‘Partnership’ or consolidation? Cannabis software deal leaves industry guessing

Did leading cannabis track-and-trace software provider Metrc just take over the government compliance business nationwide?

That’s one analysis of the “strategic partnership” announced earlier this week between Metrc and its erstwhile competitor, BioTrack.

But with exact details still sparse, state marijuana regulators and licensed operators alike were left guessing on Wednesday. However, with the uncertainty around the deal pausing efforts to finally monitor New York’s $1.5 billion market with a working “track-and-trace” system, there are already consequences.

For the past year, two Florida-based companies have dominated the “seed-to-sale tracking” space for the $32 billion U.S. marijuana industry.

Tagging cannabis plants and products with unique identifiers is meant to allow regulators to monitor the supply chain and – in theory – cut down on illegal inversion and diversion, or when the legal and illegal markets bleed into one another.

‘Partnership’ between cannabis tracking software leaders

The industry leader, Metrc, based in Lakeland, Fl., has contracts with 29 states that require licensed operators to use its software and individual radio-frequency ID tags (RFID) to track the flow of product.

Its closest competitor, Fort Lauderale, Fl.-based BioTrack, has contracts with eight states but has been losing ground despite acquiring another smaller competitor, MJFreeway, last year.

Going forward, the two companies will combine certain functions via a third firm.

Under a “strategic partnership” announced on Tuesday:

• A new entity, called BT Government Inc., will take over “BioTrack’s government-facing operations and will operate independently from Metrc and BioTrack.”
• BT Government will be led by BioTrack Chief Operating Office Moe Afaneh, and will be independent of Metrc, LLC and BioTrack, according to the announcement.
• BioTrack will continue to run point-of-sale and other business software services.

Terms of the deal were not disclosed.

Records show Metrc LLC is distinct from its parent company, Metrc Inc.

According to Florida state business records, Metrc Inc.’s principals include Karan Wadhera, a managing partner at Casa Verde Capital, a fund associated with rap mogul Snoop Dogg that helped Metrc raise $50 million in 2018.

Stephen Jaeb and company co-founder Jeff Wells are listed as directors, with Metrc LLC CEO Michael Johnson serving as Metrc Inc’s president and CEO.

Deal could mean end to marijuana software patchwork

In a statement, Emily Paxhia, managing director of cannabis-focused equity fund Poseidon, noted that operators currently must deal with “patchwork regulation and track-and-trace systems across states.”

That creates particular headaches for marijuana multistate operators who must deal with whichever software platform the state they’re in chooses.

Paxhia added that the BioTrack-Metrc “combination could be a harbinger of a future with streamlined operational experiences for the operating companies, as this industry matures.”

But it’s still not entirely clear if the “strategic partnership” equates to yet another consolidation of cannabis software providers.

In February 2023, BioTrack’s former parent company, Forian, sold the software provider to Alleaves for $30 million in cash.

BioTrack itself is the offspring of a 2018 merger with Colorado-based Helix TCS.

And it was BioTrack that merged with MJFreeway last year.

In a statement, a Metrc spokesperson said the “partnership will drive economic opportunity in the legal market while enhancing supply chain transparency and improving public safety.”

The deal appears to mean very little for the marijuana operators in the 29 states that use Metrc.

However, the picture is far from clear in states with BioTrack contracts, where confusion reigned on Wednesday.

BioTrack trailed Metrc as marijuana track-and-trace provider

According to the company, Biotrack is the selected seed-to-sale tracking provider in nine states.

These are:

• Arkansas
• Connecticut
• Delaware
• Hawaii
• Florida
• New York
• New Mexico
• North Dakota
• Virginia

Recently, Metrc had been clawing market share away from its competitor.

Illinois replaced BioTrack with Metrc in February of this year, the same month the company renewed a contract with Massachusetts.

In the case of New York, regulators selected BioTrack as its track and trace provider under a five-year deal worth $1.2 million in Nov. 2022.

That’s significantly lower than most contracts between states and Metrc, which signed a four-year deal with California that began July 1, 2024 for $113 million.

Biotrack costs were higher for marijuana operators

However, operators say the cost – and potential revenue for the company – was passed onto them.

In New York’s case, BioTrack informed operators that they would be required to purchase unique identifying tags for $0.10 – and that these would need to be on products including individual prerolls.

Critics pointed out the so-called “sublot” requirement is not in state law. They also claim it would also increase costs to unsustainable levels.

That dispute contributed to an overall feeling among some licensees that the state simply was not ready.

Reached for comment, a spokesperson for OCM directed MJBizDaily to the agency’s Aug. 5 bulletin sent to operators.

Metrc-Biotrack deal delays New York track and trace – again

Shortly after the partnership announcement, New York marijuana regulators said that compliance with its track-and-trace requirements, which were already underway, are now “temporarily suspend(ed).”

That’s until the state can “determine systems implications and communicate next steps to all licensees,” OCM said.

Licensed operators that cultivate in New York, which still has no track-and-trace system more than halfway through its third full year of sales, were required to comply with seed-to-sale tracking as of Friday.

Operators in other states with BioTrack such as Connecticut are similarly in the dark as to what’s next, state cannabis omsbudsman Erin Gorman Kirk told MJBizDaily.

Some cannabis businesses are speculating that the “partnership” is effectively a merger – and that they’ll be allowed to use Metrc even if the state has a BioTrack contract.

“If this news means that Metrc’s software will replace BioTrack in New York, that is a positive development and could help alleviate the most consequential of (our) concerns,” said Mack Hueber, president of the Empire Cannabis Manufacturers Alliance.

However, he added, “this development raises many questions, including the new timeline for implementation, if there will be any changes to the pricing structure of tracking tags, and the availability of Metrc new technology that would reduce manual labor costs.”

Chris Roberts can be reached at chris.roberts@mjbizdaily.com.