A pair of New Mexico cannabis businesses and a trade association filed a complaint against industry regulators on Aug. 21, attempting to postpone the state’s transition to a new seed-to-sale tracking system.
Albuquerque-based retailer Oasis Cannabis Co. filed the lawsuit in the Second Judicial District Court alongside vertically integrated cultivator The Grow NM and industry trade group Cannabis Association of New Mexico (CANM), seeking a temporary restraining order and preliminary injunction to halt the state’s track-and-trace rollout.
The rollout involves a mandatory transition from track-and-trace provider BioTrack’s software system to the New Mexico Seed-to-Sale System (NMS2S). The new system, according to the New Mexico Cannabis Control Division (CCD), is “specially designed to meet the unique needs of New Mexico’s cannabis licensees and ensure all cannabis products in our state are from New Mexico.”
The lawsuit names the CCD, the New Mexico Regulation and Licensing Department (RLD), CCD Director Todd Stevens and RLD Superintendent Clay Bailey as defendants.
The seed-to-sale system transition is scheduled to begin at 5 p.m. on Aug. 25, when BioTrack will no longer be available for licensees to transfer cannabis products, although retail sales may continue. Testing labs won’t be able to receive new samples until the state allows testing to resume on Aug. 31.
State regulators don’t plan on launching the new NMS2S system until Sept. 1 and 2, when retailers must begin synchronizing and migrating their retail inventory between the two systems, before the CCD turns off BioTrack on Sept. 4, requiring all cannabis activity, including sales, to be done on the NMS2S platform moving forward.
The plaintiffs argue in the lawsuit that this transition will disrupt the supply chain and that the CCD will be shutting down the state’s functioning compliance infrastructure before its replacement has been proven ready.
Kane Oueis, CEO of Oasis Dispensaries, said the transition will interrupt testing, transfers, inventory receiving and other business functions for at least six days, when new product will be grounded from entering its normal channels.
“A six-day interruption in testing, transfers and inventory receiving is not a minor inconvenience; it is a government-imposed shutdown of critical business operations,” Oueis said in a news release accompanying the complaint. “We support modernizing track and trace, but no responsible business would launch essential software this way. The state should keep BioTrack operating, pause the cutover and prove NMS2S works before putting the entire legal market at risk.”
In other words, the plaintiffs aren’t asking the court to stop the CCD from modernizing the state’s seed-to-sale system or to partner with a third-party track-and-trace software provider. Rather, they’re hoping the judge will provide relief to preserve the program’s current BioTrack system until the CCD can demonstrate “with objective evidence” that NMS2S is fully tested, operational and capable before potentially causing a bottleneck for the state’s licensees.
In announcing the transition in an Aug. 14 bulletin, the CCD provided “important steps” for licensees to prepare, from reconciling physical inventory against track-and-trace inventory to resolving discrepancies and incomplete transitions, completing outdated records, and reviewing outstanding transfers and transactions, among other steps, to help ensure BioTrack can be properly synchronized before the full migration to NMS2S.
“We understand that any change, especially in a strict regulatory environment, can be difficult,” CCD officials said in the bulletin. “It is our goal to ensure that this transition is as seamless as possible for our licensees. We are providing several different ways you can find free support during the transition.”
Still, the plaintiffs have concerns with shutting down the “only lawful means” of moving cannabis through the supply chain and on little notice. According to the complaint, the first training manuals for the NMS2S replacement system weren’t available until 4:59 p.m. on Aug. 18.
The plaintiffs also argue in the lawsuit that the CCD is forcing licensees to choose between violating the New Mexico Administrative Code (NMAC) or following transition guidelines.
“The division's own promulgated rules make the shutdown a statewide legal stop on commerce: A licensee without a functional track-and-trace account may not operate at all, 16.8.7.9 NMAC, and may not transport or receive product during any loss of access, 16.8.7.11(C) NMAC,” the lawsuit states. “The bulletin nonetheless instructs licensees to keep operating on paper records and reconcile later, placing every licensee in the state in the position of violating either the bulletin or the rules, with the division reserving the right to audit whichever choice they make.”
The court filing also outlines the plaintiffs’ unresolved readiness concerns with the new seed-to-sale system, arguing that training videos, live training dates, FAQs and dedicated support resources for the transition remain incomplete, and that additional application programming interface (API) functionality for third-party inventory systems is not expected until after NMS2S launches.
Jason Bowles, an Albuquerque-based attorney for the plaintiffs, said that his clients are asking the court to keep BioTrack in place until the CCD finishes building, testing and documenting its replacement.
“Our request is narrow: Preserve the existing system until CCD demonstrates that NMS2S is ready and can be implemented without materially harming licensed businesses,” Bowles said. “Once BioTrack is shut off, disruptions to inventory, compliance and cash flow could be immediate and difficult to undo. That is why emergency judicial review is necessary.”
Bowles is a former federal prosecutor with the U.S. Attorney’s Office for the District of New Mexico. He also is a former Tenth Circuit Court of Appeals judicial law clerk.
The Cannabis Association of New Mexico (CANM), a statewide trade association representing licensed cannabis businesses, said its members repeatedly asked the CCD to pause the rollout so they can first provide state regulators with meaningful feedback on how the new system could potentially impact their business operations.
CANM Board Chair Tony Martinez said, “Those concerns were ignored,” leaving the industry no choice but to seek injunctive relief.
CANM Executive Director and co-founder Matt Kennicott pointed out that the transition begins at the start of the fall harvest and wholesale cycle, an important time for many operators, when a broken compliance infrastructure could be harmful or devastating.
“Our responsibility is to protect New Mexico’s cannabis industry when government is not getting this right,” Kennicott said. “CCD cannot rush an unfinished system into place and expect private businesses, their employees and their customers to pay for the consequences. We support modernization, but the state must pause, prove the system is ready and stop gambling with the livelihoods of the people it regulates.”
