New York Regulators Crack Down on Cannabis Distributor at Center of Inversion Scheme Allegations
State Accuses Licensed Processor Omnium Health of Letting Illicit Product Enter Legal Market
New York state cannabis regulators have taken one of their toughest enforcement steps yet against a licensed company, accusing Long Island based Omnium Health Inc. of orchestrating a scheme that allowed unlicensed marijuana products to infiltrate the state’s legal market.
The Office of Cannabis Management (OCM) announced Monday that Omnium faces potential fines, loss of its license, and permanent exclusion from the state’s cannabis industry after investigators alleged the company provided “an unearned backdoor” for illicit operators.
The charges mark a pivotal moment for New York’s still-developing cannabis program, which has faced ongoing challenges with illegal sales and what regulators describe as widespread “inversion” — the practice of funneling unregulated products into the legal supply chain.
In a statement, Felicia A. B. Reid, the OCM’s acting executive director, emphasized the agency’s commitment to fair play in the state’s nearly $1.8 billion legal cannabis market. “Today’s move ensures that regulated businesses do not exploit loopholes or take advantage to undermine legal operators who play by the rules,” Reid said.
Omnium Health could not be reached for immediate comment on the allegations.
Major Punishment for Alleged New York Marijuana Malefactor
The enforcement action follows a April quarantine of $10 million worth of cannabis products, including vaporizers, pre-rolls, and other items under popular brand names like Stiiizy and mfused, which regulators linked to Omnium.
Those quarantined products were allegedly produced or distributed through unlicensed channels, raising significant concerns about consumer safety, tax compliance, and fairness for legitimate businesses operating under tight regulatory scrutiny.
For months, licensed operators have urged OCM to act more aggressively against companies and individuals exploiting the system. Monday’s announcement was widely viewed as a victory for those calling for a stronger stance on illicit activity.
“Today’s enforcement actions reinforce a simple truth: consumer safety and market fairness must always come before profit,” said Joe Rossi, a spokesperson for the Green Standard Alliance, which earlier this month released a white paper detailing the public health risks posed by untested cannabis products in the state.
OCM Investigation Finds Evidence of “License Laundering” and Illicit THC Products
According to the OCM, the agency’s Trade Practices Bureau launched an investigation into Omnium Health in February, after receiving reports that the company may have been allowing unlicensed businesses to operate under the guise of legitimate production.
Investigators found that Omnium allegedly leased out its licensed facilities to unlicensed operators in exchange for rent payments. Those third parties then used the Omnium license to launder illicit cannabis products, including THC isolate, into the regulated market.
OCM’s findings revealed no evidence that the THC isolate found in Omnium’s facilities was produced within New York’s regulated system — suggesting that the material likely originated from unregulated or out-of-state sources.
If proven, the actions would represent one of the most serious violations of state cannabis law since New York legalized adult-use marijuana in 2021, and a significant breach of public trust in the state’s tightly controlled licensing system.
Possible Penalties Include License Revocation, Fines, and Massive Recall
OCM regulators outlined a series of potential punishments for Omnium Health, signaling that the agency intends to set a strong precedent for future enforcement. Proposed penalties include:
Revocation of Omnium’s cannabis processing and distribution licenses.
Debarment preventing company leaders from applying for future cannabis permits.
An unspecified monetary fine tied to the projected revenue earned from the alleged inversion scheme.
A comprehensive recall of all products made by unlicensed processors and their subsequent destruction.
Such a recall could be among the largest in the state’s short cannabis history, potentially involving thousands of products currently on retail shelves. Regulators said they are still evaluating the full scope of products that may have entered the market through Omnium’s operations.
New York’s Broader Crackdown on Misconduct in the Cannabis Industry
The charges against Omnium Health come just weeks after OCM took similar action against Lexachrom Labs, another Long Island-based cannabis testing company. Regulators accused Lexachrom of “dry-labbing” — falsifying laboratory results without actually performing mandated safety tests.
That case led to a recall of 12 lots of cannabis flower over the summer, after investigators determined that Lexachrom’s results could not be trusted. The lab was later fined and barred from the industry, a punishment that industry observers see as a precursor to the state’s latest crackdown.
Taken together, the enforcement actions suggest that OCM is intensifying efforts to clean up a market still plagued by inconsistencies, delays, and persistent illegal activity.
Inversion: The Persistent Problem Undermining New York’s Legal Market
Since legalization in 2021, New York’s rollout has been marked by slow licensing, lawsuits, and illicit competition. Thousands of unlicensed stores have opened across the state, selling untested and untaxed cannabis.
“Inversion,” as regulators call it, blurs the line between legal and illegal cannabis products. By funneling unregulated marijuana through licensed distributors or processors, bad actors effectively disguise illicit goods as legitimate — undermining both consumer safety and market integrity.
Industry advocates argue that until the state strengthens oversight and accelerates licensing for legitimate growers and processors, the inversion problem will persist. Regulators, however, are increasingly signaling that they intend to hold licensed operators accountable for any role in enabling the practice.
A Turning Point for Enforcement and Industry Integrity
New York’s cannabis regulators appear to be entering a new, more assertive phase of enforcement. While early efforts focused on building the framework for legal sales, the latest actions demonstrate a shift toward accountability and compliance.
For legitimate operators who have invested heavily in following the rules, the Omnium case represents a step toward fairness and consumer trust. For those exploiting loopholes, it’s a warning that the era of lax enforcement is ending.
As OCM continues to expand its investigative reach, the state’s cannabis industry is likely to undergo significant changes — with greater transparency, stricter oversight, and a renewed emphasis on integrity.
If the allegations against Omnium are proven, the penalties could reshape not just one company’s fate, but the broader culture of compliance across New York’s cannabis market.
