New York Regulators Target Omnium Health for Unlicensed Cannabis Production

New York officials have initiated action to shut down the cannabis company Omnium Health for facilitating unlicensed production at its facilities. The state’s Office of Cannabis Management (OCM) announced on October 16, 2023, that Omnium allowed several prominent brands to manufacture products in New York without the necessary licenses, effectively providing illegal access to the regulated market.

According to the OCM, Omnium’s operations involved a practice known as reverse licensing, which is illegal in New York. The arrangement permitted out-of-state companies to produce cannabis products without oversight, raising concerns about consumer safety and market integrity. As part of the regulatory actions, officials have filed administrative charges to revoke Omnium’s licenses and impose a minimum fine of $1 million. The agency also seeks to ban the company from operating in New York for at least three years.

The investigation into Omnium, which serves as a middleman processor and was licensed to manufacture its own products, began in April and has uncovered links to major cannabis brands, including Stiiizy, Mfused, and Grön. Between January and August of this year, consumers purchased over $65 million in cannabis products produced at Omnium’s facilities, accounting for approximately 6.2 percent of the more than $1 billion in total cannabis sales in New York, as reported by Headset, a sales tracking platform.

The OCM’s executive director, Felicia A. B. Reid, stated, “Omnium’s conduct is a blatant breach of the licensing rules designed to ensure transparency and fairness in the legal market.” She emphasized that New York’s cannabis regulations clearly stipulate that licenses are non-transferable and only licensed operators may produce and distribute cannabis.

As part of the enforcement actions, the OCM has ordered Omnium to recall products valued at around $30 million that were sold to licensed dispensaries. This represents the largest recall issued by the agency to date. While the investigation continues, officials have indicated that additional charges may be brought against the brands involved.

Omnium was established in 2014 as a manufacturer of dietary supplements and cosmetics and transitioned into the cannabis industry in 2022. Previously, one of Omnium’s founders was featured in an OCM advertising campaign highlighting the safety and social justice advantages of purchasing cannabis from licensed sources. Now, the agency is pushing to destroy all products manufactured in Omnium’s facilities.

During the investigation, retailers were forced to withdraw around $30 million worth of products, primarily from Stiiizy, a leading cannabis brand in the United States. Despite this, some companies, such as Grön and Cookies, were allowed to continue selling their products while transitioning away from Omnium’s licenses.

Officials noted that Omnium had difficulties providing complete records detailing production timelines and processes. Nonetheless, they have not found evidence suggesting that the products posed a direct risk to consumers. Retailers were left to manage returns from their customers independently.

Reverse licensing is a controversial practice that, while permitted in some states, is prohibited in New York. This regulation is part of the state’s efforts to create a fair competitive landscape for new businesses, especially against well-established brands from states where cannabis is legal.

Christine Apple, founder of Grön, has previously claimed her company was among the first to utilize reverse licensing in the cannabis sector, operating in Arizona before expanding to New Jersey and New York. This practice allows companies to quickly enter markets that differ significantly due to federal restrictions on cannabis.

As the investigation unfolds, it remains unclear whether the OCM will take further action against the brands that have ceased using Omnium’s services. Both Stiiizy and Grön have secured licenses to produce their own products since the inquiry commenced, with Stiiizy purchasing a facility in Central New York, while Mfused has relocated to another licensed processing site.