Tonight we're going to take you inside a strange sub culture of a new and powerful drug you've never heard of. It can be dangerous to use and even more dangerous to make. And yet in some places it's... See More
Tonight we're going to take you inside a strange sub culture of a new and powerful drug you've never heard of. It can be dangerous to use and even more dangerous to make. And yet in some places it's totally legal. It's called wax and it's an ultra strong version of pot. But while authorities are cracking down on wax in some state, in Colorado, it is literally becoming a mom and pop business. Here is our partner network fusion. We're pretty much exploded. There's absolutely no cover. If it turns out to be a shooter event, we'll set up a perimeter. We're inside. Everybody will be secure. And we'll see what we have. Reporter: There's a new drug that's sweeping the country. It's called wax. There's no weed out there that possesses the punching power that the whack does. It's like smoking 20 joints of the best grade of weed. This Dea informant can't reveal his face but says wax is the ultimate distillation of marijuana, so potent a single hit will keep you high for over a day. It could generate up to $10,000. That's what I did in my first week at $100 a gram. That's if it doesn't blow you up while you're making it. Run! We have people blowing up, we have kitchens blowing up. People getting injured and even killed. The house is on fire. The house is on fire! And the Dea says it's not just the making of the drug that's dangerous. We've seen people have onset psychosis or even brain damage. The concern is this is going to spread before we get this under control. Dea with a warrant. Reporter: I'm about to visit a kind of alternate universe. While California cracks down on wax, Colorado is rushing to embrace it. Call it the great green divide. After you got your stuff unloaded, park over here. Reporter: This is a three-day contest held in broad daylight to see who can make the most potent batch of that very same drug. So this actually looks kind of like melted wax, right? So this particular one, this brand is called girl scout cookies? Yes. Reporter: You see in Colorado, wax is legal. Even the Dea has decided to tolerate state regulated marijuana businesses, despite federal law. If you're an everyday person that smokes a little bit of weed, that's probably a lot right there. If somebody doesn't smoke weed, I will not give them a dab. It's too much for them. Reporter: So how do you know? I ask them. Do you smoke weed? Like do you smoke weed? I do not, no. I would never give you a dab. Reporter: Anyone over 21 can walk into a store and buy wax right off the shelf. A lot of people don't agree with what's happening in Colorado and think that the pot should not be legalized. I don't really agree with alcohol being legal in the way that drunk people act. Reporter: They may seem like a bunch of stoners, but they say they're gearing up for a new Colorado gold rush. The contest is really a new kind of trade show. Trying to position themselves in the new wax marketplace and who they are may surprise you. So you don't look like a lot of the guys in there. No, I don't. I don't smoke like those guys either, ton honest with you. Brody moved his whole family up from Texas to try to get into the wax business. You guys are marry, you have a 2-year-old? We are. We do. Reporter: It's a family-owned company? Yeah, it's a mom and pop business. Reporter: So do you use the products that your husband makes? Yeah, I do. They're good. They keep me calm and coherent, you know? You call it your medicine? My medicine. Don't touch mommy's medicine. I'm going to need a bigger piece of that cloth. Never mind, I got it to work. Reporter: So now the butane, the solvent is coming through here all the way through the plant materials and it's sdsh. The solvent and the essential oil is falling under there. Reporter: The stuff in the can is beutane. Any spark can set off an explosion. But it also happens to strip out the thc, the chemical in marijuana that gets you high. So this is the end product? Obviously this is a huge disaster. We let it get a little too cold on us so that it became a lot harder to work with. Reporter: But for the all important contest, he has 12 rivals. Emily and Selena are the only two women to enter. We do this outside because we don't want it to explode. Blow ourselves up. What if our wax wins? It's going to win. We're going to make a mark in the industry. Reporter: Across town, contestant jay hood wants to leverage haze popular web cast. We're here from ABC "Nightline." We're about to do a run here. We have prime material. Tell us about the contest. Oh, yeah, the contest. We'll see, man. I'm not going to get too cocky, but I've definitely got my hat in the ring and it's definitely an important one. The American dream looks like it's starting to get closer and Clos closer. It's a new gold rush. There it is. That's what people want right there. I want to keep an eye on that bubble. It's about to get gigantic. Yeah, it came out to be a nice one. 100% of the people that have been blown up or burned is because they've had an open flame near their blast. No open flames, please. None. And you'll be okay. Don't try to get all scientific anticipate try to use a hot plate or anything like that. You might burn your damn house down. Then your mom is not going to be very happy about that. Reporter: In all fairness, most of the deadly butane had dissipated by the time he lit up, but it's obvious this industry is light on safety standards. Are you worried that it's been dangerous? I've seen guys pass out. Reporter: With your wax? Do you feel partly responsible? I feel bad a little bit. Reporter: And there's another group in the contest. Come on in. Guys are out to corner the market with industrial scale operations. We have 300 light ps and we're planning for expansion. 120 lights here. Reporter: At least no one would blow themselves up. They would just buy wax at the store It's like a supermarket. Kind of like a supermarket. Reporter: Back at the contest, the entries are ready. We're going to be just about done here. Emily and Serena's wax looks like a paste. It looks look it's going to be beautiful. It is going to be beautiful. A lot of love. Brody's is sticky. I would really like you all to get another shot when it's the right consistency. Jays looks like glass. Look at that clarity. Eat your heart out. That's what wins cups. Anybody will tell you that. Reporter: It's the moment of truth. You're counting the results? How does it look so far. We go by the max tch. 75.73% jay herez. Jay takes home the prize. Meanwhile, the Dea is conducting yet another bust for wax. But with huge tax wind falls expected for states who legalize marijuana, some say the feds may be fighting a rear guard action. We're between a rock and a hard place. We want to enforce the federal laws as we see fit, but we have times when state laws ma I be difficult for us to enforce the federal laws. Tilting perhaps towards a world not so far away where the tactical raids are replaced by a wax tax. For "Nightline," in Denver, Colorado.
This transcript has been automatically generated and may not be 100% accurate.