Cannabis Finally Got Into US Bankruptcy Court — Through a Canadian Side Door

The order that ended a decade of exclusion looks like nothing at all. On May 9, 2026, in Wilmington, Judge Brendan L. Shannon of the US Bankruptcy Court for the District of Delaware signed Docket No. 82 in Case No. 26-10426 — a recognition order of the kind Delaware enters routinely for Canadian insolvencies. There was no written opinion. The lone objection had been resolved before the hearing. And with that signature, for the first time, a company built on cannabis stood inside a US bankruptcy court with the law's protection instead of its back turned.

The company was The Cannabist Company Holdings Inc., the multistate operator once known as Columbia Care — one of the original names in American cannabis, with 58 facilities and 43 dispensaries across its footprint when it sought protection. Its collapse was conventional: too much debt, taken on too confidently. Between 2019 and 2024 the parent raised roughly C$340 million in equity and $320 million in secured debt from Canadian capital markets. It reported a $105.1 million net loss for 2024 and $124.2 million more through the first nine months of 2025. On December 31, 2025, it missed an interest payment; by January 30 that was an event of default, and five forbearance extensions later the company was out of road. David Hart, the chief executive promoted in January 2024 to arrest the slide, had already exited Florida and shed assets chasing $10 million in savings; it wasn't nearly enough. (S3, S10)

What was not conventional was where it went next. Bankruptcy has been a door marked closed for cannabis since the industry's beginning: because marijuana remains federally illegal, the Office of the United States Trustee has moved to dismiss virtually every plant-touching case, and courts have agreed — In re Rent-Rite in 2012, In re Arenas in 2015, In re Way to Grow in 2019, In re Burton in 2020. Distressed cannabis companies died in state receiverships instead, where value goes to be liquidated, not preserved. (S8)

Cannabist's lawyers at Weil, Gotshal & Manges found the seam. On March 24, 2026, the two Canadian holding companies at the top of the corporate tree — entities that hold no cannabis licenses and touch no plant — commenced proceedings under Canada's Companies' Creditors Arrangement Act in the Ontario Superior Court of Justice. The next day they filed Chapter 15 petitions in Delaware, asking the US court to do something modest on its face: recognize the Canadian proceeding and extend its protections to the American assets underneath. (S4, S8)

Chapter 15 is the Bankruptcy Code's cross-border chapter — the US court assists a foreign restructuring rather than running its own. That distinction became the case's signature line. "Simply put, Chapter 15 is not Chapter 11," the company's briefs argued: the main event was in Ontario, under a legal system with no prohibition on cannabis insolvencies, and Delaware was being asked only for comity. At the first-day hearing on March 26, the US Trustee objected to stretching the stay over non-debtor cannabis subsidiaries. Judge Shannon overruled it, shielding the US operations and some 70 leases and contracts while the Canadian process ran. (S7, S9, S10)

“Simply put, Chapter 15 is not Chapter 11.”

— The Cannabist Company's briefs, Weil, Gotshal & Manges, to the Delaware bankruptcy court

The structure was the argument. The debtors were holding companies with what restructuring lawyers began calling space between the filer and the plant; the subsidiaries actually growing and selling cannabis in eight states never entered a US courtroom as debtors at all. That space — plus a Canadian forum whose orders US courts routinely honor — was the whole trick, and every distressed operator's counsel in the country watched it work. (S1, S8)

The money at stake explains the effort. Alongside the roughly $179 million in senior secured notes sits a $40.4 million East West Bank mortgage over properties in New York, Maryland and New Jersey — and $51 million in IRS claims under Section 280E, the tax provision whose relief arrived, for the rest of the industry, only with April's rescheduling of medical cannabis. Under CCAA protection the company has been selling itself in pieces: Virginia went for $130 million on February 5 (after Cannabist paid a $3.3 million break-up fee to walk away from Curaleaf's $110 million bid), Ohio is under contract to Holistic Industries for $47 million, Delaware to the Millstreet affiliate for $16.5 million. New York's license was surrendered; Pennsylvania is winding down for lack of a buyer. (S3, S4, S10)

The fight that could have stopped all of it came from East West Bank. On May 1 the mortgage lender filed the sole formal objection to recognition, invoking Section 1506 of the Bankruptcy Code — the public-policy escape hatch. Granting recognition, the bank argued, "would be in violation of federal law, specifically the CSA, because the stated purpose of the Canadian Proceeding is to monetize cannabis-related assets and distribute the resulting proceeds." It was the exact argument that had killed every prior cannabis bankruptcy. This time it never reached a ruling: the objection was resolved consensually before the hearing, and the recognition order went in clean. (S2, S8)

The dog that didn't bark was the US Trustee. The office that dismantled a decade of cannabis filings submitted no written objection to recognition — only informal comments, resolved in advance. Mark Salzberg and Katherine Catanese, restructuring partners at Squire Patton Boggs, called the silence one of the case's mysteries in a widely read analysis: "We do not know why," they wrote, and the Trustee retains every right to object later, when the debtors ask the US court to bless asset sales or distributions. (S1)

The restructuring bar has been careful not to over-claim. "This is the first time a US bankruptcy court has recognized a foreign insolvency proceeding involving a cannabis company," Salzberg and Catanese wrote — while cautioning that a cross-border filing "needs to be meticulously planned and well thought out." Morrison Foerster's analysts noted the decision's precedential value "may be limited" because recognition was consensual rather than litigated. Duane Morris put it most plainly: Cannabist opens a door without guaranteeing it stays open — a less comity-minded judge, a live Trustee objection, or a debtor closer to the plant could shut it. (S1, S7, S8)

Charles Alovisetti, an attorney at the cannabis firm Vicente LLP, offered the industry's epitaph for the era that produced the case: "Many of these big cannabis companies took on significant amounts of debt and a lot of them have run into issues servicing the debt." Of Cannabist itself: "I think they're just trying to do an orderly wind down." (S3)

There is also a counter-current. On May 13 — four days after the recognition order — Trulieve announced a proposed re-domestication from British Columbia to Delaware, citing April's Schedule III order. The healthiest operators are betting that rescheduling makes American corporate homes safe again; the distressed ones now know a Canadian address is what gets you into a US bankruptcy court. Whether rescheduling eventually opens Chapter 11 itself to cannabis — mooting the side door entirely — is, the law firms agree, the unresolved question hanging over all of it. (S2, S7)

1. Q3 2026 — Ohio ($47M, Holistic Industries) and Delaware ($16.5M) sales expected to close, the first test of whether the US court's assistance extends to consummating cannabis asset sales.
2. Pending — definitive agreements for the six remaining markets (Colorado, Illinois, New Jersey, Massachusetts, Maryland, West Virginia) under the non-binding memorandum of understanding.
3. Watch the US Trustee — it reserved its public-policy arguments; an objection at the distribution stage would put Section 1506 in front of a judge for the first time.

Somewhere in the industry's next downturn, a distressed operator's board will ask its lawyers the question Cannabist just answered: is there any version of bankruptcy for us? The honest answer is now yes, conditionally — file the parent in a friendlier country, keep daylight between the debtor and the plant, and hope your objectors settle. Judge Shannon signed no opinion explaining why the door opened. Which means nobody can be entirely sure what keeps it open — or when it swings shut.

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