New York regulators moved on Monday to shut down a cannabis company on Long Island for allowing some of the industry’s biggest brands to make products at its facilities without the required licenses.
With a furtive arrangement, the company, Omnium Health, gave unlicensed businesses from out of state an illegal back door into New York’s regulated market, the state’s Office of Cannabis Management said. Officials filed administrative charges seeking to strip Omnium’s licenses to make and distribute cannabis products, to impose at least $1 million in fines and to ban the company from New York.
Omnium received rent and royalties from the companies and passed their work off as its own. The practice, known as reverse licensing, is illegal in New York and raises questions about the safety of products made without the proper oversight.
In its biggest recall to date, the office ordered Omnium to take back about $30 million worth of cannabis products made in its buildings and sold to licensed dispensaries.
Felicia A. B. Reid, the acting executive director of the office, said, “Omnium’s conduct is a blatant breach of the licensing rules designed to ensure transparency and fairness in the legal market.”
“Our state’s cannabis laws are clear: Licenses are not transferable, and only licensed operators may produce and distribute cannabis,” she added.
Omnium can challenge the charges in an administrative hearing overseen by a judge at the office.
The action came after an eight-month investigation into Omnium, a middleman processor licensed to make its own lines of products and those of other companies in New York. The investigation ensnared some of the industry’s biggest brand names, including Stiiizy, Mfused and Grön. Officials said the investigation was still active and that additional cases could be filed against the companies.
Between January and August, consumers purchased more than $65 million worth of vapes, joints, edibles and other items from 17 brands that are or were made at Omnium’s sites. Over that time, those products made up 6.2 percent of the more than $1 billion in sales in New York, according to Headset, a sale-tracking platform.
The office proposed a $1 million fine against Omnium if the company does not contest the charges. However, state law allows officials to collect as much as three to five times the retail value of the products. Such a fine would be a record for the agency.
Omnium was founded in 2014 as a manufacturer of dietary supplements and cosmetics. The company branched into hemp sales in 2018 and then cannabis in 2022, becoming one of the state’s first licensed processors.
The Office of Cannabis Management featured one of Omnium’s founders in an ad campaign in 2023 emphasizing the safety and social-justice benefits of buying cannabis from licensed sellers. Now, the agency is seeking to bar the company from New York for at least three years and destroy all the products made in its facilities.
When the investigation began in April, the retailers pulled about $30 million worth of products, mainly from Stiiizy, a California company that is the best-selling cannabis brand in the country, and Mfused, a best seller out of Washington State. But stores had been allowed to continue selling brands like Grön, a top edibles company from Oregon, and Cookies, a popular brand that started in California’s illicit market.
During the investigation, Omnium could not provide records that fully accounted for how and when products were made, officials said in a document previously obtained by The New York Times that outlined investigators’ initial findings.
Yet officials said they had no evidence that the products made at Omnium were unsafe for consumers. They left it up to retailers to accept returns of the items from their customers.
Reverse licensing is permitted in some states and widely used in the cannabis industry. But the practice is illegal in New York, where state regulators have sought to level the playing field for new businesses competing with deep-pocketed companies that have had a head start in other states. Grön’s founder, Christine Apple, has claimed that her company was one of the first to use reverse licensing in the cannabis industry, starting in Arizona and eventually expanding to New Jersey and New York.
The arrangement allows companies to cut through bureaucratic hurdles to jump quickly into new markets, which are fragmented from state to state because the industry remains illegal at the federal level. Reverse licensing makes it harder for regulators to exercise oversight of the companies that make legal cannabis.
It is unclear if the agency will take any action against the brands that no longer use Omnium’s licenses. Since the start of the investigation into Omnium, Stiiizy and Grön have both obtained licenses to make their own products (though Grön continues to rent space in Omnium’s facilities). Stiiizy purchased its own factory in Central New York, while Mfused moved to another licensed processing facility.
Ashley Southall writes about cannabis legalization in New York.
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