Cannabis Musings - March 31, 2026
Cannabist is trying a back door bankruptcy.
Friends - The Cannabist Company, née Columbia Care, is closing up shop. Another one of the major US cannabis operators to unfortunately call it a day, Cannabist is selling off all of its remaining assets after struggling for a long time to wrangle its creditors and restructure its debt. But we’re not here to talk about that. We’re here to talk about bankruptcy.
Cannabist has filed for protection under Canada’s Companies’ Creditors Arrangement Act (CCCA), that country’s equivalent of US bankruptcy. It’s also “commence[d] proceedings under chapter 15 of the Bankruptcy Code in the United States Bankruptcy Court to recognize the CCAA Proceedings in the United States,” which is a way to domestically recognize a foreign insolvency proceeding as a matter of international deference known as ‘comity.’ But wait, you may exclaim – isn’t bankruptcy protection unavailable to US cannabis operators? Is Chapter 15 the ‘one weird trick’ that everyone has been missing?
Bankruptcy in the US comes out of federal law, not state law, so it was a federal bankruptcy court judge that declared in 2018 that to “prevent this Court from violating its oath to uphold federal law,” it had to dismiss a hydroponics supplier’s bankruptcy petition. The delicious benefits of bankruptcy – putting litigation on hold (the ‘automatic stay’), organizing creditors in a defined process, allowing the debtor (the party that filed for bankruptcy) to reject contracts – are as unavailable to US cannabis operators as the public library is to Snoopy. And as we’ve discussed, state remedies like receivership just don’t do the trick. They’re like Snackwells– they taste vaguely like the advertised product, but they’re ultimately an unsatisfying simulacrum.
In my unscientific opinion, if bankruptcy had been available to cannabis all along, the industry would be much more robust, streamlined, and healthier financially, because a large number of operators, which are very insolvent, would have filed to either restructure or liquidate. (Then again, if it had been available, it probably would have meant that cannabis was federally legal anyway, so it’s kind of a moot thought experiment.) Instead, here we are.
The idea of using Chapter 15 combined with a CCSA filing for cannabis has been out there for a while. Jason Rosell, a bankruptcy partner at the Delaware boutique firm, Pachulski Stang Ziehl & Jones, wrote a very thoughtful article back in 2019 outlining the idea. This was at the tail end of when many US operators went public on the Canadian Securities Exchange to raise capital, giving them a Canadian presence (the typical structure was to create a Canadian holding company that listed on the exchange, which then owned the US operating companies beneath). That would be enough for the Canadian holding company to file for protection under the CCSA, as Cannabist did, and as other companies like Flower One and MedMen did.
Unlike Flower One and the others, Cannabist is also taking the further step of filing for Chapter 15 in Bankruptcy Court in the US. What Jason’s article explains, but many don’t understand, is that Chapter 15 isn’t the same as filing for Chapter 11 (to restructure) or Chapter 7 (to liquidate). It’s there to get the US Bankruptcy Court to acknowledge and respect a foreign insolvency filing, like under the CCSA. Assuming the court in Cannabist allows this to move forward, it’ll stay any pending litigation against the company. However, it doesn’t afford Cannabist the full suite of bankruptcy benefits, like creating a bankruptcy estate, cancelling contracts, or adopting a restructuring plan (though that’s not in the cards in Cannabist’s case – it’s apparently selling everything off). So, any US operator filing in Canada under the CCSA and then slipping on the Chapter 15 wouldn’t be the equivalent of straight up filing for Chapter 7 or 11. That even assumes that the operator could even file in Canada – it would require a Canadian presence, and that Canadian entity needs to actually be insolvent (generally meaning that its debts are greater than its assets, and it can’t pay them off). That’s a fairly narrow set of circumstances for success (kind of like ESOPs), pretty much limited to those US operators that went public up in Canada back in the heyday.
All of this of course assumes that the Delaware Bankruptcy Court hearing Cannabist’s Chapter 15 case won’t reject it for the same ‘public policy’ reason that other cannabis operator bankruptcy cases have failed. The Chapter 15 rules have a similar provision: a court may refuse to “take an action … if the action would be manifestly contrary to the public policy of the United States.” It’ll be a few weeks before we get a decision from the court about this, and it’s anyone’s guess which way this will go. On the one hand, it’d be a little odd for Cannabist’s judge to find that it’s okay for a US operator, which is breaking federal law, to directly take advantage of bankruptcy protection, as every other bankruptcy court has found. On the other hand, those courts have also chipped away at that finding on the margins, such as allowing the sale of equity in a cannabis company in an individual bankruptcy case, because it wasn’t about the operator itself. The Delaware court could plausibly decide that, even though Cannabist’s Chapter 15 is indeed about Cannabist (which it is), it’s not about the business itself - it’s about comity.
This is one of those times when the creativity of cannabis industry lawyers impresses me, navigating the constrictions of the system to help illegal businesses operate. But, even if it works, don’t expect this will be a game changer that’ll transform the industry.
Be seeing you.
© 2026 Marc Hauser. None of the foregoing is legal, investment, or any other sort of advice, and it may not be relied upon in any manner, shape, or form. The foregoing represents my own views and not those of Jardín, B&Y Ventures, or anyone else who employs/hires me.
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