The David v Goliath cannabis battle continues…..

OG article by Nichole West

December 11, 2025

Good morning, friends. It’s good to be back. Today I’m reporting on potentially one of the most consequential legal victories the California cannabis industry has seen in years — a breakthrough that could redefine how the state is required to regulate, track, and enforce cannabis laws. In a stunning legal setback for the state’s cannabis regulator this week a Superior Court judge ruled that the Department of Cannabis Control has not been following state law—specifically in how it tracks cannabis movement across the legal market.

The ruling comes from Orange County Superior Court Judge Lee Gabriel, who sided with Catalyst Cannabis Co., the Southern California dispensary chain that has repeatedly accused the state of failing to control diversion into the illicit market.

At the center of the lawsuit is Metrc, the state’s mandatory “track-and-trace” system. Under California law, the system is supposed to automatically flag irregular or suspicious activity. But today, the judge said that the DCC has not configured or used the system in a way that satisfies this legal requirement.

In plain language, the court found that: California’s cannabis regulator has been collecting data—but not actively using it to stop illegal activity, despite a legal mandate to do so.

Catalyst argues this failure has allowed massive amounts of legal cannabis to be diverted into the illicit marketplace, harming compliant operators who are already struggling under the weight of taxes and regulation.

This ruling marks the first time a California court has formally stated that the DCC is out of compliance with its statutory duties under Business and Professions Code 26067.

The state is now under pressure to come up with a plan to fix the problem—and fast.

A published opinion from the California Court of Appeal, issued on August 2, 2023, revived a lawsuit filed by Catalyst Cannabis Co., This case has now escalated into a full-blown reckoning over whether the state regulator is doing the job the law demands — and the outcome could reshape the entire industry.

PROP 64 — WHAT WERE CALIFORNIANS ACTUALLY PROMISED?

When Proposition 64 passed, Californians were told the legal market would be:

• tightly regulated,

• fully traceable,

• monitored in real time, and

• designed to stop illegal diversion cold.

The law required a digital track-and-trace system that could:

• track every plant and product from cultivation to retail

• automatically flag suspicious or irregular activity

• protect licensed businesses from being undercut by the illicit market

• ensure consumer safety and accurate tax reporting

That system — METRC (Literally stands for Marijuana Enforcement Tracking Reporting Compliance) — which is currently the required tracking software in 33 of the 39 states with cannabis laws include tracking…… was supposed to act like the umpire watching every play on the field. 

Instead, Catalyst and many others argue the state never even turned the scoreboard on.

As someone who has had my METRC records used against me in a case that led to my incarceration I mildly disagree…. But I still understand their point. 

2020 — THE SPARK THAT LIT THE FUSE

In 2020, Catalyst CEO Elliot Lewis became widely known for his outspoken criticism of California’s enforcement failures and what he believed to be widespread diversion into the illicit market.

Shortly after going public with those concerns, Lewis says he was audited multiple times in one week — which he interpreted as straight-up retaliation.

Instead of backing off, he went on offense and filed suit on September 15, 2021, arguing the DCC failed to implement the required automatic-flagging system mandated under Prop 64.

2022 — CATALYST v DCC case is THROWN OUT ON DEMURRER

By early January 2022, a trial court dismissed the case on demurrer, meaning: Even if every allegation was true, the judge ruled the complaint did not state a legal claim the court could hear. It wasn’t a ruling on the facts — only on the pleading. But Catalyst wasn’t done.

2023 — THE APPELLATE COURT REVIVES THE CASE…..

Everything changed on August 2, 2023, when the Fourth Appellate District issued a published opinion reversing the dismissal.

The appellate court said the trial judge got it wrong.

Here’s what the appellate panel found:

• The lower court improperly relied on government contracts and DCC budget documents

• Those documents did not contradict Catalyst’s claims

• Catalyst did, in fact, state a valid cause of action

• A writ of mandate and injunctive relief were appropriate remedies

By publishing the opinion, the court made the ruling binding precedent — effectively warning every state agency that they are not above the law.

This ruling made clear that cannabis regulators can be held accountable in court when they fail to execute their duties.

In the same year:

• Catalyst sued Glass House for unfair business practices….that case was thrown out but is now on appeal

• Glass House’s sues Elliot for defamation and that case was dismissed

The fight over enforcement standards was officially underway.

2025 — THE BOMBSHELL RULING

After the case returned to the trial court, a bench trial took place in November 2025.

Then on December 9, 2025, Catalyst scored its biggest victory yet.

An Orange County Superior Court judge ruled that the DCC has NOT complied with California’s tracking requirements under Prop 64.

The court found that:

• The METRC system does not automatically flag suspicious activity

• Prop 64 requires such automatic detection

• The state’s implementation does not meet statutory obligations

This ruling is the strongest judicial rebuke the DCC has ever faced.

It confirms what operators have complained about for years:

California built a system that collects data — but doesn’t use it to regulate the market.

And in an industry where diversion, tax pressure, and illicit competition are still rampant, that failure has real consequences.

2026 — THE NEXT EPISODE……

The court has ordered the DCC back into the courtroom on February 6, 2026, to explain:

• How they plan to fix the broken system

• What compliance will look like

• And how they intend to enforce the law going forward

Lewis has indicated he wants to pursue a reform-based settlement — including a compliance rating system for growers and manufacturers, something the original Prop 64 framework envisioned but the state never implemented.

SO…. IN SUMMARY OF WHY THIS CASE MATTERS

This is not just Catalyst versus the state.

This is about whether California is living up to the regulatory framework voters approved — or whether the state has been asleep at the wheel while compliant operators struggle to survive against a massive illicit market.

The appellate court’s published reversal, the December 2025 trial court ruling, and the upcoming 2026 compliance hearing collectively represent one of the most important legal sequences in California’s cannabis history.

If Catalyst succeeds, California could finally be forced to implement the enforcement infrastructure the industry was promised — and paid for — nearly a decade ago.

This case has the potential to set the regulatory tone for years to come.

And we’ll continue following every development as it unfolds.