General – Cannabis Industry

Like many other jurisdictions, New Jersey imposed union organizing and negotiating requirements on most cannabis licensees when it legalized adult use cannabis—a mandate that has shaped workforce decisions across the industry for nearly a decade. Last week, a federal judge in New Jersey confirmed what many attorneys have said all along: state-mandated labor peace and collective bargaining requirements are preempted by federal law.[1]

The implications for operators and applicants are substantial.

New Jersey’s LPA Requirement

Under New Jersey’s Cannabis Regulatory, Enforcement Assistance, and Marketplace Modernization Act (“CREAMMA”), cannabis businesses have been required to sign a labor peace agreement (“LPA”) with a qualifying labor union as a condition of obtaining—and retaining—a license. An LPA grants the designated union broad access to attempt to organize employees, and usually requires the employer to remain neutral and remain silent as to the merits of union representation.

New Jersey further required licensees to enter into a collective bargaining agreement within 200 days of opening for business. Failure to comply could result in fines, license suspension, or revocation. New Jersey cannabis regulators regularly and intensely monitored whether licensees were engaged in good faith negotiations towards a CBA as part of their annual license renewal process.

The Curaleaf Dispute

Though most cannabis companies chafed at the union requirements imposed in many states, few wished to challenge the law and incur the wrath of regulators, elected officials, and powerful union interests. New Jersey’s requirement was challenged only once state regulators overplayed their hand.

Curaleaf, one of the largest cannabis companies in the country, became the focal point when its LPA with UFCW Local 360 expired in April 2025 and renewal negotiations broke down. Members of the Cannabis Regulatory Commission reacted very strongly, imposing a $610,000 civil penalty—calculated at $5,000 per day—and threatened to suspend or revoke Curaleaf’s licenses.

Curaleaf filed suit in October 2025, arguing the LPA requirement was preempted by the National Labor Relations Act (NLRA). Curaleaf was not alone. Cannabis companies in Oregon (Casala, LLC v. Kotek), California (Ctrl Alt Destroy, Inc. v. Elliott), and New York (Hybrid NYC LLC v. New York State Cannabis Control Board) had already filed similar lawsuits challenging their states’ union mandates on federal preemption grounds. Most notably, in Casala, LLC v. Kotek, a federal court in Oregon granted a permanent injunction striking down that state’s LPA requirement just months before Curaleaf filed its complaint.[2]

Curaleaf’s Arguments

Curaleaf advanced four arguments why the LPA requirement exceeded the state’s authority:

First, it forced cannabis companies to surrender “economic weapons” like the right to lock out workers during a dispute—tools that federal law deliberately leaves available to both sides.

Second, it regulated union organizing and collective bargaining (areas exclusively governed by federal law) by forcing employers to recognize a union based on signed cards rather than allowing them to insist on a secret-ballot election supervised by the National Labor Relations Board.

Third, it imposed state-level fines and license penalties for conduct that only the federal government is authorized to regulate.

Fourth, it restricted employees’ right to choose their union representative by limiting eligible unions to large, established organizations meeting the state’s narrow criteria.

The Court’s Analysis

In May 2026, United States District Judge Michael A. Shipp issued a detailed memorandum opinion addressing the preemption question directly. The court found the NLRA’s reach extends to the cannabis industry’s labor market, notwithstanding that cannabis is federally prohibited, because the workers and their labor rights are still protected by federal law.

The court ruled that the LPA requirement was preempted for two reasons. First, the requirement impermissibly regulated activity arguably protected by the NLRA. Second, the requirement restricted economic tools that Congress deliberately left unregulated. On August 10, 2026, Judge Shipp entered final judgment holding that the LPA requirement was preempted as applied to Curaleaf.

Key Takeaways

For cannabis business owners and license applicants in New Jersey, this decision carries significant weight. The court has declared that the state cannot condition licensure on LPAs and collective bargaining, and cannot impose penalties for operating without an LPA and CBA.

Though New Jersey filed a formal notice of appeal on August 13, 2026, the following consequences remain in effect unless and until New Jersey convinces the Third Circuit to rule otherwise:

State regulators can no longer force cannabis businesses to assist union organizing activities, or to accept collective bargaining agreements or suffer penalties and license revocation.
Cannabis employers will now operate on the same terms as most other industries.
Cannabis employees will enjoy the same rights to organize or to not be represented as employees in most other industries.
Unions will no longer enjoy free access to organize cannabis employees, or to pressure businesses to agree to unfavorable collective bargaining agreements or suffer adverse regulatory consequences.

Cannabis employers in New Jersey and other states with similar requirements should confer with experienced labor counsel to evaluate whether proposed or executed LPAs remain viable in view of the growing body of decisions invalidating state union requirements for the cannabis industry.

[1] Curaleaf Holdings Inc. v. New Jersey Cannabis Regulatory Commission, Civil Action No. 3:25-cv-16397-MAS-RLS

[2] Casala, LLC et al v. Kotek et al, No. 3:2025cv00244 – Document 48 (D. Or. 2025) :: Justia

July 29, 2026July 29, 2026 by Jim Hearon

Can States Favor Local Cannabis Businesses? The Supreme Court Declines to Resolve

On February 23, 2026, the U.S. Supreme Court declined to resolve a growing disagreement among federal appeals courts; that is, whether states may afford preferences to in-state residents under their cannabis laws and regulations. The case, Jensen v. Maryland Cannabis Administration, involved a challenge to Maryland’s social equity applicant program for allegedly shutting out prospective operators from other states. By declining to hear the case, the Court left in place conflicting rulings that directly affects how cannabis operators can expand across state line.

At the heart of the dispute is the Dormant Commerce Clause (“DCC”), a constitutional principle that generally prohibits states from passing laws that their favor their own residents to the detriment of out-of-state competitors. What several courts have struggled with is whether the prohibitions of the DCC apply when the product being sold (i.e. cannabis) is illegal under federal law. Courts are split on this issue, and where a cannabis business is located determines the answer.

Courts That Have Applied DCC to Cannabis

The First Circuit was the first to weigh in on this issue. In a 2022 case, Northeast Patients Group v. United Cannabis Patients & Caregivers of Maine, an out-of-state applicant challenged a provision in Maine’s cannabis law requiring owners of dispensaries to be state residents. The First Circuit ruled that the DCC applied to cannabis just like any other product and struck down Maine’s residency requirement.

In 2025, the Second Circuit agreed with the First Circuit. In that case, Variscite NY Four, LLC v. New York State Cannabis Control Board, an out-of-state operator challenged a provision in New York’s adult use cannabis program which afforded applicants who were convicted of a cannabis-related offense under New York law with “Extra Priority” in the application process. The plaintiffs, who were residents of California and had convictions for cannabis-related offenses under California law, argued that the provision violated the DCC by discriminating against out-of-state individuals. The Second Circuit agreed and struck down the provision.

The Ninth Circuit’s Disagreement

In January 2026, the Ninth Circuit broke from the pack and ruled that the DCC did not apply to a market that Congress declared illegal. In two consolidated cases, Peridot Tree WA, Inc. v. Washington State Liquor & Cannabis Board and Peridot Tree, Inc. v. City of Sacramento, out-of-state applicants challenged the cannabis licensing schemes in the City of Sacramento and the State of Washington, which required a person to have been a resident for a specified period of time to be eligible for a dispensary license. The Ninth Circuit affirmed the dismissal of both cases, holding that the DCC did not apply to those residency requirements because cannabis is illegal under federal law.

The Case the Supreme Court Declined

In Jensen, the Fourth Circuit opted to sidestep the big constitutional question altogether. That case involved Maryland’s social equity applicant program. To qualify as a social equity applicant, an individual needed to meet one of several criteria, which included attending for at least two years a Maryland institution of higher education where at least 40% of students are Pell Grant eligible. The plaintiff, who was a resident of California, claimed eligibility as social equity applicant based on her attendance at a college in California meeting the Pell Grant requirements. Maryland found her ineligible during the licensing process. The Fourth Circuit ruled that the social equity applicant program did not violate the DCC because it did not discriminate against non-Maryland residents. The court explained that the program did not have a residency requirement and was available to out-of-state applicants who attended qualifying Maryland institutions.

Why the Supreme Court Passed

While it is reasonable to believe that a circuit split on a constitutional question would warrant resolution by the Supreme Court, there may be practical reasons why the Court declined to intervene. One reason could be based on President Trump’s December 2025 Executive Order directing the rescheduling of cannabis from Schedule I to Schedule III. If rescheduling goes through, it would fundamentally change the legal landscape concerning cannabis and likely moot any debate over whether DCC applies to cannabis.

Another reason could be the narrowness of the issue. Cannabis is the only area of law where the federal government has declared it illegal but a majority of states have legalized it. The Court may see this as a nuanced question without general applicability, thereby not warranting intervention.

Whatever the Court’s reasons for not hearing this issue, for now, the rules depend on where a cannabis business operates. In the Ninth Circuit (which includes California, Washington, Oregon, and other western states), residency requirements and local-preference licensing are permitted. In the First Circuit (covering Maine and other New England states) and the Second Circuit (covering New York and neighboring states), those same residency preferences are constitutionally suspect and may be struck down.

Looking forward, this issue should hopefully be resolved once rescheduling is completed or the Court finds it necessary to intervene.

June 15, 2026June 16, 2026 by Duane Morris

U.S. Bankruptcy Court Cracks Open Door for Canadian Cannabis Restructurings

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: acting under Chapter 15 of the Bankruptcy Code – the U.S. framework for recognizing and aiding foreign insolvency proceedings – it recognized a Canadian (CCAA) proceeding involving a cannabis enterprise notwithstanding the continuing illegality of marijuana under federal law.

Read the full Alert on the Duane Morris LLP website.

April 23, 2026April 23, 2026 by Paul P. Josephson

Relief, Finally? DEA Issues Order Expediting Cannabis Rescheduling to Schedule III

On April 22, 2026, a final order issued by the Acting Attorney General and the Drug Enforcement Administration took effect, fundamentally altering the federal regulatory landscape for marijuana. The order moves FDA-approved drug products containing marijuana and marijuana subject to qualifying state-issued medical marijuana licenses from Schedule I to Schedule III of the Controlled Substances Act (CSA).

Though a welcome and long hoped-for action, it is critical to note this is not a broad legalization of all adult use (recreational) cannabis sales. Nor does it legalize the controversial category of hemp-derived THC products.

This post summarizes the key provisions of this landmark action and its implications for stakeholders across the cannabis industry. We will follow up with more detailed analyses of the new order specific to various stakeholders and issues.

Highly Expedited Action

The DEA acted under 21 U.S.C. § 811(d)(1), which authorizes the Attorney General to control a substance under the schedule deemed most appropriate to satisfy U.S. obligations under the Single Convention on Narcotic Drugs. This move permits the Attorney General to issue a scheduling order “without regard to” the findings and notice-and-comment rulemaking procedures that ordinarily apply under the CSA. Accordingly, the DEA took the position that the Administrative Procedure Act’s notice-and-comment requirements do not apply to this action.

Scope of the Final Order

The rescheduling to Schedule III applies to two categories of marijuana:

FDA-approved drug products containing delta-9-tetrahydrocannabinol (Δ9-THC) derived from the plant Cannabis sativa L., other than the mature stalks and seeds.
Marijuana subject to a state medical marijuana license, defined as a license issued by a state entity authorizing the licensee to manufacture, distribute, and/or dispense marijuana or products containing marijuana for medical purposes.

The order also covers marijuana extracts, as defined in 21 CFR § 1308.11(d)(58), and naturally derived Δ9-THC to the extent they fall within the above two categories.

The DEA also announced an expedited hearing commencing June 29, 2026, to consider whether marijuana as a whole—not just FDA-approved and state-licensed medical products—is reclassified to Schedule III.

Several important exclusions apply:

Critically, any form of marijuana that is neither in an FDA-approved drug product nor subject to a state medical marijuana license remains a Schedule I controlled substance. This leaves the cultivation and sale of recreational cannabis that dominates the state-licensed industry in legal limbo for the time being.
The order does not apply to synthetically derived THC, which remains in Schedule I.
It does not affect the status of hemp as defined in Section 7 U.S.C. § 16390.
Nor does it affect the scheduling of previously rescheduled drug products such as Marinol and Syndros, or any previously scheduled synthetic cannabinoids.

Expedited Registration for State Licensees

Recognizing that forty U.S. states have now legalized the sale and use of marijuana for medical purposes under state law, the order establishes a new expedited federal registration pathway for entities holding state medical marijuana licenses.

State licensees may submit their existing state credentials as conclusive evidence of state-law authorization when applying for DEA registration as manufacturers, distributors, or dispensers. The Administrator must grant registration unless doing so would be inconsistent with the public interest under 21 U.S.C. § 823 or with the requirements of the Single Convention. A DEA registration will automatically suspend upon suspension, revocation, or expiration of the underlying state license.

To facilitate a smooth transition, the DEA will prioritize applications submitted within 60 days of publication, with a target of processing those applications within six months. Applicants who submit within that 60-day window may continue to operate under their state-issued licenses during the pendency of their application.

Regulatory Framework for State Licensees

The order contains several provisions designed to minimize regulatory burden on compliant state-licensed entities by deferring to existing state regulatory infrastructure:

Prescriptions. State-authorized medical marijuana certifications or similar documents are sufficient to permit dispensing, provided they include the user’s name and address, are dated and signed on the day of issuance, and identify the issuing practitioner.
Records and Reporting. The DEA will require only such reports, records, and order forms as are necessary to comply with federal statutory and treaty obligations, and will accept state-required records to the maximum extent permissible.
Labeling, Packaging, and Security. Registrants may comply with state-law labeling, packaging, disposal, and physical-security requirements in lieu of otherwise applicable federal requirements, subject to inclusion of the statutory warning label required by 21 U.S.C. § 825(c).

Tax Implications Under Section 280E

One of the most significant practical consequences of the rescheduling relates to federal taxation. The order notes that, as a consequence of moving state-licensed medical marijuana to Schedule III, licensees will no longer be subject to the deduction disallowance imposed by Section 280E of the Internal Revenue Code, which applies only to businesses trafficking in Schedule I or II controlled substances.

The Acting Attorney General further encouraged the Secretary of the Treasury to consider providing retrospective relief from Section 280E liability for taxable years in which a state licensee operated under a state medical marijuana license.

Notably, however, the order expressly states that nothing in the rule constitutes a determination regarding federal tax liability, and state licensees are advised to consult with tax counsel.

Key Takeaways

This final order marks a historic shift in the federal treatment of marijuana. For state-licensed medical marijuana operators, the rescheduling opens the door to DEA registration through an expedited pathway that leverages existing state regulatory infrastructure, potentially reduces or removes the punitive effects of Section 280E, and reduces duplicative federal compliance obligations. For pharmaceutical companies with FDA-approved marijuana products, the move to Schedule III eases regulatory requirements while maintaining robust federal oversight.

At the same time, stakeholders should recognize important limitations. Recreational marijuana remains squarely in Schedule I, as does any marijuana not covered by an FDA-approved product or a state medical marijuana license.

Synthetically derived THC is also unaffected.

What to Watch

The administrative hearing set to begin on June 29, 2026, will be the most significant near-term development to monitor. The outcome of that proceeding will determine whether marijuana as a whole — not just FDA-approved and state-licensed medical products — is reclassified to Schedule III.

Stakeholders should also watch for potential legal challenges to the Acting Attorney General’s use of treaty-implementation authority as the basis for the immediate rescheduling order, as this legal theory may face scrutiny in the courts. Finally, federal agencies such as the IRS, the Department of Health and Human Services, and the FDA may issue additional guidance clarifying how the rescheduling affects tax treatment, healthcare regulation, and product approval pathways.

We will continue to monitor these developments closely. Stakeholders with questions about how these changes may affect their operations, compliance programs, or research activities should not hesitate to reach out to Paul Josephson, Michael Schwamm, Tracy Gallegos or any member of our Cannabis and State Attorneys General teams.

March 27, 2026March 27, 2026 by Duane Morris

Intellectual Property Considerations for Cannabis and Hemp Industry Executives

By Paul Josephson, Thomas Kowalski and Brandon Chan

The constantly evolving legal landscape and regulatory challenges facing cannabis and hemp cultivators, manufacturers, and retailers require close attention to compliance with local, state, and federal regulatory bodies.

As these industries mature and converge, operators should be equally vigilant about avoiding infringement of intellectual property rights held by others. To minimize the risk that investments in a new product or brand run afoul of protected IP rights, cannabis and hemp businesses are well advised to undertake a freedom-to-operate (FTO) analysis. An FTO analysis helps preemptively defend against possible assertions of infringement, minimize litigation risk, and provide comfort to investors regarding the marketability of goods and services.

Each stage of developing and bringing a product or brand to market presents significant risks of infringing another’s intellectual property. These risks include patents directed to methods of processing cannabis and hemp into finished products, as well as the marketing and presentation of products through distinctive trademarks and trade dress. This is especially important considering that many cannabis strain names and brands reference popular music or musicians—such as “Garcia Hand Picked,” “Fat Axl,” “Deep Purple” and “Willies Wonder”—or other well-known brands and trademarks.

In the cannabis and hemp industries, intellectual property rights may protect particular plant strains, methods by which plants are harvested and processed into consumer products, desired physical and chemical properties of processed materials (such as terpene and moisture content), methods of achieving those properties, and the branding and presentation of products to identify the underlying business as the source of goods-building consumer appeal and goodwill.

Violating the intellectual property rights of others can torpedo the substantial investment required to bring a product to market. An infringement claim can bring an operator’s business or new product to a halt and result in costly litigation, undermining the foundation on which an operator has built its business. In one recent example, Spotify successfully opposed registration of “POTIFY” on grounds of dilution of the “SPOTIFY” mark.

FTO analysis is an essential component of the product development cycle in mature industries, and it should be standard practice in the cannabis and hemp sectors as well. An FTO analysis conducted by experienced intellectual property counsel helps ensure that your hard work will not be undermined by the later assertion of third-party IP rights when your product reaches the market.

To learn more about freedom-to-operate issues impacting cannabis and hemp companies, join Duane Morris IP attorneys at our upcoming March 31 webinar focused on FTO issues for the food and beverage sector. The program will provide an overview of practical strategies for navigating FTO in this rapidly evolving landscape. Register and learn more here: https://www.duanemorris.com/events/consumer_branded_products_webinar_series.html

March 6, 2026March 6, 2026 by Kayla Handt

Municipalities Can’t Just Say “No”: What Higher Breed Means for Cannabis Licensing

Can a city council deny a cannabis retailer application for a resolution of local support (“ROS”) without providing any explanation? According to the New Jersey Appellate Division, the answer is no.

On March 3, 2026, in Higher Breed NJ LLC v. City of Burlington Common Council, the New Jersey Appellate Division held that municipal governing bodies must provide a discernible basis when denying an ROS—a prerequisite to obtaining a Class 5 Cannabis Retailer License from the Cannabis Regulatory Commission (“CRC”).¹

Higher Breed, a cannabis business, applied for an ROS to operate a Class 5 cannabis retail dispensary in Burlington. The City Council ultimately denied the ROS without offering any reasons for the decision.

The Appellate Division recognized that municipal councils possess broad discretionary authority when evaluating ROS applications and are permitted to take into account all relevant evidence. Nevertheless, the court emphasized that such discretion does not permit a council to deny an application without providing an explanation. In order for the City Council’s resolution to receive deference, there must be a clearly discernible basis supporting the decision reached.

The court found this requirement consistent with CREAMMA (the Cannabis Regulatory, Enforcement Assistance, and Marketplace Modernization Act), which requires the CRC to provide specific reasons when denying a license. Burlington’s own municipal code reinforced the point: it defines a resolution as a written description of “the sense or will” of the City Council—language that inherently calls for some articulation of reasoning.

The court identified two primary reasons this requirement matters.

First, transparency. Without an explanation, applicants are left to speculate about what went wrong and whether it can be remedied. The public likewise deserves to understand the basis for City Council’s decisions.

Second, meaningful appellate review. Courts cannot evaluate whether a denial was arbitrary or unreasonable absent a stated rationale. As the court observed, deference to a governing body’s decision requires “confidence that there . . . [are] appropriate findings addressing the critical issues in dispute.”

The court noted that a decision on the issuance of an ROS will not typically demand the same level of detail as a land use board’s decision, but it must contain enough to make the council’s reasoning discernible.

This decision meaningfully shifts the balance of power in the ROS process. Municipalities can no longer simply vote “no” and move on—they must provide a written basis for any denial. That requirement makes it possible to challenge denials driven by irrelevant considerations or personal grievances rather than legitimate regulatory concerns.

For cannabis operators, Higher Breed establishes a critical safeguard: applicants are now entitled to clear reasons for an ROS denial, enabling them to address any deficiencies in future applications and to challenge decisions grounded in illegitimate reasoning.

https://www.njcourts.gov/system/files/court-opinions/2026/a3414-24.pdf ↩︎

February 20, 2026February 20, 2026 by Michael D. Schwamm

NY Bill Would Allow Low-THC Drinks in Liquor Stores

New York State Senate Bill S9220 (2025-2026), introduced February 17, 2026, by Sen. Jeremy Cooney (D-Rochester), chair of the Senate Subcommittee on Cannabis, would allow liquor and wine stores to sell low-potency cannabis beverages.

Regulatory Framework

The bill vests joint authority in the State Liquor Authority and Office of Cannabis Management over this novel class of intoxicating beverages limited to 5 milligrams of delta-9 THC per serving. Products must be maintained in a separate, distinctly marked area from alcoholic beverages, with sales confined to persons 21 years or older.

Taxation Provisions

An excise tax of 9% applies to retailers’ purchases from distributors; a 13% retail tax burdens end purchasers. Revenues from the latter are apportioned primarily to the state Cannabis Revenue Fund, approximately one-third to the locality of sale, and one-thirteenth to the liquor authority.

Legislative Precedent

This measure succeeds S8575 (the “Hemp Beverage and Taxation Act”), also sponsored by Cooney and pending in committee since November 2025, which proposes Cannabis Control Board oversight of hemp-derived cannabinoid beverages (≤5mg THC/container) with a uniform 10% tax and parallel age/labeling restrictions. As of February 19, 2026, S9220 remains referred to the Senate Investigations and Government Operations Committee.

February 13, 2026February 13, 2026 by Duane Morris

Ohio Attorney General Files First-of-Their-Kind Antitrust Claims Against Major Multistate Cannabis Operators

By Sean P. McConnell, Wayne A. Mack, Christopher H. Casey, Paul P. Josephson, Tracy Gallegos, Michael D. Schwamm, and James Hearon

The Ohio attorney general recently filed an unprecedented state antitrust enforcement action against nine of the nation’s largest multistate cannabis operators. The complaint alleges these defendants formed illegal cartels through reciprocal supply agreements, competitively sensitive information exchanges and discriminatory distribution practices designed to exclude independent Ohio cannabis operators from the market and artificially inflate consumer prices. The complaint seeks injunctive relief, civil forfeitures of $500 per day per defendant for each day the alleged combinations were in effect, and attorneys’ fees.

Read the full Alert on the Duane Morris LLP website.

February 13, 2026February 13, 2026 by Paul P. Josephson

Ohio Attorney General Files First-of-Its-Kind Antitrust Claims Against Major Cannabis MSOs

The Ohio Attorney General recently filed an unprecedented state antitrust enforcement action against nine of the nation’s largest multistate cannabis operators (MSOs). The complaint alleges these defendants formed illegal cartels through reciprocal supply agreements, competitively sensitive information exchanges, and discriminatory distribution practices designed to exclude independent Ohio cannabis operators from the market and artificially inflate consumer prices. The complaint seeks injunctive relief, civil forfeitures of $500 per day per defendant for each day the alleged combinations were in effect, and attorneys’ fees.

Key Takeaways

Though targeted at MSOs, this action marks a watershed moment for all cannabis and hemp businesses and the trade associations promoting their interests. Casual business arrangements that proliferate in both sectors create significant antitrust exposure.
This action represents the first state attorney general enforcement action targeting alleged anticompetitive conduct in the cannabis industry and follows theories advanced in private litigation currently pending in federal court in Illinois.
The Ohio case demonstrates state willingness to pursue enforcement theories developed in private litigation, potentially validating and lending government credibility to those claims. We can expect more antitrust enforcement activity from other states, and federal antitrust interest cannot be ruled out.
Cannabis and hemp companies of all sizes and their associations should take immediate steps to assess their commercial arrangements and implement robust antitrust compliance programs.

Legal Claims and Theories

The Ohio AG brings claims under Ohio’s Valentine Act (Ohio Revised Code §§ 1331.01 et seq.), alleging unlawful trusts and conspiracies against trade. The complaint identifies three primary categories of anticompetitive conduct:

Reciprocal Supply Agreements and Shelf Space Allocations. The complaint alleges that defendants entered into national “Trade Balance” agreements through which they committed to reciprocal purchasing quotas across multiple states and allocated dispensary shelf space to one another’s products. For example, corporate executives allegedly met quarterly to establish state-by-state purchasing commitments, with documented agreements showing shelf space allocations of up to 25% for competitor MSO products. The complaint alleges these arrangements were designed to exclude independent cultivators and processors from retail channels, citing internal communications describing the strategy as a “distribution game” where vendors not reciprocating purchases were eliminated.

Exchange of Competitively Sensitive Information. The complaint alleges defendants regularly shared promotional plans, pricing information, costs paid to non-MSO suppliers, and discount terms-information that would typically be closely guarded in a competitive market. According to the complaint, this information sharing facilitated coordination on pricing and allowed defendants to monitor compliance with their reciprocal dealing arrangements.

Discriminatory Supply and Promotional Terms. The complaint alleges defendants offered each other preferential pricing, including “frontload discounts,” rebates, and split co-promotion arrangements not available to independent dispensaries. These arrangements allegedly placed non-MSO dispensaries at a structural competitive disadvantage, forcing them to either maintain higher retail prices or absorb margin losses.

Practical Considerations for Cannabis and Hemp Companies and Trade Associations

From the outset, cannabis and hemp businesses have banded together to legalize cannabis and hemp. Once legalized, they have worked together to create state-specific regulatory structures. These companies have for the last decade worked together to promote their common interests in well-regulated and economically viable state markets. The informal and often collegial practices of these nascent industries that has been a strength also creates significant antitrust exposure.

All companies and associations should take action to mitigate risk:

Experienced legal counsel can assist by conducting privileged antitrust compliance audits of existing commercial arrangements, including supply agreements, shelf space allocations, and promotional programs across all operating states.

Companies and associations should consider reviewing and revising information-sharing protocols to ensure no competitively sensitive information is exchanged with competitors.

Companies should implement or strengthen antitrust compliance training programs for all personnel involved in purchasing, wholesale, and retail operations.

Companies should also work with counsel to develop document retention policies that balance legal obligations with risk management considerations.

Counsel can assist with coordinating regulatory and defense strategy across jurisdictions, engaging with state regulators proactively, and assessing proactive steps that may mitigate penalties or inform settlement negotiations.

If you have any questions about this Alert, please contact Paul P. Josephson, Tracy A. Gallegos, Michael D. Schwamm, James Hearon, any of the attorneys in our Cannabis Group, Sean P. McConnell, Wayne A. Mack, Christopher H. Casey, any of the attorneys in our Antitrust and Competition Group, any of the attorneys in our State Attorneys General Group, or the attorney in the firm with whom you are regularly in contact.

January 16, 2026January 16, 2026 by Jim Hearon

New Jersey Joins in Closing Hemp Loophole –New Legislation Regulates Hemp-Derived Products

On January 12, 2026, Governor Phil Murphy signed Senate Bill 4509 into law, ushering in a sweeping reform of New Jersey’s hemp laws and establishing a regulatory framework for intoxicating hemp products (“IHPS”) that have proliferated across the Garden State. The bill’s sponsors aimed to close a long-standing loophole created by the 2018 federal Farm Bill, which permitted IHPs to be sold widely with no oversight. The enactment of SB 4509 represents the latest and most consequential chapter in New Jersey’s multi-year effort to regulate these products.

Two years ago, New Jersey attempted to regulate IHPs but its efforts were unsuccessful. In September 2024, New Jersey enacted legislation prohibiting the sale of IHPs to minors and imposing new restrictions on their distribution. Just days before the law was scheduled to take effect, a federal judge issued a permanent injunction blocking most of its substantive provisions. In Loki Brands LLC v. Platkin, the District Court of New Jersey held that the law’s definition of “intoxicating hemp products” expressly discriminated against out-of-state hemp by prohibiting its sale in New Jersey. The court concluded that the law violated the Dormant Commerce Clause by penalizing out-of-state producers and manufacturers. It further held that the statute conflicted with—and was, therefore, preempted by—the 2018 Farm Bill because it effectively transformed federally legal hemp into a controlled substance simply by virtue of being shipped through New Jersey.

The federal landscape concerning hemp has dramatically shifted since Loki was decided. As part of the 2025 federal spending bill, Congress overhauled federal hemp standards by including a provision banning the sale of any hemp-derived THC product containing more than 0.3% total THC—not just delta-9 THC as permitted under the 2018 Farm Bill—on a dry weight basis. Congress also narrowed the definition of legal hemp to exclude products containing cannabinoids that “were synthesized or manufactured outside the plant” and prohibited consumer products containing more than 0.4 milligrams of total THC per container. Taken together, these changes render virtually all existing IHPs unlawful under federal law. The new federal prohibition is set to go into effect on November 13, 2026.

New Jersey’s newly enacted law is calibrated to align with these updated federal standards. Under SB 4509, hemp may not contain more than 0.3% total THC, including delta-8, delta-10, THCA, and similar cannabinoids, and IHPs may not contain more than 0.4 milligrams of THC per container. Products that exceed these thresholds are deemed cannabis and fall under the jurisdiction of the New Jersey Cannabis Regulatory Commission (“CRC”). As a result, the sale of such products will require a state-issued cannabis license and compliance with the same regulatory requirements imposed on licensed cannabis businesses operating in New Jersey.

While the law took effect on January 13, 2026, its implementation will be a phased approach. To allow the CRC time to develop its regulatory scheme, and to mitigate the economic impact on existing IHP retailers, the statute provides a grace period through April 13, 2026, during which time current sellers must liquidate their inventory. The law does, however, carve out a narrow exception for intoxicating hemp beverages, which may continue to be sold at licensed liquor stores until November 13, 2026 when the federal prohibition goes into effect. At that point, any beverage exceeding the new THC limits will be regulated as cannabis.

With the passage of SB 4509, New Jersey has signaled an end to the sale of unregulated IHPs. By harmonizing New Jersey law with federal hemp rules and addressing the constitutional defects identified in Loki, the Legislature has likely crafted a framework designed to withstand legal scrutiny while prioritizing consumer safety and regulatory clarity.