Cannabis company fined for illegal production is a telling sign that states are cracking down on businesses that are not fully licensed. The California company was fined $128 million for illegally producing millions of cannabis gummies.
Biggest Cannabis Fine in State History?
Marijuana companies producing illicit products is a common issue in the cannabis industry. The gray areas in the industry mean many companies produce products that are falsely advertised for their purity and potency. There are also many companies who try to get around complex licensing regulations.
But the cannabis company fined for illegal production may be facing the biggest fine in state history, a sign that officials are really cracking down.
A Los Angeles judge found the makers of the popular Kushy Punch Gummies guilty of illegally producing the products at an unlicensed Los Angeles facility on Monday. The goods were worth millions of dollars incurring a fine of $128 million, possibly the largest cannabis penalty in state history.
A spokesperson for the Department of Cannabis Control said they were not aware of a larger cannabis fine in state history. San Francisco attorney Jennifer Fisher, who specializes in cannabis cases, backs this up saying, “I would be surprised if there was a judgement bigger than this- I’ve never seen it in my practice.
What’s the Story Behind Cannabis Company Fined for Illegal Production?
The cannabis company fined for illegal production, Vertical Bliss, was the subject of a 2019 investigation which found that the Kushy Punch brand producers had illegally produced 3.3 million cannabis gummies worth $64 million in total.
The company had a license to produce cannabis at a facility in the Los Angeles town of Chatsworth but were also producing at a second unlicensed facility in a nearby town of Canoga Park. The Canoga Park location was not permitted to produce cannabis.
California Department of Consumer Affairs investigators raided the location of the cannabis company fined for illegal production in October of 2019 and found $21 million of illegal cannabis products. Investigators also found records from the cannabis company fined for illegal production showing that the company had produced 3.3 million Kushy Punch gummies worth $64 million.
Legal Action is Taken
Investigators found evidence of Vertical Bliss’s illegal activity when they made an unannounced visit to their Chatsworth location. During the visit, they found evidence that the cannabis company fined for illegal production facility was receiving Kushy Punch products from their second illegal facility. The Department of Cannabis Control stated that this meant they were bringing “illegally manufactured product back into the regulated market”.
Fisher noted that this was not a typical arrangement as most companies will legally produce cannabis and bring the products into an illegal market.
Vertical Bliss, the cannabis company fined for illegal production, had their license revoked in November 2019. The state filed a lawsuit against the brand and its executives in September of 2020.
The unusual behavior Vertical Bliss has been exhibiting is further evidenced in that the company executives never defended themselves in court. They were fined $128 million after they failed to provide any legal defense.
The company could not be reach ed for comment.
Current State of Kushy Brand Gummies
Kushy Brand gummies continue to be sold in California and three other states. They are known for their brightly colored packaging and high quality. They have won several industry awards and are followed by thousands on social media.
The brand is no longer produced by Vertical Bliss. Varavo has taken over manufacturing duties and did not respond to media requests for a comment on the matter.
Why is it So Important for all Aspects of the Cannabis Industry to Be Licensed?
The cannabis industry is heavily regulated making it particularly difficult to get a cannabis license. Licensing laws vary from state to state and change depending on your business category and which city or county you plan to operate in. To operate legally, you must comply with all licensing laws, permits, regulations, and other requirements.
Not being licensed can lead to dire consequences. As seen in the case of the cannabis company fined for illegal productions, it can result in hefty fines. It can also affect investors’ decisions to invest in your company.
A lack of licensing can cause customers to be distrustful of your company, so they no longer want to buy from you. It can even cause your company to be shut down completely.
The cannabis industry has seen its share of gray areas. But as it’s becoming legal in more states, the market is gaining more attention and officials are cracking down.
Director of the Department of Cannabis Control Nicole Elliot, stated in a press release, that the hefty fine Vertical Bliss is facing shows that the illegal cannabis market “will not be tolerated in California.”
“DCC and our partners will do everything in our power to protect consumers and maintain the integrity of California’s legal cannabis market. We applaud the Court for its commitment to enforcing the rule of law in California’s cannabis industry,” Elliot stated.