New York’s Office of Cannabis Management (OCM) has an enforcement problem. Earlier this month the agency was forced to drop what had been its largest recall effort to date, along with a subsequent investigation in an alleged license rental scheme. Now there’s a lawsuit that threatens to further delay implementation of a seed-to-sale system that is supposed to curb illegal diversion and inversion.
Veterans Holdings Inc., a licensed cannabis processor, is suing the state of New York over the implementation of Metrc’s seed-to-sale tracking system. Veterans Holdings, which operates as Veterans Choice Creations in Fulton County, is seeking a temporary restraining order against the Jan. 12 start date for mandatory Metrc compliance.
The plaintiff argues that the state’s requirement for operators to purchase ID tags from Metrc creates an unfair economic burden on those operators. They also claim the rule was improperly implemented.
“The new requirements are not authorized by statute or regulation. OCM went well beyond its authority and improperly assumed the role of the Legislature to impose its own idea of policy,” said the 19-page complaint, which was filed Dec. 16 in Albany Supreme Court. “OCM’s unconstitutional overreach violates the separation of powers doctrine.”
The plaintiffs also took issue with the fact that the state’s previous agreement with Biotrack required operators to tag batches or lots, but the deal with Metrc required tagging individual items.
“The new requirements would increase a factor of hundreds, or even thousands, the number of UIDs (Unique Identifier tags) that licensees such as Veterans Choice would need to purchase from Metrc to be compliant with the new system – thus imposing an enormous economic burden,” said the complaint.
Metrc charges 10 cents per ID tag.
Outdoor cultivation sites are allowed to grow up to 100,000 square feet of canopy, while indoor operations can go up to 10,000 square feet. One to two plants can fit into a single square foot of canopy, meaning that indoor operators may have to pay up to $2,000 for tags for a single crop, while outdoor operators could face a bill as high as $20,000.
In order to ease that transition, OCM announced on Dec. 15 that it would provide 20 million ID tags at no cost, evenly distributed to every licensed processor in the state.
In addition to OCM, Veterans Holdings named Chief Administrative Officer Susan Filburn (who now serves as interim executive director), the Cannabis Control Board, the state Division of Alcoholic Beverage Control and Metrc.
The state is required to file its official response in court by Jan. 7.
“A temporary restraining order precluding the implementation of the Office’s STS (seed-to-sale) system severely threatens the Office’s ability to ensure product authenticity and protect the health and safety of New York State’s consumers,” wrote OCM Director of Regulatory Operations Patrick McKeage, in an affirmation to the court filed on Dec. 18.
Reid out as Omnium Health case dropped
Almost two weeks before that filing, Gov. Kathy Hochul ordered the resignation of former interim Executive Director Felicia Reid and OCM Deputy Counsel James Rogers on Dec. 8. On the same day, the state dropped its case against Omnium Health, for allegedly taking part in a diversion scheme.
Rogers also served as director of OCM’s Trade Practices Bureau. Formed in February 2025, the TPB unit was specifically created to tackle the state’s ongoing illicit market problem and quickly launched an investigation of Omnium Health that month following a referral from the agency’s compliance team.
“Too often, the Office of Cannabis Management has stood in the way of the market realizing its potential, including most recently in the case of a pending compliance action that it has had to withdraw. As a result, I directed my office to take action, including requesting the resignation of the Acting Executive Director. That resignation has been accepted and is effective immediately,” said Hochul in an emailed statement.
The case against Omnium Health alleged that the licensed processor rented its facilities to non-licensed operators so they could manufacture cannabis products for the legal and illicit market. A functioning seed-to-sale system would have made such a scheme easier for the state to identify. OCM said TPB investigators examined audit and inspection records, reviewed contracts between Omnium and the unlicensed businesses, and took testimony from several witnesses. Neither OCM nor Hochul has explained why the case was dropped.
“Over the past year the OCM has made meaningful progress in establishing the cannabis marketplace. We could not have done it without support from the governor, this board and most importantly, the dedication of the staff,” said Filburne on Dec. 18 during her first meeting with the Cannabis Control Board after she was promoted. “My priority is to provide stability, clarity and support so our team can continue to excel. Our mission does not change. We remain committed to protecting public health and safety.”
New York launched its adult-use market on Dec. 29, 2022. At the time, the plan was for operators to work with BioTrack to log their inventories in order to prevent diversion to the illicit market, with a tentative deadline set in 2023. Amid a court-delayed retail roll out, the state kept pushing back its deadline, with the most recent date for implementation set for Jan. 12, 2026.
The change came after BioTrack, the state’s original seed-to-sale provider, announced a partnership with its former competitor Metrc in the first week of August. Following that announcement, OCM switched operators to Metrc.
