California cannabis company Kushy Punch just lost its business license after state authorities discovered that the company was operating from an unlicensed facility.
In October, the California Department of Consumer Affairs (CDCA) raided an illegal vape manufacturing facility in northern Los Angeles, seizing 7,200 illicit cannabis vape cartridges valued at nearly $21 million. These vape carts were packaged with the logos and likeness of Kushy Punch, a legal weed business that has been operating in California's medical marijuana market for over two decades.
Kushy Punch runs a fully licensed cannabis facility in California, creating edibles, extracts, and other products compliant with the state's strict testing regulations. But, according to an anonymous source, the company had a double life. At this secret facility, the company allegedly created products using weed that failed testing due to contamination with mold, pesticides, or heavy metals. These products were essentially being turned into illegal knock-offs of the company's own legitimate products.
This week, the California Bureau of Cannabis Control revoked Kushy Punch's business license over the incident. “All commercial cannabis activity in California must be conducted on a premises with a valid license issued by the appropriate state cannabis licensing authority,” California regulators said in a statement reported by Marijuana Business Daily. “Manufacturing, distributing or selling cannabis goods without a state license or at a location that is not licensed is a violation of state law.”
An attorney for Kushy Punch shifted the blame to the state, arguing that high taxes and costs of compliance are forcing many cannabis companies out of business. “The More Agency, as the sole owner to all rights to the recipes, formulas and intellectual property pertaining to Kushy Punch, is saddened by the license revocation … ” said the company's legal counsel, Eric Shevin, to Marijuana Business Daily.
“We have witnessed what has been termed a cannabis extinction event, as many operators are unable to withstand the licensing delays, costs and onerous taxes that continue to be a barrier for historical brands like Kushy Punch to survive,” Shevin continued.
The BCC's decision to shut down Kushy Punch is not surprising, given the recent outbreak of vaping-related lung illness. Health officials have linked many cases of this illness to black-market cannabis vapes, and federal authorities now believe that vitamin E acetate – an ingredient usually only found in illegal products – may be causing these lung injuries. Several states have tried to manage this crisis by banning legal vapes, but California is working to keep illegal products off the market.