Whistleblower Lawsuit Against METRC Raises Significant Compliance and Accountability Concerns for the Legal Cannabis Industry
METRC, Inc., the predominant provider of seed-to-sale tracking software used by state regulatory bodies overseeing legal cannabis markets across the U.S., faces serious allegations detailed in a recent lawsuit filed in Oregon. The lawsuit, brought by a former executive at METRC, accuses the company of whistleblower retaliation and wrongful termination under Oregon law. Central to the plaintiff’s complaint are allegations that METRC knowingly ignored substantial compliance violations within its tracking systems in California, potentially facilitating illegal diversion of cannabis products. The litigation raises critical concerns for cannabis regulatory compliance, not only in Oregon and California but also in the 25 other jurisdictions that rely on METRC’s systems.
Overview of the Complaint and Allegations
Plaintiff Marcus Estes joined METRC as an executive vice president after METRC’s April 2023 acquisition of Chroma Signet, a company Estes founded to develop blockchain-enabled QR-code technology. Initially optimistic about the position, Estes promoted a transition away from METRC’s RFID tag-based tracking technology toward his QR-based technology, which promised lower costs and enhanced security for cannabis tracking. Estes claims that he quickly encountered significant resistance within METRC management against moving away from the highly profitable RFID tags.
Estes’ complaint further details a visit to Catalyst Cannabis Company in California in June 2023, during which Estes was informed of widespread abuses involving “burner distros” — operations that legally acquire cannabis through California-licensed businesses but subsequently divert substantial quantities into illicit interstate markets. In addition to bringing legal action against the California Department of Cannabis Control for failing to take action against these illicit actors, Catalyst representatives directly alleged that METRC’s software failed to automatically flag these types of irregularities despite specific contractual obligations mandating such safeguards.
The complaint states that Estes verified internally that METRC possessed the technical capability to quickly identify and flag irregularities but was choosing not to, ostensibly to protect its lucrative RFID revenue streams and contractual standing. Estes voiced his concerns internally. Rather than addressing these compliance issues, METRC allegedly retaliated against Estes by marginalizing him, excluding him from key responsibilities, and ultimately terminating his employment without cause in early 2024.
In his lawsuit, Estes claims whistleblower retaliation under Oregon statutes ORS 659A.199 and 659A.885, asserting that METRC’s actions directly resulted from his lawful reporting of suspected regulatory violations. Additionally, Estes alleges wrongful discharge, contending that his dismissal was rooted in his refusal to remain silent about practices he reasonably believed violated both state and federal laws, as well as contractual agreements with state regulatory authorities.
Why It Matters
METRC’s seed-to-sale tracking system is integral to cannabis regulation, serving as a linchpin for compliance and enforcement efforts across 24 states, the District of Columbia, Guam, and the U.S. Virgin Islands. State-legal cannabis markets are meticulously designed to prevent the inversion of unregulated cannabis into legal markets and diversion from regulated markets into illicit channels, protecting public health and safety, ensuring accurate tax collection, and safeguarding the viability of licensed businesses.
The allegations raised by Estes suggest potential systemic vulnerabilities or willful noncompliance within METRC’s widely deployed tracking solutions. These claims could lead to increased regulatory scrutiny in multiple jurisdictions, triggering audits, contractual reviews, and potentially significant operational changes.
For cannabis industry stakeholders — including regulators, licensed operators, and ancillary businesses — the lawsuit underscores concerns about accountability, trustworthiness, and the reliability of compliance infrastructure. The outcome of this litigation could compel states to re-examine partnerships and reassess the effectiveness of cannabis regulatory frameworks, ultimately shaping future compliance standards and regulatory enforcement nationwide.
Our Cannabis Practice provides advice on issues related to applicable federal and state law. Cannabis remains an illegal controlled substance under federal law.
