Hide the Pot: Why Grow Houses Still Skirt Rules

It can ruin a business and hurt investors– so why is it happening?

by Dessy Pavlova · January 09, 2023

Hide the Pot: Why Grow Houses Still Skirt Rules

Helping Hands Wellness Center, a cannabis facility in Las Vegas, is accused by a Nevada state board that oversees the state’s cannabis industry with hiding unregistered plants at a facility.

The plants were being kept in a storage closet in an attic to avoid being tagged and registered in the state’s seed-to-sale tracking system, which authorities state make them susceptible to illicit sale. Video captured staff discussing plans to hide the plants from state auditors and moving the plants to a hidden location while the inspection occurred elsewhere. The facility has since had its license suspended.

This story shares similar aspects with what happened to CannTrust north of the border. Stocks plummeted when one of Canada’s most valuable publicly traded cannabis companies was accused of using fake walls to hide rooms not disclosed to authorities to grow thousands of kilograms of unregistered cannabis. Job losses, nearly a billion dollars in losses for shareholders, and a slew of lawsuits followed, and while the case is full of twists and turns and the legal outcome for those involved in the allegations is still uncertain, it raises questions as to why the industry is still seeing companies try to circumvent regulations.

Hiding weed, growing more than allowed: Why take the risk?

While difficult to excuse, there are several possible factors that could explain why even successful companies try to skirt the rules. Licensing fees and the costs to stay compliant with industry regulations can be overwhelming. Since the legality of cannabis varies from state to state, the complexity of establishing and maintaining a legal cannabis business is much more complicated and costly than other start-ups. Producers may feel compelled to expand the operation beyond its legal limits simply to remain profitable or even compliant. This doesn’t mean that costly compliance requirements are to blame for licensed producers growing and hiding illicit weed, but it would be harder for companies violation to play victim to unfair costs and claim they they acted illegally out of desperation and necessity if compliance fees were less expensive.

Businesses that saw their start in the wild west of the illicit cannabis trade can simply be accustomed to trying to squeeze as much cash out of their crop as possible, or don’t see the consequences of doing so as severe enough to not take the chance. Seed-to-sale tracking systems are a new concept in a relatively new industry, and it’s possible that cannabis businesses that were entrenched in a guerrilla style of illicit trade need to adapt to a rigorous system where every plant must be tagged. Then again, it could also be plain old greed– cheating to gain a larger market share.

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