How Cannabis Regulators Can End The ‘Croptober’ Crisis Of Product Inversion (Op-Ed)

*“Regulators face a choice: confront inversion with meaningful oversight,
or let legalization harden into monopoly and fraud.”*

*By Damian Fagon, Parabola Center for Law & Policy*

New York enters the month known in the cannabis space as “Croptober” with a
problem it can no longer ignore: Much of what is marketed as homegrown
cannabis is not grown in state at all.

The practice, known as inversion, funnels cheap cannabis from oversupplied
states into New York’s licensed market, where it is falsely sold as locally
produced. It is simple, profitable and increasingly brazen. With harvest
season underway and oversight still weak, inversion threatens to become the
norm in the nation’s fastest-growing legal market.

In spring 2025, state regulators quarantined roughly $10 million in
products during an inversion probe, followed by a broader recall in June.
But New York’s seed-to-sale system, Metrc, will not be fully operational
until late December 2025. Until then, this Croptober provides cover for
tons of inverted supply.

The roots of this problem extend far beyond New York.

California pioneered the oversupply model. Early legalization enabled
companies to stack dozens of small cultivation licenses, producing far more
cannabis than local demand. When large licenses opened in 2023, production
consolidated, with the top ten percent of cultivators controlling about 60
percent of acreage and millions of square feet concentrated under a handful
of operators.

By early 2025, California’s legal sales fell 11 percent year-over-year as
its licensed oversupply spilled into New York’s legal and illegal
storefronts.

Michigan followed the script but went further. The state explicitly allowed
stacking of Class C cultivation licenses at one site, fueling
industrial-scale grows. By June 2025, regulators had licensed about 3.2
million plants, more than one and a half plants per in-state consumer.
Flower that once sold for over $500 an ounce now averages $60. That same
month, regulators reported the fourth straight year-over-year sales decline.

California and Michigan’s surpluses do not stay contained; they are
absorbed into New York’s market.

Licensed New York operators explain the mechanics (including in an
interview with a licensed cultivator and broker who wished not to be
named): Growers pad harvest reports by recording fake bulk purchases or
disposals of low-value plant matter. When out-of-state cannabis arrives, it
is logged under those inflated totals and presented as part of their local
production. In some cases it is outright swapped for in-state harvests.
Processors mirror the scheme, reporting extraction yields far higher than
the inputs could ever produce.

The incentives align too neatly. Oversupplied states churn out cannabis at
rock-bottom prices. New York’s tracking is delayed, its inspections limited
and its penalties trivial compared to profits. Licensed farmers sit on
unsold compliant harvests while inversion fills our dispensary shelves.
Consumers lose trust that “New York grown” means what it claims, and safety
risks rise when provenance is unknown. To put it plainly, our market cannot
survive when fraud is easier than compliance.

Recent research confirms that permissive regulatory climates are the
strongest attractor for cannabis firms. That is why companies cluster in
Michigan, Oklahoma and California, regardless of geographic affiliation.
Their lax systems destabilize not only their own markets but those of
neighboring states.

*How New York Can Shut Down Inversion*

Metrc can track paperwork, but it cannot stop fraud from being entered as
fact. It inhibits licensed cannabis from leaking into the illicit market,
but it cannot stop illicit supply from being typed in as if it were grown
in New York. To close that gap, regulators must pair digital reporting with
routine audits, surprise inspections and real-time checks that confirm
reported yields against actual production.

Structural reform is just as urgent. Stacking licenses has created
surpluses no market can absorb. Soon-to-be-legal markets such as
Pennsylvania and Virginia must not repeat those mistakes. Canopy caps,
ownership restrictions and limits on consolidating multiple grows at one
site are essential to make oversight realistic and preserve room for small,
compliant growers.

Finally, regulators should create true consumer-facing accountability.
Today, cultivation and processing sites are reported to the Office of
Cannabis Management (OCM) but largely hidden from the public. Making that
information visible on product labels, verified through inspections and
distributor-level audits, would let buyers distinguish authentic New York
harvests from imports. Paired with penalties that seize ill-gotten profits
rather than fines, such reforms would flip incentives and inversion would
no longer be the rational business choice.

State-level reforms, however, cannot fix a national imbalance.

California designed this model of unchecked supply and Michigan has
expanded upon it. Officials in those states have refused to align
production with demand, and their neglect destabilizes markets far beyond
their borders.

New York cannot continue to absorb the costs of their failure. Regulators
face a choice: confront inversion with meaningful oversight, or let
legalization harden into monopoly and fraud. The future of craft cannabis,
small farmers and equity licensees will be decided by whether officials
finally enforce the systems they promised.

*Damian Fagon is a former New York cannabis regulator and is the executive
leadership fellow at Parabola Center for Law and Policy.*

*Photo courtesy of Chris Wallis // Side Pocket Images.*

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Inversion (Op-Ed) appeared first on Marijuana Moment.