By 1982, the Kanata Registry, with 1,017 ponies, had passed the magic number required for breed status (although that requirement had not been applied to the CPOA). A Certificate of Recognition was received in January of 1983, making the Kanata Pony a fully recognized breed under Canada's Livestock Pedigree Act. But Cal MacWilliam, Chief Registration Officer, Livestock Improvement, Agriculture Canada, Department of Agriculture, began waffling. He said that the two breeds must be kept distinct and separate, but also said that a Kanata/CPOA cross could be registered as a first-generation Kanata. Then in May, he stated that the original pony/Appaloosa cross used to create the Kanata would not be considered a first-generation Kanata. What was going on? MacWilliam's two statements were contradictory.
Correspondence went back and forth. Despite this confusion, all seemed to be going fine for the Kanata until July 1983, when the CPOA asked to amalgamate the Kanata into the CPOA registry. Kanata club members voted 21-0 against this. The government began requiring more and more information from the Kanata registry, including grading charts, a new constitution, new bylaws, new definitions for breeding stock and so on. When that was completed, an inspection of all third-generation ponies was demanded in March 1984, at the end of winter with the ponies not in show condition. A request to hold the inspection at the annual show in July, when the ponies would be fit and in summer coat and all gathered in one place, was denied.
The inspection of the third-generation Kanatas took place in March, followed by an inspection of CPOA ponies. These were done, not by licensed horse show judges, but by MacWilliam and a veterinarian. The Kanata club stated that, at that time, most of the CPOA registered ponies were of Kanata origin, not POAs at all, so the club asked that only CPOA ponies of known American POA breeding be inspected, so that the differences could be seen. But MacWilliam admitted that he did not check the papers of the CPOAs he inspected.
Because the inspectors — who, according to the Kanata club, said they professed “not to know much about horses” — reported that they saw little difference between the two breeds, on March 26, 1984, Agriculture Canada rescinded recognition of the Kanata Pony, despite the department having said in 1976 that they could not rescind the CPOA's recognition. More letters flew back and forth, but the government held firm.