that’s similar to what we revoked this license for, it’s highly probable that we’ll determine that out-of-state product, product that’s not properly marked, and product that’s not tracked in our system is a clear and immediate threat to public health and safety. And we’ll go out and seek an injunction and then they’ll have their opportunity for due process on the back side instead of on the front side.

With Paradise Distro, the final decision mentioned the hearing officer’s decision to not take into consideration a previous violation. Can you talk about how those two are intertwined? It looks like the previous one was a similar situation where there were products stamped with California labels.

RS: The first instance was a little odd. They had California packaging, but no product in the packaging. They said that their consumers liked to take the product and put it in the California packaging as like an exit packaging. So that was just a little odd. We told them not to do that. That was the first violation. We said, ‘Hey, please fix this,’ and they alleged that they did fix this. Then we went back, and then there was a similar but more severe issue the second time, and now that it is a second time, it has become a pattern. So that was part of the reason that we moved forward with that. But the hearing officer just kind of wanted to isolate it to the second, more severe instance.

Paradise Distro didn’t show up to their April hearing. Has the Regulation and Licensing Department or the Cannabis Control Division heard from them at all since then?

RS: We have. They asked what the next steps would be and we just recommended that they seek legal counsel.

Anything else that either of you two wanted to mention?

LT: Our responsibility is to report what we think could be criminal activity to law enforcement, and so we do that: We report. In this case, we’ve reported it to other regulatory agencies that have other authorities that we don’t even begin to try to figure out. Our administrative authority is very limited and getting the Uniform Licensing Act changed so that we can take swifter action on bad actors is one step towards having a better response to illegal activity. In that same bill we got authority to fine unlicensed activity as much as $10,000. So we were given much greater authority under this law change, again, effective June 16. But it’s really important for folks to understand our limitation is administrative, and we have to report what we think is criminal activity to the appropriate law enforcement. But even if we fine them up to $10,000 per incident, collecting that money might never happen. So it’s teeth without having anything that we can take from them.