California regulators have sued a Los Angeles-area company they accuse of manufacturing and distributing $64M worth of cannabis-infused gummies, despite lacking the licensing to do so.
The suit, filed Wednesday in Los Angeles County Superior Court, targets Vertical Bliss, which produces the Kushy Punch brand of gummies, and its managers. The state alleges the defendants acted in concert to engage in commercial cannabis activities at an unlicensed facility outside of its licensed operations. (Read complaint here)
The litigation, brought by the California Department of Public Health and the state’s Bureau of Cannabis Control, seeks civil penalties to be decided at trial, as well as a court order for the defendants to destroy all cannabis products associated with the alleged violations.
The civil suit is the culmination of an investigation into Vertical Bliss that began in October 2019. At the time, the state says regulators received a tip about an illegal cannabis manufacturing and distribution operation at a site in the Canoga Park neighborhood of Los Angeles.
A raid at the unlicensed facility turned up “a commercial cannabis manufacturing kitchen, packaging and labeling materials for Kushy Punch brand products, detailed production records for Kushy Punch branded materials, delivery receipts for raw cannabis materials” among other evidence, according to the suit.
Among other products, the raid yielded 58 pounds of cannabis concentrate and records appearing to confirm the facility had produced 3.3M Kushy Punch brand gummies between October 2018 and September 2019 with an estimated retail value of $64M.
The state also reported finding “significant quantities” of raw materials for additional batches of edibles and vape cartridges.
Following the 2019 raid at the unlicensed facility, Vertical Bliss had its manufacturing and distribution licenses from a separate facility – in the Los Angeles neighborhood of Chatsworth – revoked by the state.
Based on the most conservative estimate of total output at the unlicensed site, it would have required licenses valued at $75,000 annually, regulators posit.
Beyond the site being unlicensed, the state also alleges the operators were manufacturing “Kushy Punch T.K.O.”-branded gummies containing twice the legal limit of THC.
The suit maintains the defendants are liable for civil penalties up to three times the amount of the necessary license fee for each violation each day of operating without a license, as per state law.
The suit accused the defendants of depriving the state of licensing fees and tax revenue, but notes that the potential harm goes beyond lost revenue.
“By engaging in unlicensed commercial cannabis activity, Defendants placed unregulated cannabis products into the cannabis market, thereby causing economic harm to California’s legal commercial cannabis industry and supporting the unlicensed cannabis market,” the suit states. “Defendants’ manufacturing, distribution, and sale of illegal cannabis products that were untested and/or do not meet the safety standards under the [state law] and its implementing regulations create grave public health and safety risks to Californians.”
The California regulators are being represented in the case by Ethan A. Turner, from the state’s Attorney General’s Office.
Kushy Punch did not respond Friday to a request for comment.
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