When it comes to regulating a multibillion-dollar cannabis industry that’s still federally illegal, data is everything. Trust in that data? Even more crucial. That’s why the recent whistleblower lawsuit filed by former METRC executive Marcus Estes could shake the foundation of cannabis compliance in California — and far beyond.
The allegations laid out in Estes’ April 2025 complaint suggest more than a workplace dispute. They point to potential collusion between METRC — the largest provider of cannabis track-and-trace technology in the United States — and state regulatory agencies. If even half of these claims are proven true, the implications for the cannabis industry, regulators, and public trust in compliance tech could be massive.
The Allegations: A Conspiracy Hiding in Plain Sight?
Estes, a former high-level sales and product executive at METRC, alleges that he discovered and attempted to report what he believed to be a criminal conspiracy involving:
- METRC, which provides the track-and-trace software for the state of California (and many others)
- The California Department of Cannabis Control (DCC) and large operators, particularly Glass House Brands, a publicly traded cannabis company.
According to Estes, the CTS (Cannabis Track-and-Trace System) software developed and maintained by METRC was not doing what it claimed: flagging suspicious transactions or inventory irregularities. This, he alleges, allowed a blind eye to be turned to large-scale illicit market diversion — particularly illegal interstate cannabis trafficking — all while the state collected taxes on these transactions.
Estes says that when he raised these concerns with supervisors and colleagues, he was ignored, marginalized, reprimanded, and eventually fired. His lawsuit claims METRC retaliated against him for whistleblowing, in violation of Oregon whistleblower protection laws and public policy.
The DCC and METRC “Looking the Other Way”
Perhaps the most damning part of Estes’ complaint is the suggestion that both state regulators and METRC knew about illegal diversion — and chose not to act.
He recounts a conversation with Elliot Lewis, the CEO of Catalyst Cannabis Co., in which Lewis reportedly referred to Glass House as “the largest black market cannabis operator in history.” Estes says he found Lewis’ claims credible and that METRC’s own software data could confirm or deny these allegations. But when he reported this to METRC’s leadership, he was told “flagging irregularities was not our job.”
Let’s be clear: METRC’s job is flagging irregularities. Under California Business and Professions Code § 26067(b)(2), the DCC is required to implement a track-and-trace system that identifies potential regulatory violations. If METRC’s software knowingly avoids this — or if it sells the illusion of compliance while enabling illegal activity — that’s not just negligence. That could be fraud.
From Hero to Outcast in METRC
Estes’ legal complaint paints a bleak picture of what happens to insiders who raise the alarm. After he voiced concerns about regulatory failures and software shortcomings, he experienced significant retaliation. He was removed from leadership roles, including the Retail ID product line, which he considered his “life’s work.” Additionally, he was excluded from important meetings and industry events, such as MJBizCon.
Despite his performance and contractual eligibility, Estes was denied a bonus. Ultimately, he was terminated without cause just days before his stock options were set to vest. This series of events paints a grim picture of the repercussions for whistleblowers within the organization.
Most damning, perhaps, was the internal conversation Estes describes having with METRC’s CEO, Michael Johnson, about hiding a company acquisition through a shell company in order to avoid violating state contracts. If substantiated, this could suggest a willingness at the highest levels of leadership to evade oversight by state regulators.
A Systemic Breakdown in Oversight
This lawsuit raises uncomfortable questions for the cannabis industry at large:
- Can regulators be trusted to enforce their own rules?
- Are compliance tools really ensuring legality, or just providing cover?
- What happens when regulators and tech providers become too cozy?
California’s cannabis market has long struggled with illegal operations siphoning off product into unlicensed or out-of-state markets. The supposed benefit of METRC’s system was transparency — a safeguard for consumers, operators, and tax collectors alike. But if METRC’s system is designed not to flag wrongdoing, that transparency is a lie.
And if regulators are aware of this — or even encouraging it — then the public policy infrastructure of legalized cannabis is compromised.
Damage Beyond the Courtroom
Regardless of how this case is adjudicated, the fallout is already affecting the industry:
Trust in METRC is Fractured
METRC has long operated as a monopolistic vendor, contracted in over 20 states. This case could invite deeper scrutiny of their agreements, performance, and influence. Cannabis operators — many of whom already loathe the user experience with METRC — now have a stronger reason to question the integrity of the platform itself.
Regulatory Agencies Face a Crisis of Credibility
The DCC and similar bodies in other states will need to demonstrate that they are not in bed with big operators or asleep at the wheel. Failing to investigate these claims independently and transparently could damage public trust for years to come.
Compliance Has a New Cynicism
Track-and-trace systems were sold to the public and policymakers as an antidote to illegal sales. If this case proves they’re just window dressing, then reform — or even a total overhaul — may be needed. And that might mean opening up the market to competitors, audits, and deeper third-party scrutiny.
Who Really Runs Legal Weed?
This case touches on a fundamental tension in the legal cannabis space: Is legalization about public safety and economic opportunity, or is it about protecting a handful of large operators and state coffers at any cost?
Estes’ lawsuit hints that the answer may be the latter — and that people trying to pull the industry in a more ethical direction are being discarded. If METRC was willing to protect big players from scrutiny, and if regulators turned a blind eye to obvious red flags, then legalization has become a performance, not a promise.
This case touches on a fundamental tension in the legal cannabis space: Is legalization about public safety and economic opportunity, or is it about protecting a handful of large operators and state coffers at any cost?
Estes’ lawsuit hints that the answer may be the latter — and that people trying to pull the industry in a more ethical direction are being discarded. If METRC was willing to protect big players from scrutiny, and if regulators turned a blind eye to obvious red flags, then legalization has become a performance, not a promise.
This situation could lead to several significant developments. Firstly, there is the potential for federal attention. References to violations of the Controlled Substances Act and RICO could attract federal prosecutors or oversight bodies to launch investigations.
Additionally, states using METRC might face increased pressure to re-evaluate their contracts and conduct audits to ensure vendors are held accountable for their actions.
Lastly, if Estes wins or secures a favorable settlement, it could encourage other insiders to step forward with evidence of wrongdoing, strengthening whistleblower protections and exposing further issues.
What Comes After Trust is Broken?
Cannabis legalization is still a work in progress. The industry is fighting for legitimacy, equity, and the chance to move out of the shadows. But when companies and regulators betray the public trust, that fight becomes harder.
METRC may survive this lawsuit. They may even win. But the narrative has shifted. Operators, regulators, and advocates now have to ask: Is our compliance system designed to keep the industry clean — or just to keep it profitable for a select few?
The answer may define the next chapter of legal cannabis in America.
