A Recipe For Avoiding Disaster: How Strong Trade Associations Can Help Neutralize Bitter Ingredients in the Cannabis Industry

Over the last few years, the industry has seen a spike in lawsuits filed by cannabis operators against regulators, service providers, and even other operators as once-booming markets decline.

California and Colorado, for example, have been home to some particularly headline-dominating litigation as business owners attempt to force state agencies to update insufficient regulations, all in an apparent search for someone to bear responsibility for dwindling profits. At the same time, cannabis businesses in states across the country have banded together to advocate for more effective regulations that will better serve the industry and minimize opportunities for bad actors to gain a foothold.

So, what’s behind the recent spate of blame-game lawsuits? And how can we change the trajectory of the regulated marijuana industry without relying on expensive litigation?

This article will examine common themes behind four notable cases and recommend four ways that strong trade organizations can help cannabis business owners build a stronger industry.  

562 Discount Med Inc. v. Glass House Brands and HNHPC v. Department of Cannabis Control

In 2023, California operator Catalyst Cannabis Co. launched a litigation campaign in two lawsuits filed against the state Department of Cannabis Control (DCC) and competitor Glass House Brands.

Catalyst alleged that while the rest of the California industry suffered, Glass House managed to stack profits that could only result from a complex scheme to use “burner” companies to overproduce regulated marijuana in order to divert the excess to black markets outside California at an astronomical markup. Glass House was successful in getting that case dismissed.

In a separate action, a Catalyst affiliate sued the DCC, claiming the department allowed this scheme to go unchecked. That matter remains pending.

Mammoth Farms LLC et al. v. Colorado Department of Revenue et al.

Earlier this year, Colorado’s Marijuana Enforcement Division (MED) faced a similar lawsuit when Mammoth Farms LLC and its affiliates (for purposes of this article, “Mammoth”) accused the MED of allowing the rampant inversion of hemp-derived THC into Colorado dispensaries. Mammoth alleged that bad actors had been able to infiltrate the regulated market by using illegal chemicals to create synthetic THC from hemp flower, manipulating test samples, and mislabeling end products as if they contained naturally derived THC.

According to Mammoth, the problem was compounded by so-called “ghost facilities” — licensed premises that appear legitimate on paper but, in reality, operate little or no cultivation or processing, serving primarily as a front to launder illicit or noncompliant product into the regulated supply chain by transferring Metrc tags but not regulated product.

The complaint further described how certain operators seemingly purchased large quantities of higher-quality marijuana flower, diverted that product into illegal distribution channels, and recorded distillate extraction from said flower while actually inverting hemp-derived distillate.

Mammoth contended that this inversion/diversion scheme was not only foreseeable but also enabled by the MED’s failure to enforce existing safeguards in Colorado’s seed-to-sale tracking system. The court ultimately granted the MED’s motion to dismiss, and Mammoth has not appealed.

Mammoth Management LLC et al. v. C2CC LLC et al.

Prior to suing the MED, Mammoth lodged the same allegations included in its MED lawsuit against competitors in Colorado’s marijuana industry, claiming such businesses were introducing chemically converted, hemp-derived THC into the regulated market while labeling and selling it as marijuana-derived. The complaint described how operators allegedly used “ghost” compliance entries, misleading tracking data, and large-scale extraction of low-value biomass to obscure the synthetic origin of their products.

Mammoth argued that these practices distorted the marketplace by flooding it with low-cost distillate, creating public health concerns and driving down the value of products made by compliant businesses. The case seeks injunctive relief and damages under the Colorado Consumer Protection Act and the Colorado Organized Crime Control Act. Motions to dismiss remain pending.

Retail Surveillance and Public Pressure: Ripple’s Secret-Shopper Study

Outside of litigation, Lifestyle Foods Inc., d/b/a Ripple Colorado, reportedly conducted a “secret-shopper” style survey of Colorado adult-use cannabis retailers in late 2024, purchasing 15 flower, shake, and pre-roll products anonymously and submitting them to a third-party lab for blind testing.

According to Ripple, only two of the 15 samples passed all state-mandated potency and contaminant thresholds; many allegedly deviated well outside the allowed 15% variance for THC under state law, and some showed elevated levels of yeast, mold, pesticides, or microbial contaminants beyond permissible limits.

Following the release of those results via media channels (notably via CPR News and MJBizDaily), Ripple framed the data as evidence of systemic regulatory failure; in its view, the study showed that traceability, lab oversight, and enforcement had failed to protect consumers or ensure compliance. Following its off-the-shelf testing survey, Ripple was active in the MED’s Science and Policy Forum that ultimately rolled out a Surveillance Testing Program in October 2025.

Feelings of Dissatisfaction and Distrust

There are common ingredients in the Catalyst and Mammoth lawsuits and Ripple’s secret-shopper study—for example, state regulations regarding mandatory seed-to-sale tracking, concerns with testing results, and the software company that holds exclusive long-term contracts with the states to provide tracking services.

The lawsuits allege that bad actors engaging in inversion and diversion were able to easily manipulate the Metrc system to hide this illicit activity, and the secret-shopper study called into question a majority of test results for marijuana products already on shelves.

Catalyst, Mammoth, and Ripple each accused state regulators of ignoring these red flags and failing to promulgate more effective regulations to prevent inversion and diversion from slipping through the cracks in the regulatory framework, as well as contaminated products from reaching consumers. Additionally, the lawsuits and media coverage following the secret-shopper study asked state regulators to tighten regulations and increase enforcement to prohibit activities from endangering the industry.

These cases illustrate current feelings of (1) dissatisfaction toward regulators who impose burdensome rules on the “good” actors while appearing to ignore the behaviors of “bad” actors, and (2) distrust between businesses struggling to stay competitive in stagnant markets.

But more often than not, litigation is expensive, time-consuming, and too slow to effectuate real change; most cannabis businesses do not have the resources to fight state regulators or bad actors in court. And, even when operators are willing to “go it alone” and speak up, they run the risk of being cast as pariahs within the industry—alienating potential partners or customers by publicly calling out peers rather than working collaboratively toward solutions.

So, how can cannabis businesses work together to minimize the bitter taste that bad actors can leave behind?

#1 Amplify Influence

A strong trade association will often champion common industry interests at the political table. While one cannabis business alone may not have the resources to lobby for beneficial policies, joining (or starting) a trade association can be an effective way to pool resources, present a collective voice, and advocate for positive regulatory change.

#2 Increase Accountability

Trade associations often advance best business practices and utilize peer benchmarking to measure performance and identify areas for development. When local and state governments struggle to keep pace with innovation, a strong trade association can provide an invaluable opportunity to implement effective means of self-regulation, like enhanced safety, quality, and ethical standards.

#3 Develop Networks

Not everything needs to be a competition. Though cannabis businesses compete in the market, strong trade associations can offer cannabis business owners and employees the chance to connect with peers, discuss industry trends, offer advice, and foster symbiotic business relationships. This spirit of “coopetition”—where rivals collaborate on shared challenges while still competing in the marketplace—can help raise overall industry standards and strengthen collective resilience. In an industry facing heavy regulation and persistent stigma, coopetition can be a powerful way to build trust and solve problems that no single operator can tackle alone.

#4 Promote Public Health and Safety

Education is the key to ensuring the continued prioritization of public health and safety in the cannabis industry. Just as strong trade associations help individual businesses combine forces to better lobby on behalf of the industry, they can also help develop educational programs and campaigns to increase public awareness when it comes to the healthy and safe use of regulated marijuana, e.g., distinguishing “good” actors from “bad” actors.

Final Notes

By joining or forming a strong trade association, cannabis business owners can overpower the bitter taste of bad actors and advocate for improved policies, implement higher quality and safety standards, and help hold each other accountable more effectively—and less expensively—than a lawsuit.