New York Regulators Target Omnium Health for Unlicensed Cannabis Production

New York regulators have initiated proceedings to close down Omnium Health, a cannabis company on Long Island, for facilitating unlicensed production by several prominent brands. The state’s Office of Cannabis Management revealed that Omnium allowed businesses from outside New York to operate without the necessary licenses, effectively creating an illegal entry point into the regulated market.

Officials filed administrative charges aimed at revoking Omnium’s licenses for manufacturing and distributing cannabis products. They also proposed imposing fines of at least $1 million and barring the company from operating in New York for a minimum of three years. According to the Office of Cannabis Management, Omnium profited from rent and royalties while passing off the products of these unlicensed companies as its own, a practice referred to as reverse licensing, which is illegal in New York.

The investigation, which lasted eight months, uncovered significant concerns regarding product safety. In a major action, regulators ordered Omnium to recall approximately $30 million worth of cannabis products that had been produced in its facilities. These products had been sold to licensed dispensaries across the state.

Felicia A. B. Reid, acting executive director of the Office of Cannabis Management, 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 state cannabis laws clearly stipulate that licenses are non-transferable and that only licensed operators can produce and distribute cannabis.

Omnium has the right to contest the charges in an administrative hearing overseen by a judge. The investigation implicated several major brands, including Stiiizy, Mfused, and Grön. Between January and August 2023, consumers purchased more than $65 million worth of various cannabis products produced at Omnium’s facilities, accounting for 6.2 percent of the state’s total cannabis sales exceeding $1 billion, as reported by the sales-tracking platform Headset.

The proposed fine of $1 million could escalate to three to five times the retail value of the products if the charges are upheld, which would set a record for the agency. Omnium, founded in 2014 as a manufacturer of dietary supplements and cosmetics, expanded into hemp sales in 2018 and began producing cannabis products in 2022, becoming one of New York’s first licensed processors. The Office of Cannabis Management had previously featured one of Omnium’s founders in a promotional campaign highlighting the importance of purchasing cannabis from licensed sellers.

During the investigation, retailers were instructed to withdraw around $30 million worth of products, particularly from Stiiizy, which is recognized as the best-selling cannabis brand in the United States. Although some brands, like Grön, continued producing products under Omnium’s licenses, the investigation led to a significant review of their compliance with state regulations.

While officials noted that Omnium did not adequately maintain records detailing the production processes, they indicated that there was no evidence to suggest that the products manufactured at Omnium posed safety risks to consumers. Retailers were left to manage returns of these products from their customers.

Reverse licensing, while common in some states and used frequently in the cannabis sector, is prohibited in New York. This regulatory stance aims to create a level playing field for new businesses that compete against established companies with a head start in other regions. Christine Apple, founder of Grön, has claimed her company was among the first to utilize reverse licensing within the industry, a strategy aimed at facilitating entry into fragmented state markets due to federal cannabis prohibition.

As the investigation continues, it remains uncertain whether further actions will be taken against the brands that have ceased using Omnium’s licenses. Notably, both Stiiizy and Grön have secured their own licenses for production since the investigation began, with Stiiizy acquiring a factory in Central New York and Mfused relocating to another licensed facility.