Vol 23 (2026) - Issue 4

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Chapter 15 Provides Relief Where Chapter 11 Cannot in Restructuring of Cannabis Business

Synopsis
Despite its legalisation in numerous states, marijuana (or cannabis) remains prohibited under federal law and continues to be classified as an illegal controlled substance under the Controlled Substances Act (the 'CSA'). As a result, bankruptcy courts have routinely dismissed filings under the Bankruptcy Code by debtors who operated cannabis-related businesses on public policy grounds, by concluding that administering assets tied to a federally illegal business activity would be inconsistent with title 11 of the US Code (the 'Bankruptcy Code').
Against that backdrop, In re Cannabist Company Holdings Inc. marks a significant development. In In re Cannabist, the US Bankruptcy Court for the District of Delaware (the 'Bankruptcy Court') granted recognition under Chapter 15 of the Bankruptcy Code of a Canadian restructuring proceeding involving – for the first time – a cannabis-related enterprise.
The decision is notable because it may provide cannabis enterprises with a functional 'backdoor' to US restructuring relief through Chapter 15, while such relief likely remains unavailable in Chapter 7, 11, and 13 cases. Furthermore, it confirms that, in the crossborder restructuring context, a debtor's connection to a cannabis business does not, without more, render recognition of the debtors' foreign proceeding 'manifestly contrary to the public policy of the United States' under section 1506 of the Bankruptcy Code.