On Feb. 6, a lawsuit was filed in the U.S. District Court in Georgia by resident Hannah Ledbetter against 12 cannabis companies. The claim alleges that all of the companies mentioned have sold cannabis products as delta hemp products instead of cannabis products and is asking for a total of $150 million. The companies listed include STIIIZY, LLC; Cookies Creative Consulting and Promotions; Cloud 9 Online Smoke & Vape, LLC; Green Rush LLC dba Xhale City; TheSY LLC dba Element Vape; Savage Enterprises; Delta Extrax; L&K Distribution; Columbia Laboratories; PharmLabs; Encore; and Pur ISO Labs LLC.
The plaintiff claims she was deceived by the companies into buying federally illegal products that were being sold as federally legal hemp products (with 0.9% THC or less). “Defendants have conspired to import, manufacture, distribute, and possess illegal (delta-8) THC vape pens that are marijuana,” the lawsuit stated. “This scheme could only be accomplished through a pattern of racketeering activity.”
According to Justia, a “racket” refers to a single fraudulent service, while “racketeering” defines multiple illegal activities, usually done collaboratively through a group via organized crime. The Racketeering Influenced and Corrupt Organizations (RICO) Act describes racketeering activity with crimes such as fraudulent offenses, murder, kidnapping, drug trafficking, bribery, and more.
Ledbetter purchased delta-9 THC products from Cloud 9, Element, Xhale City and/or Xhale Franchise locations in and near Atlanta, Georgia. She alleges that the products contained far more than what is legally acceptable by law. The lawsuit claims that all cannabis companies named “have facilitated the manufacturing, distribution, and/or sale of illegal marijuana to thousands of people over the course of the last four years.”
Ultimately, the lawsuit summarizes its accusation. “In essence, [customers of the defendants] are paying for legal hemp-derived THC but are receiving illegal marijuana, which has created millions of dollars of fraudulent profit,” it stated.
Ledbetter’s team is accusing the defendants of finding third party testing labs Columbia Laboratories in Oregon, and Encore and Pharmalabs SD in California, that would issue false certificates of analysis for the five products. Results showed that “the hemp-derived D9 variance levels that was in excess of the legal limit” included hemp-based vape pens with the following strains: Cookies’ Huckleberry “Gelaot” (assumedly Gelato but there is a typo in the lawsuit text), Extrax’s Forbidden Jelly and Power Plant, Looper’s Blue Gusherz, and STIIIZY Hemp’s OG Kush.
“To facilitate this fraud, the Lab Defendants knowingly created false test results that were advertised over the internet hundreds of times for publication and marketing through the wires, and such activity is wire fraud,” the lawsuit continued.
According to an article published by Green Market Report, a STIIIZY spokesperson said in an email statement that the lawsuit “contains absolutely no factual evidence to support its conclusory and baseless claims against STIIIZY. We intend to defend ourselves vigorously against this meritless lawsuit and seek to have it dismissed since it has no factual basis.” At the time of publishing, Cookies and other defendants had not yet provided a statement.
The lawsuit calls on the court to determine it as a class action lawsuit, which must first be granted by a federal judge. RICO lawsuits state that plaintiffs are entitled to three times the listed damages, and this lawsuit requests $50 million for damages, referencing “treble” damages, which means that a successful lawsuit could lead to the plaintiff receiving up to $150 million.
A similar lawsuit was filed in California last summer between the state of California and nine individual cannabis companies based in California, Massachusetts, Nevada, New Mexico, Oregon, Vermont, or Wyoming. The lawsuit claimed that cannabis products should include a Proposition 65 warning label on delta-9 THC cannabis products, because it is “known to cause harm to the developing fetus.”
According to California Attorney General Rob Bonta, the potential dangers of illegal hemp products should be addressed. “I want to be clear: The sales of industrial hemp products that do not comply with California law, and the illegal sale of inhalable hemp in California will not be tolerated,” said Bonta. “The dangers of these products must be communicated for sale to the public, and the sale of all industrial hemp inhalable products must cease altogether. The California Department of Justice will continue to protect the legitimate businesses who are operating responsibly in this space. There is no room for illegal inhalable hemp products in our state.”
The rise in hemp-derived cannabis products began after the 2018 Farm Bill was passed. It authorized the use and sale of hemp-based products, mainly CBD. Since then, many state legislators have introduced bills to regulate such products. One of the latest examples of this was seen in Missouri last December, when Sen. Nick Schroer introduced Senate Bill 984, also titled the “Intoxicating Cannabinoid Control Act.” If passed, the bill would regulate delta-8 THC products as cannabis, not hemp. The most current action for SB-984 includes Senate Judiciary and Civil and Criminal Jurisprudence Committee hearing held on Feb. 12.
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