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Report: State Cannabis Regulators Leave Room for Growing Black Market

An audit by the Oregon Secretary of State's office found that state regulators have failed to prevent cannabis from being diverted into the black market.

Posted: Jan 30, 2019 12:23 PM

SALEM, Ore. — More than four years into Oregon's legalization of cannabis, regulations on the industry leave much to be desired, according to a report from Secretary of State Dennis Richardson.

The biggest problem? State regulations have failed to keep large quantities of marijuana from being diverted to a burgeoning black market.

“Preventing diversion is imperative to ensure federal authorities maintain confidence in Oregon’s ability to adequately regulate the use and sale of marijuana,” said Richardson. “As the market is still developing, agency tracking of Oregon’s marijuana supply and inspections is lacking. This increases the risk that marijuana businesses in Oregon will find themselves subject to federal scrutiny.”

According to an anecdote from Richardson's office, the Oregon Liquor Control Commission (OLCC) which oversees regulation of legal cannabis has seen proof-positive of this diversion:

"In September 2018, the agency revoked a recreational grower’s license in response to 13 compliance violations. Two of the licensee’s plants reported as destroyed were found at a residence where a butane explosion had occurred earlier in the year, linking the grower to black market activity."

While the OLCC has done a great deal to automate some checks on cannabis shops and growers — such as seed-to-sale product tracking and surveillance cameras — there is still potential for "data errors," the Secretary of State's office found.

The biggest issue for both the recreational and medical areas of cannabis production is simply a lack of first-hand, human inspection of shops and grow sites, beyond an initial inspection prior to licensing.

"As of October 2018, OLCC had only conducted proactive inspections of an estimated 3% of 591 retail shops and 32% of 1,094 growers," Richardson's office found.

Meanwhile, the Oregon Health Authority (OHA) — tasked with regulating medical cannabis — has only four inspectors for some 6,850 grow sites. Between January of 2017 and September 2019, the OHA had only managed to inspect some 2.9 percent of those sites.

Richardson's office determined that the OHA lacked even the regulatory power that the OLCC possesses — rendering them unable to put in the same automated monitoring measures adopted by the OLCC and leaving them without the authority to test medical cannabis for pesticides and solvents, which is common practice for recreational cannabis.

"All marijuana labs in Oregon must be accredited by OHA’s environmental lab accreditation program," the audit found. "However, limited authority, inadequate staffing, and inefficient processes reduce the program’s ability to ensure labs consistently operate under accreditation standards."

The Secretary of State's office said that it has made 23 recommendations to the OLCC and OHA to help prevent diversion to the black market and improve testing procedures.

In a statement of response released on Wednesday, the OHA said that it agreed with the audit's findings and intended to pursue the recommendations.

"Auditor findings for the Oregon Medical Marijuana Program were consistent with findings of an internal review OHA conducted last year and submitted to the Oregon Cannabis Commission in May 2018," the agency said.

Oregon Coronavirus Cases

Data is updated nightly.

Cases: 154554

Reported Deaths: 2204
CountyCasesDeaths
Multnomah31785528
Washington21060212
Marion18335285
Clackamas13310175
Lane10172126
Jackson8299111
Umatilla763181
Deschutes591859
Yamhill375964
Linn356556
Malheur334358
Polk302942
Klamath277455
Douglas242853
Benton231816
Josephine231649
Jefferson195028
Coos142519
Union127519
Columbia124321
Wasco122026
Lincoln112820
Hood River106329
Morrow104414
Clatsop7756
Crook77518
Baker6487
Curry4166
Tillamook4122
Lake3746
Harney2726
Grant2221
Wallowa1424
Gilliam531
Sherman530
Wheeler221
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California Coronavirus Cases

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Cases: 3554629

Reported Deaths: 51395
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Los Angeles118754221106
Riverside2891853749
San Bernardino2853342673
Orange2603483889
San Diego2589823260
Santa Clara1098411765
Kern102627811
Fresno947941412
Sacramento929441464
Alameda800881224
Ventura77238834
San Joaquin665691082
Contra Costa62164674
Stanislaus55775944
Tulare47784746
Monterey42138327
San Mateo38763515
San Francisco34061398
Santa Barbara31763407
Solano29968164
Merced28915395
Sonoma27954298
Imperial26843589
Kings21951218
Placer19713231
San Luis Obispo19612227
Madera15390209
Santa Cruz14588183
Marin13136197
Yolo12760185
Shasta10944174
Butte10915160
El Dorado9095100
Napa897668
Sutter884597
San Benito574359
Yuba573336
Lassen560119
Tehama508152
Tuolumne394659
Nevada393274
Mendocino379643
Amador344441
Humboldt316033
Lake313440
Glenn221023
Colusa212813
Calaveras190547
Siskiyou174014
Inyo128736
Mono12114
Del Norte9875
Plumas6536
Modoc4524
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