Along with the usual bureaucratic rigamarole of approving license renewals, meetings of Alaska’s Marijuana Control Board this year have been a source of top-shelf drama as the industry and regulators crack down on what one company calls innovation.
A new process called “CBD to THC conversion” combines heat, a citrus fruit essential oil and an undisclosed acid to turn widely available hemp-derived CBD — which may not be from Alaska — into high-inducing THC. Critics say the proprietary process violates state law, creates an unfair advantage by not paying the cost to grow weed in Alaska and that the chemistry isn’t well understood and potentially unsafe.
The issue has been the focus of nearly every Marijuana Control Board hearing this year, with it first coming to light at the April meeting. By the June meeting, there were more questions than answers, along with several hours of public testimony, both blasting and defending the process.
The company at the center of the controversy, Next Level Labs, has been upfront about using the process and has defended its actions. However, owners stopped short of fully explaining the chemical reaction or what kind of acid they’ve been using, calling it proprietary.
“The truth is, the process is pretty simple,” Kerby Coman, one of the owners of Next Level Labs, told the board in June. “Yes, it’s technical, but it’s a natural chemical reaction that uses all food-grade consumable ingredients. … So just because we understand the chemistry and do something a little bit more advanced with the same CBD isolate that is used in other products that you guys have no issue with, doesn’t mean we’re doing something wrong. It just means we’re being innovative.”
An industry fuming
Many opponents argued that Alaska’s recreational marijuana industry, which voters approved in 2014 and went into operation in 2016, is meant to be a seed-to-sale system where the marijuana that goes into your cannabis, joints, vapes, edibles and concentrates comes from a plant grown and taxed within the state’s system. For many, the prospect of consuming cannabis not grown in Alaska is frustrating.
“I’m also a consumer myself,” said Aaron Stiassny, the general manager of Uncle Herb’s, at the board’s June meeting. “And what matters to me most is I want to know what I’m putting in my body. I feel like cannabis grown in Alaska should be labeled accordingly. … So that’s where I have a problem with some of these products.”
And while many have complained about the original tax system, which charges a flat rate based on the weight of the flower at the wholesale level rather than its potency or final sale price, they also argue that everyone should be required to follow the same rules.
Some of the fiercest criticism came from Alaska Marijuana Control Board member Lacy Wilcox, who holds an industry member seat as the co-owner of Top Hat Concentrates. She argued the laws were never intended to allow the conversion of CBD sourced from outside the recreational sector into THC that can be sold within the recreational industry.
“It’s a huge advantage to break this rule,” she said at the June meeting. “I thought it was really clear that that would not be allowed. And I’m shocked that it is happening. I would really strongly support seizing these products for multiple reasons, but for my manufacturing hat, I don’t want to see more businesses that are well-meaning fail.”
Others question the safety of the CBD to THC conversion, with several noting that while the final product may be THC, there are several altogether new compounds that are left behind by the reaction that haven’t been studied and aren’t understood. Chris Lindsay with the American Trade Association for Cannabis and Hemp told the board that ambiguity in federal law has left the matter to the states, creating a patchwork of rules. But, he said, many states have also chosen to shut the door on the process until it’s better understood.
“The problem is that the minute you move into CBD conversions, you’re really dealing with a much different process than anything that states typically do when they’re regulating marijuana,” he told the board. “When you’re doing conversions, you’re spinning off synthetic byproducts; unless you can control the manufacturing, you don’t even know what those byproducts are. … There is a false equivalency between what’s being grown naturally and what gets spun out of the lab, and to say that THC is THC misses the point that it’s the conversion process that we do not understand, and very often we can’t regulate.”
State rolls in
The emerging science has tested the state’s marijuana and industrial hemp programs, raising questions about jurisdiction and potential penalties. For now, enforcement falls within the Division of Agriculture, which regulates hemp production, manufacturing and processing.
And, according to a June notice of violation, the process is illegal.
Next Level Labs got slapped with a $63,000 fine, an order to destroy more than 5,000 vape cartridges and other products distributed to associated stores, King Street Cannabis and Top Shelf Herbs, and an order to halt any further conversions.
PDF: Division of Agriculture’s notice of violation to Next Level Labs
The notice of violation, which Next Level Labs has appealed, outlines how the company and its staff have been forthright about what they’re doing. It includes interviews with the company’s chemist, who explained that the process took about 1 gram of THC concentrate from the Alaska market and mixed it with 5 kilograms of CBD isolate, a 1:5,000 ratio.
In subsequent testimony, the company says it has halted any further conversions while its appeal process plays out.
The notice also lays out the many ways the products and the process are illegal, including that Next Level Labs isn’t registered with the state’s hemp program and therefore isn’t cleared to process hemp in any way. It also notes that existing rules and regulations bar the conversion of industrial hemp into a psychoactive drug in any way.
“CBD oil is unquestionably industrial hemp,” explains the notice. “When Next Level takes this industrial hemp and converts, extracts, refines, alters, manufactures, or turns it into a finished industrial hemp product, it is processing industrial hemp. Adding CBD oil to a marijuana extract does not result in a marijuana extract any more than adding a marijuana extract to CBD oil results in a CBD oil.”
The state has already taken aim at hemp-derived THC products, which for years were operating entirely outside the cannabis industry. Thanks to a loophole in the federal farm bill, it allowed edibles to be made from the trace amount of THC that can naturally be found in hemp. The products, which could be found at gas stations and head shops, have largely vanished from Alaska’s shelves, but they can still be bought online.
At the September meeting, there was a good deal of focus on what penalties — if any — the Marijuana Control Board should impose. Nothing official, such as a license revocation, has been issued for the involved companies. Another public hearing is planned, but not yet scheduled, to focus on the science of CBD conversions. But, Board Chair Bailey Stuart, who holds the board’s other seat and is the owner of Green Jar, was firm that it won’t be tolerated.
“To address the public conversation: The conversion of CBD to THC is not a permissible process. This has been made clear by the Division of Agriculture, a letter from a governor and advisories from the AMCO office,” she said. “If you are found to be converting CBD to THC, there will be action taken.”
A cloud of uncertainty ahead
Meanwhile, the tone of Next Level Labs and those involved has shifted significantly, with some calling for ethics investigations into Wilcox and Stuart, accusing them of using their official positions to shut down competition. Others suggested it had become a “banana republic.”
“I would just like to encourage everyone out there if you have witnessed or been a victim of overreach, misapplied authority, due process violations, selective enforcement, HIPAA or other personal violations, defamation, abuse of discretion, conflict of interest or excessive penalties by this board,” said Johnny Furlong, a consultant who has been working with Next Level Labs. “While the bloviating about being fair and equal is being constantly driven into our ears to gaslight us, it’s been quite evident through just once again this meeting that we have a serious conflict of interest by at least one of these board members who, because of innovation, was getting beaten.”
Wilcox, who has previously worked with the Alaska Marijuana Industry Alliance to advocate for changes to the state’s marijuana laws, defended her concern about the process during the hearing. She stressed that the continued health of the state’s marijuana industry relies on everyone playing by the same rules.
“It’s not a battle,” she said. “I’ve been a pretty strong advocate for smart rules, and for following those roles and changing them when they’re not proving to be smart. The rules are the rules, and people who break the rules, I think, should be held accountable — especially when it could cause harm to people, to businesses and potentially to the entire program’s longevity.”
Matt Acuña Buxton is a long-time political reporter who has written for the Fairbanks Daily News-Miner and The Midnight Sun political blog. He also authors the daily politics newsletter, The Alaska Memo, and can frequently be found live-tweeting public meetings on Bluesky.
