When I started representing cannabis businesses in 2010, the biggest epidemic in the industry next to I.R.C. 280E was the overwhelming lack of cannabis banking. This inability to access financial institutions for just depository accounts was staggering to businesses, leading to endless public safety hazards and organizational chaos. Almost 14 years later, the cannabis banking crisis has somewhat improved due to the 2014 FinCEN guidelines. But they’re not enough on either side of the aisle, and Congressional Research Services (“CRS”) echoed that point in a recent “Legal Sidebar”, detailing the myriad liabilities financial institutions to face if they want to bank cannabis businesses.

On the heels of New York and Missouri legalizing adult use cannabis, on November 7, 2023, Ohio voters approved “Issue 2” – a citizen initiative paving the way for adult use marijuana legalization in the state, which according to voter ballots creates “a system that regulates and taxes marijuana just like alcohol”. While the law goes into effect on December 7th, lawmakers can modify the new law before it goes into effect, and of course Ohio’s newly created Division of Cannabis Control (within the Department of Commerce) will need to rulemake around the new law, which could throw some curveballs at enterprising adult use marijuana businesses.

drinks with addition of hemp (cannabis)

Many states with cannabis legalization have manufacturer and dispensary licensees that make and sell cannabis-infused beverages and even cannabis-infused drink mixes. What you don’t usually see is a major liquor retailer carrying any form of cannabis drink. Why? First, states with cannabis legalization on the whole ban alcohol and cannabis being mixed together in a single beverage, and, second, major liquor retailers won’t bother getting a state cannabis license due to a multitude of legal issues, including federal law and how it conflicts with cannabis negatively impacts alcohol licensing. However, Total Wine & More (“Total Wine”) is breaking the mold by offering cannabis drinks in Minnesota.

Recently, the Department of Health and Human Services recommended to the Drug Enforcement Administration that cannabis be rescheduled on the Controlled Substances Act (“CSA”) from a I to a III. At the same time, the SAFER Banking Act is winding its way through the Senate. And as of October 26, the cannabis industry will try to end prohibition through the courts. Cannabis litigation at this level has been tried before and failed. This time, however, may be different for a few important reasons (not the least of which is that renowned litigator David Boies is leading the charge). I’ve been practicing in this space for 14 years, and this is really the first time that all three branches of government are seeing the cannabis movement all at once, which is exciting and should give the industry some much needed hope.

National law firm Husch Blackwell is pleased to announce that Hilary Bricken has joined the firm as a partner in the Los Angeles office and as a member of its Food Systems industry group.

Bricken is a highly regarded cannabis law attorney who joins Husch Blackwell’s nationally recognized Cannabis practice team. She has more than a decade of experience in guiding clients of all sizes in cannabis licensing; marijuana and industrial hemp regulatory compliance; mergers and acquisitions; corporate and transactional matters, including negotiating management services agreements, fee slotting agreements, cultivation supply agreements, and intellectual property licensing agreements; receiverships; dissolution and wind downs; and financing and debt restructuring.

Part 1 of this series discussed the lack of bankruptcy protections for cannabis companies since bankruptcy in the U.S. is an exclusively federal procedure and cannabis remains illegal under federal law and proposed a number of alternative options for businesses struggling in the current environment. Part 2 of this series focused on state law receiverships for several states.  

In the third and final part of this series, we continue to review state law receiverships for several additional states and discuss the final non-bankruptcy option for cannabis companies, an assignment for the benefit of creditors.

Part 1 of this series discussed the lack of bankruptcy protections for cannabis companies since bankruptcy in the U.S. is an exclusively federal procedure and cannabis remains illegal under federal law and proposed a number of alternative options for businesses struggling in the current environment. Part 2 of this series focuses on one of these alternatives: state law receiverships.

The problems facing the cannabis industry arising from its ongoing status as a federally illegal enterprise are numerous and well documented: 280E tax burdens, limited access to banking, exclusion from capital markets, uneven access to federal intellectual property right protections, and the inability to access the stream of interstate commerce. The recent woes faced by cannabis companies operating in mature markets reveal another key legal hurdle for cannabis companies, their investors, and their creditors: the inability to access federal bankruptcy protection. However, cannabis companies may have access to a number of contractual and state law remedies to deal with insolvency and other financial woes.