Many companies in the cannabis industry currently face substantial financial distress caused by oversupply and pandemic-related stay-at-home and retail closure orders. Unfortunately, non-hemp cannabis companies cannot obtain bankruptcy relief under federal law. Due to the unique position of cannabis—legal under the laws of many states, but illegal under the federal Controlled Substances Act (“CSA”)—“a federal court cannot be asked to enforce the protections of the Bankruptcy Code in aid of a debtor whose activities constitute a continuing federal crime.” This position not only harms insolvent cannabis enterprises, but also harms their creditors by preventing a controlled, court-supervised wind-down or reorganization. Landlords that have helped expand the industry through sale-leaseback financing (“SLF”) stand to be particularly hurt by disorderly liquidations and they cannot rely upon the federal bankruptcy laws for…
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