By Timothy T. Brock, Paul P. Josephson and Drew S. McGehrin
Cannabis companies had long been shut out of the U.S. bankruptcy system because federal courts refused to administer assets derived from or connected to federally prohibited activity. That meant distressed cannabis operators were left only with state-law options including receiverships, out-of-court restructuring or liquidating assets piecemeal—until now. On May 9, 2026, the U.S. Bankruptcy Court for the District of Delaware did something no federal court had ever done before: It recognized a foreign insolvency proceeding involving a cannabis enterprise notwithstanding the continuing illegality of marijuana under federal law. The key was the distinction between Chapter 11 and Chapter 15.