A new tracking system for cannabis businesses in New Mexico went live Tuesday, even though owners have sought to delay the start because they say it is unproven and has already hurt their operations.
A district court judge issued a continuance Monday in a legal challenge to the system, putting the industry’s hopes of stopping its rollout on hold — at least for now.
A group of cannabis businesses filed a preliminary injunction and temporary restraining order on August 21st against the state’s Regulation and Licensing Department in the hopes they would be allowed to continue using the old tracking system — known as BioTrack — until the new one is proven to work properly.
The state tracks and traces all cannabis products from when the seed is planted until the product ends up in a customer’s hands. According to state law, if the system goes down, cannabis can’t be transported, which is what worries businesses.
The new system, the locally developed New Mexico Seed to Sale, or NMS2S, that went live for retailers Tuesday was already in use for producers, wholesalers and testing labs since Monday.
In their 12-page legal complaint, the plaintiffs argue the State’s contract with the old tracking system, called BioTrack, is paid up through September 15, and that “the relief sought costs the State nothing it has not already bought.” BioTrack costs the state $23,127.50 per month, according to the complaint, or about $750 per day, meaning the state will have paid more than $8,000 for a service it won’t be using when BioTrack goes away for retailers on September 4.
The new system’s rollout saw BioTrack shut down for everyone but retailers from August 25 through August 31, and business owners said that created problems.
Matt Kennicott, executive director of the Cannabis Association of New Mexico, an industry trade association that is one of the plaintiffs, told KUNM after Monday’s hearing that if a business can’t transport then wholesalers can’t make sales, testing labs can’t test, and retailers can’t restock.
“That means we haven't been able to make sales for the last six days, which means no cash flow for us,” he said. “I chatted with one wholesaler. She's probably going to be without revenue for at least six weeks because of how the sales cycle works in cannabis.”
He said the blackout extends much farther than its six-day timeline because the cannabis industry “operates on a rhythm" of retailer orders from wholesalers triggering a multi-week process involving testing labs and other businesses.
“If you disrupt that rhythm,” he said, “it takes time to restart it. It's not something that instantly gets back into shape right away.”
The change comes at one of the worst possible times for the industry, Kennicott said. Early September is the beginning of the fall harvest and wholesale cycle, which is one of the most lucrative and financially active times of the year.
As retailers make the switch over to the new system, Kennicott said he expects to see problems based on issues other businesses experienced when the system went live for them on Monday, the same day as the trial.
“I was talking with operators all the way up until about 1:30 today,” he said, “and to a person, they could either not see inventory in their system, or things like barcodes were not transferring over properly, or batch numbers.”
He said without batch numbers they can’t track the product, which means they can’t sell it.
Second District Court Judge Joshua Andrew Allison said he chose to continue the court case until Thursday morning to see how the rollout goes with retailers before issuing a decision.
Lawyers for the state pointed out plaintiffs had not shown genuine harm in court, which the judge agreed with. Kennicott said he thinks that’s partially because testimony only came from retailers, not from businesses in other parts of the industry.
Retailers had ordered extra stock ahead of time to make sure they could make it through the blackout without running out of product, he said.
“So I agree. The retailers, they've experienced no harm through this yet,” he said. “But very clearly, I think the harms to growers and manufacturers need to be addressed because the harm is real.”
Other plaintiffs in the case include Oasis Cannabis Co, New Mexico’s largest cannabis retailer, and The Grow NM..
Support for this coverage comes from the W.K. Kellogg Foundation
