A licensed cannabis processor in New York has sued the state to halt the January 12 rollout of a mandatory seed-to-sale tracking system, arguing it imposes unlawful economic burdens and exceeds regulatory authority. The lawsuit by Veterans Holdings Inc., filed December 16 in Albany Supreme Court, seeks a temporary restraining order against the Metrc system, which aims to prevent illegal diversion from legal markets. This challenge compounds recent setbacks for the Office of Cannabis Management, including a dropped investigation into alleged license rentals, exposing enforcement vulnerabilities two years after the adult-use market launched.
Lawsuit Targets Metrc Tags and Regulatory Overreach
Veterans Holdings, operating as Veterans Choice Creations in Fulton County, contends that OCM's requirement for operators to buy unique identifier tags from Metrc at 10 cents each violates statutes and the separation of powers. The complaint highlights a shift from the prior BioTrack system, which tagged batches or lots, to Metrc's demand for tags on individual items—a change that multiplies costs hundreds or thousands of times for processors. Indoor operations, limited to 10,000 square feet of canopy with one to two plants per square foot, could face $2,000 per crop; outdoor sites up to 100,000 square feet might incur $20,000. OCM responded on December 15 by offering 20 million free tags, distributed evenly to licensed processors, but the suit names the agency, its leadership, the Cannabis Control Board, and Metrc as defendants. The state must reply by January 7.
Enforcement Stumbles Precede Tracking Delay
OCM dropped its largest recall and an investigation into Omnium Health on December 8, the same day Governor Kathy Hochul demanded resignations from interim Executive Director Felicia Reid and Deputy Counsel James Rogers, who led the Trade Practices Bureau. That unit, formed in February 2025 to combat illicit markets, had probed Omnium for allegedly renting facilities to unlicensed operators for legal and illegal production, based on audits, contracts, and witness testimony. Neither OCM nor Hochul has detailed the withdrawal, but a functional seed-to-sale system could have detected such diversions earlier. Hochul criticized OCM for impeding market growth, forcing the agency to abandon the case amid broader rollout delays.
Market History Underscores Need for Reliable Tracking
New York opened its adult-use cannabis market on December 29, 2022, initially planning BioTrack for inventory logging to block illicit diversion, with a 2023 deadline that slipped due to court delays in retail licensing. The January 12, 2026, Metrc mandate followed BioTrack's August partnership announcement with its rival. OCM Director of Regulatory Operations Patrick McKeage affirmed on December 18 that blocking the system endangers product authenticity and consumer safety. New interim leader Susan Filburn, addressing the Cannabis Control Board that day, pledged stability and focus on public health. These events reveal persistent enforcement gaps, as unchecked diversion fuels a parallel illicit economy despite licensing efforts, with the lawsuit's outcome poised to shape compliance and market integrity.
