Five Years of Warnings: Elliot Lewis Says California’s DCC Chose Not to Fix Its Metrc System

For years, California has required licensed cannabis businesses to record nearly every regulated movement of cannabis inside a state-mandated track-and-trace system. Plants and packages receive identification tags, transfers are documented, inventory changes are entered, and licensees devote considerable time and money to keeping those records accurate.

The system is built around a basic promise. California collects this information so regulators can protect the licensed market, identify suspicious activity, prevent diversion, and investigate operators whose reported activity does not add up.

Catalyst Cannabis founder and CEO Elliot Lewis says the state failed to deliver on that promise.

In 2021, Catalyst affiliate HNHPC filed a lawsuit against the California Department of Cannabis Control, alleging that the agency had failed to perform one of its clearest statutory duties. California’s track-and-trace database was required to be designed to flag irregularities for the department to investigate. Catalyst argued that it was not doing so.

The lawsuit began a five-year legal saga that included an initial dismissal, a unanimous appellate reversal, attempted settlements, a bench trial, an adverse ruling against the DCC, and continued disagreement over what the agency must do to comply with the law. On August 4, 2026, the Orange County Superior Court entered final judgment against the department.

We reached out to Lewis to hear his account of the case from its 2021 filing through the latest judgment. His conclusion is blunt: the DCC’s continued failure to address the problem is not the result of confusion or a lack of information.

“The conclusion I came to is that it is intentional,” Lewis told Beard Bros. “And I don’t say that lightly.”

California Did Not Create Metrc

One distinction is essential to understanding the lawsuit. California did not create Metrc, and Metrc is not a state agency.

Metrc is a private regulatory technology company that contracts with governments to provide cannabis tracking software and related services. California selected the company’s platform for use in the California Cannabis Track-and-Trace system.

The DCC, however, remains the state regulator. The department is responsible for administering California’s cannabis program, determining how the platform is configured and used, reviewing the information collected through the system, granting appropriate access to enforcement agencies, and investigating potential violations.

Put simply, Metrc supplies the technology, while the DCC is responsible for using it to enforce California law.

That division of responsibility creates several separate questions. Did the Metrc platform lack necessary functions? Did the DCC fail to activate, configure, or use functions that were already available? Or did both the vendor and the regulator know the system was not accomplishing its legal purpose and fail to correct it?

The Catalyst litigation focused primarily on the DCC’s statutory obligations, but the broader controversy has raised serious questions about both the agency and its private contractor.

What California Law Requires

California Business and Professions Code section 26067 requires the DCC to establish a track-and-trace program that follows cannabis and cannabis products through the regulated distribution chain.

The law does not merely require the state to collect information. It states that the electronic database “shall be designed to flag irregularities for the department to investigate.”

That sentence became the foundation of Catalyst’s case.

The lawsuit was not primarily about Metrc being difficult to use, expensive to operate, or burdensome for licensees. Catalyst alleged that California’s system was failing to perform an expressly mandated enforcement function.

The published appellate opinion described Catalyst’s position clearly. California had created a track-and-trace system, but Catalyst alleged that the system did not flag irregularities. The company argued that this failure contributed to the growth of so-called burner distributors, licensed entities allegedly used to acquire regulated cannabis before diverting it into unregulated markets.

State contracts were also central to the dispute. According to the appellate record, the contracts contemplated a system capable of automatically identifying activity outside expected values and statistical norms, based on criteria developed and refined by California regulators.

The legal question was therefore not whether California possessed a database. It was whether the database had been designed and used to perform the function required by the Legislature.

2021: Catalyst Takes the DCC to Court

HNHPC filed its lawsuit in Orange County Superior Court in 2021. The company alleged that irregularities inside California’s licensed cannabis supply chain could be identified mathematically if the state established meaningful criteria and required the system to generate useful alerts.

Lewis says concerns about diversion were already circulating among operators, lobbyists, regulators, and others close to the state’s cannabis program before the lawsuit was filed. According to Lewis, certain production, inventory, and transfer patterns did not make commercial sense, particularly when compared with the physical capacity of licensed facilities.

He also saw a growing imbalance in enforcement. Licensed operators could face inspections and penalties for relatively minor compliance issues, while the state appeared unwilling to confront larger patterns suggesting that cannabis was leaving the regulated system.

That frustration played a major role in Catalyst’s decision to sue.

“You guys are here inspecting me on everything,” Lewis recalled thinking. “Your system doesn’t even work.”

The lawsuit sought a writ of mandate compelling the DCC to establish and maintain a system capable of identifying suspicious information and flagging it for investigation.

The Case Is Dismissed Before Trial

The DCC responded with a demurrer, arguing that Catalyst’s complaint should be dismissed before trial because it did not establish a legally viable claim.

The trial court agreed. In January 2022, it sustained the state’s demurrer without allowing Catalyst to amend the complaint. Judgment was entered for the DCC in March 2022.

The court relied partly on state contracts and a budget request to conclude that the department had complied with its mandatory duty by establishing a track-and-trace program and allocating resources toward enforcement.

Catalyst appealed.

Lewis described the case at that stage as effectively dead. The company was not appealing after losing a full trial on the evidence. It was appealing for the right to present that evidence in the first place.

2023: Catalyst Revives the Lawsuit

On August 2, 2023, California’s Fourth District Court of Appeal unanimously reversed the dismissal.

The appellate court concluded that the contracts and budget materials cited by the state did not establish that the database actually flagged irregularities. Catalyst had adequately alleged a viable claim for mandamus and injunctive relief, allowing the lawsuit to proceed.

The victory was significant, but it did not decide the ultimate merits of the case. The appellate court did not find that Catalyst had proven widespread diversion, nor did it rule that every allegation made by Lewis about specific businesses was accurate. Instead, the court held that the DCC could not defeat the lawsuit simply by pointing to the existence of software, a contract, and an enforcement budget.

That distinction remains important. A government agency cannot necessarily satisfy a legal requirement to flag irregularities merely by purchasing a platform that might be capable of doing so.

We covered the appellate ruling in the 2023 article, “Appeals Court Sides With Catalyst in Lawsuit Against DCC and METRC.” The decision restored Catalyst’s opportunity to examine whether the state was meaningfully using its track-and-trace system to monitor the licensed market.

Two More Years of Litigation

After the lawsuit was revived, the case continued for another two years.

Lewis says Catalyst made repeated efforts to resolve the dispute between 2023 and 2025. From his perspective, the company and the state should have shared the same goal. Catalyst wanted regulators to detect diversion and protect compliant licensees, while the DCC was responsible for enforcing cannabis laws and maintaining the integrity of the regulated supply chain.

Lewis said he could not understand why the department treated Catalyst as an adversary rather than using the lawsuit as an opportunity to correct the system.

“The Department of Justice, the attorney general and us should be aligned on this,” Lewis told Beard Bros. “The fact that we’re fighting never made any sense.”

That conflict is central to the allegation of willful ignorance. A regulator may initially disagree with a private company’s analysis. It may dispute the scale of a problem, the interpretation of data, or the best technical solution. But the record eventually extended far beyond a single complaint from a single operator.

Catalyst filed suit. The Court of Appeal revived the case. A former Metrc executive later made allegations that appeared to overlap with Catalyst’s concerns. The case went to trial, and the DCC lost.

The longer that sequence continued without a meaningful correction, the more difficult it became to characterize the problem as a simple oversight.

Marcus Estes Adds an Insider’s Account

In April 2025, former Metrc executive Marcus Estes filed a federal complaint against Metrc and a related company.

Estes alleged that he discovered conduct he believed violated California and federal law and enabled illegal interstate cannabis activity. He claimed that after raising concerns internally, he was marginalized and ultimately terminated.

Those claims remain allegations. His Oregon case was dismissed because substantially similar issues were already involved in an earlier-filed Florida case, not because a court conducted a trial and rejected all of his factual assertions. The disputes were later consolidated into the Florida proceeding.

Estes’ complaint is important to the Catalyst story because it describes an interaction with Lewis. According to the complaint, Estes met with Lewis and discussed concerns about California diversion and the analytical capabilities of the track-and-trace platform. Estes alleged that he believed Metrc’s data could be used to examine those concerns and that he raised the matter with company leadership.

Lewis told us that Estes appeared genuinely interested in correcting the problem.

“He said, ‘We want software that works,’” Lewis recalled.

Lewis also said Estes told him that several potential fixes, including risk-rating concepts, could be implemented without enormous technical difficulty. According to Lewis, Estes later faced resistance after raising the issue internally and was eventually fired.

We here at Beard Bros previously examined those allegations in “Metrc and California DCC: A Legacy of Denial Amid Mounting Evidence of Cannabis Diversion” and “Broken Trust in Cannabis Compliance: The Fallout of the METRC Whistleblower Lawsuit.” Both articles made clear that Estes’ claims were allegations requiring adjudication, while also noting that they appeared to reinforce concerns Catalyst had raised years earlier.

The timing is significant. Estes did not create Catalyst’s theory of the case. His account emerged after Catalyst had already spent years arguing that California’s tracking system was not being used to identify suspicious activity.

An executive from the private technology vendor was now describing concerns that resembled those a California licensee had been trying to place before a judge since 2021.

December 2025: The Court Rules Against the DCC

A mandamus bench trial was held on November 4, 2025.

On December 9, Orange County Superior Court Judge Lee Gabriel granted Catalyst’s petition. The court found that the DCC’s existing track-and-trace system did not comply with Business and Professions Code section 26067(b)(2), which requires the database to be designed to flag irregularities for investigation.

The decision represented the result Catalyst had spent years pursuing. The court did not merely state that California’s enforcement program could be improved. It found that the system failed to comply with an express legal requirement.

We covered the ruling in “California’s Metrc Track-and-Trace Is in the Hot Seat Again, and a Judge Says DCC Isn’t Following the Law.” The article explained that California had built a sweeping recordkeeping structure without establishing a sufficient rules-based process for automatically identifying suspicious patterns.

The ruling should have marked the beginning of a straightforward correction process. Lewis says that did not happen.

Winning the Case Did Not Fix the System

After the December decision, the DCC was expected to explain how it intended to bring the system into compliance. According to Lewis, the agency instead continued to maintain that its existing approach was adequate or that the problem had already been corrected.

“They keep telling the judge they think it’s fixed,” Lewis said. “Everything’s fine.”

The legal fight therefore shifted. Catalyst had already persuaded the court that the DCC’s system did not comply with the statute. The next question was what the department would actually be required to do.

That dispute is why the five-year timeline matters. The DCC was warned before the lawsuit. Catalyst sued in 2021. The agency successfully obtained an early dismissal, only to have it reversed in 2023. Estes raised related allegations in 2025. The DCC then lost at trial in December 2025.

Still, the dispute continued.

On August 4, 2026, the Orange County Superior Court entered final judgment against the DCC in accordance with the December ruling. The judgment created another formal legal marker in a record that can no longer be dismissed as industry speculation or an untested complaint.

Why Lewis Calls the Failure Intentional

Lewis told us that he did not lightly conclude that the DCC’s conduct was intentional.

He pointed to the number of people who allegedly knew about diversion concerns, the department’s possession of extensive track-and-trace data, resistance to public-records requests, reported limitations on law-enforcement access, and the continued unwillingness to implement changes he believes are technically achievable.

“They have all the information there to fix it,” Lewis said. “They just won’t do it.”

That remains Lewis’ conclusion, based on his experience and interpretation of the record. The article does not present motive as a fact established by the court.

However, his argument raises a question the department has yet to answer publicly in a convincing way. If the system contains the relevant data, state contracts anticipated automatic irregularity detection, the Legislature required that detection, a former Metrc executive raised related concerns, and a court found the DCC noncompliant, what adequately explains the continued delay?

Bureaucratic inertia may explain months. It becomes a less satisfying explanation after five years of litigation and a final judgment.

What a Functional Irregularity System Could Detect

A functioning track-and-trace enforcement system would not need to determine guilt automatically. Its purpose would be to identify activity outside expected patterns and direct investigators toward transactions requiring closer review.

Potential indicators could include production volumes inconsistent with licensed canopy or facility capacity, repeated inventory losses, unusually high destruction entries, large discrepancies between cannabis received and cannabis sold, frequent backdating, unusual record corrections, or transfers involving businesses with limited apparent commercial activity.

Other patterns might include cannabis moving through implausible chains of distributors, licensees purchasing amounts inconsistent with their facilities or sales, or businesses appearing to operate primarily as diversion channels while maintaining licensed status.

An alert would not prove misconduct. It would establish a reason to investigate.

Lewis said Catalyst proposed a rating system that could assign risk scores to licensees based on irregular activity. Under that type of model, operators with consistent records could demonstrate a lower risk profile, while businesses with unexplained anomalies could receive greater scrutiny from regulators, investors, or commercial partners.

Any automated system would need safeguards. Technical mistakes, reporting delays, staff shortages, and complicated regulations can create innocent discrepancies. Risk scores should initiate review, not replace evidence, due process, or human judgment.

Still, the risk of imperfect enforcement does not justify collecting enormous amounts of data without using it to identify meaningful warning signs.

Who Pays When Track-and-Trace Fails?

The consequences of an ineffective tracking system extend far beyond Catalyst.

Compliant cultivators, manufacturers, distributors, and retailers absorb the full cost of testing, taxation, labor, licensing, local permits, security, recordkeeping, and product tracking. If cannabis is diverted out of the regulated system, that product can avoid many of those costs while still originating from licensed production.

The result is an uneven market. Businesses following the rules must compete against products that may have escaped taxation, testing, and regulatory oversight.

Small and legacy cultivators pay through falling prices and lost market share. Workers pay when compliant businesses reduce staff or close. Taxpayers fund a regulatory system that collects extensive information but may fail to use it for one of its primary enforcement purposes.

Consumers may also face risks when products move into channels where testing, labeling, and recall protections are weaker or nonexistent. Lewis raised particularly serious concerns about untested cannabis products and illicit-market vape cartridges. Those claims require careful review of the underlying data before specific contamination rates or conclusions are published as fact.

Local enforcement agencies may also be limited if they cannot follow suspicious transactions across jurisdictions. A city or county may be able to review activity within its borders while lacking visibility into connected transfers elsewhere in the state.

That fragmentation undercuts the purpose of a statewide system. Cannabis does not stop moving when it crosses a municipal boundary, and regulatory visibility should not stop there either.

What Catalyst Says Must Change

Lewis believes California needs more than a new dashboard, an internal committee, or another promise to study the issue.

Potential reforms include automated irregularity alerts, transparent risk criteria, stronger audit trails for backdated records, broader investigative access, independent review of the DCC’s Metrc configuration, and public reporting on the number of alerts generated and investigations opened.

Lewis has also advocated moving some testing requirements earlier in the supply chain. His argument is that waiting until cannabis is close to retail before testing leaves large portions of production without the same safety visibility.

Any reforms would need to be implemented carefully. An overly aggressive system could disproportionately burden small operators already struggling with complex regulations and limited staff. Automated flags should guide investigators toward potential problems, not create automatic findings of wrongdoing.

California already requires every licensed operator to participate in the system. The state should therefore be able to explain how it uses the information, which patterns generate scrutiny, how often alerts lead to investigations, and what safeguards protect compliant businesses from false positives.

The Fight Over Attorneys’ Fees

Catalyst is also seeking to recover attorneys’ fees connected to the litigation. The exact amount and the parties’ complete arguments should be confirmed from the current court filings before any dollar figure is published.

The larger issue is already clear. A private cannabis company spent five years and substantial resources trying to compel a public regulator to perform a duty written into state law.

Every additional year increased the financial burden on Catalyst. The state’s defense was also funded through public resources.

The fee dispute will determine whether the cost of forcing compliance remains with the company that brought the case or shifts, at least partly, to the agency that lost.

A Five-Year Record of Warnings and Resistance

This story did not begin when a judge ruled against the DCC.

It began when operators looked at California’s regulated cannabis market and saw product moving in ways that appeared inconsistent with physical capacity, reported inventory, and ordinary commercial activity.

Catalyst turned those concerns into a lawsuit. The case was dismissed, then revived on appeal. Marcus Estes later raised allegations from inside Metrc that overlapped with parts of Catalyst’s warning. The case went to trial, and the court ruled that the DCC’s system did not comply with state law.

Final judgment was entered against the department on August 4, 2026.

The remaining question is what California will actually change.

Lewis told us that winning the case made him more pessimistic rather than less.

“Playing it out over five years, I realized they don’t want to fix it,” he said. “We’re not raising attention to the matter. They already know about it.”

That is the central story of the Catalyst litigation. This is not merely a dispute over whether software worked as advertised. At its core, it is a story about an industry required to provide the government with exhaustive records, while those records were never used in the manner required by law.

It is also a story about a regulator that spent years fighting the operator calling attention to the problem rather than working alongside it to develop a solution.

After five years of warnings, litigation, an appellate ruling, whistleblower allegations, a trial decision, and final judgment, continued inaction becomes increasingly difficult to describe as an accident.

Frequently Asked Questions

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• Appeals Court Sides With Catalyst In Lawsuit Against DCC And METRC
• California’s Metrc Track-and-Trace Is in the Hot Seat Again, and a Judge Says DCC Isn’t Following the Law
• Broken Trust in Cannabis Compliance, The Fallout of the METRC Whistleblower Lawsuit
• Metrc and California DCC: A Legacy of Denial Amid Mounting Evidence of Cannabis Diversion
• Burner Distribution—The When, Why, and How