New Mexico's Cannabis Industry Struggles Against Criminal Exploitation And Regulatory Failures

Despite achieving over $1 billion in sales since the legalization of recreational cannabis 29 months ago, New Mexico’s cannabis industry is grappling with severe regulatory challenges. A year-long investigation by KRQE’s Larry Baker has uncovered serious regulatory issues in New Mexico's cannabis industry, which has attracted lawbreakers and crime networks. 

Lack Of Regulatory Oversight

According to the report, the Cannabis Control Division (CCD) is under-resourced, with only nine inspectors overseeing 3,000 licensed cannabis businesses. This understaffing has led to a situation where many operations go uninspected, allowing criminal enterprises, some linked to international criminal networks in Mexico and China, to thrive without scrutiny. This loophole could be the result of the state’s licensing process.

In a podcast interview with KRQE, Duke Rodriguez, CEO of Ultra Health, New Mexico's largest cannabis operator, highlighted the gravity of the situation, revealing that two-thirds of the state's cannabis activity remains illicit. He criticized the state’s licensing system, describing it as an ineffective “honor system,” where applicants are granted licenses with the assumption they won’t violate regulations.

Rodriguez explained that inspections occur only after the license is issued and the business is already operational. The state can only intervene if irregularities are found during these inspections. "You won't see that anywhere else in the country," added Larry Barker, noting that enforcement delays often mean businesses can operate for 12 to 18 months without proper oversight.

Change In The State’s Regulatory Approach

Rodriguez also pointed out that under the old medical cannabis program, such infractions would have led to immediate license suspension or revocation. However, since recreational cannabis legalization, the lack of enforcement has allowed illegal operations to flourish unchecked. “The lack of enforcement is hurting the state’s economy,” he said, adding that the regulated market struggles to compete with its illicit counterpart.

"The state simply took its hands off the steering wheel … just issue a license to anyone who marked the boxes. And that's what they did," Rodriguez said. He added that while Governor Michelle Lujan Grisham celebrated the state surpassing $1 billion in legal cannabis sales in March 2024, most of the sales figures were tied to political optics rather than a reflection of a healthy market.The CCD's limited ability to collect fines or shut down rogue operations further complicates the situation.

Systemic Lack Of Enforcement

Barker's investigation found that only about 10% of cannabis businesses consistently comply with reporting regulations. Even when the CCD takes action, it struggles to enforce penalties. Barker cited one cannabis farm fined $1 million for rule violations, but it remains unpaid and the farm is still operational. "They have the authority to issue fines but not to collect them," Barker explained, highlighting the regulatory division's limited power.

Rodriguez echoed these concerns, saying that the state's lack of enforcement has fostered a rampant illicit market. "We're just creating this overly illegal, illicit black market," he said, noting that the number of rogue operations likely extends beyond what has been uncovered.

Cover image made with AI