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On May 9, a Delaware bankruptcy court handed The Cannabist Company Holdings Inc. something no cannabis multistate operator had ever managed to obtain: federal bankruptcy protection. U.S. Bankruptcy Judge Brendan L. Shannon signed the recognition order, confirming that Cannabist’s ongoing insolvency proceedings in Canada qualify as a foreign main proceeding under Chapter 15 of the U.S. Bankruptcy Code, effectively pausing domestic collection actions while the company works through its asset sales.
Cannabist had filed for protection under Canada’s Companies’ Creditors Arrangement Act on March 24, 2026. The company’s Vancouver-registered holding companies, Canadian-law debt, and active CCAA proceeding gave it the standing to pursue U.S. recognition through Chapter 15, rather than attempt a domestic Chapter 11 or Chapter 7 filing, routes that have historically been closed to cannabis operators because marijuana remains a Schedule I controlled substance under federal law. Shannon found that without the requested relief, individual creditors could move to frustrate the Canadian restructuring process, which would run counter to the purpose of Chapter 15.
David J. Cohen, a partner at Weil, Gotshal & Manges serving as counsel for Cannabist’s foreign representative, told Bloomberg Law that the approach made sense given the company’s cross-border structure: “Combined with some regulatory changes that probably provided enough impetus, at least in these circumstances, the facts made it make sense to pursue this path. It’s not going to be the right path for every company, but for those who have a cross-border element, it’s certainly a good alternative.”
The ruling drew attention partly because of who did not object. The U.S. Trustee, which has historically sought dismissal of cannabis bankruptcy petitions, stayed silent. East West Bank was the only objector, arguing that recognition would amount to endorsing conduct prohibited under federal law. Shannon overruled the objection, though EWB retained the right to revive it if negotiations with the foreign representative do not produce agreed documentation by May 26, according to court records.
Jason Rosell, who leads Pachulski Stang Ziehl & Jones’ cannabis restructuring group, told Bloomberg Law the Trustee’s silence may signal a shift: “My takeaway is that the trustee may be softening its position with respect to cannabis bankruptcies.” On the ruling itself, Rosell was measured: “This has created a road map for other Canadian-based cannabis companies to use. The problem is that it’s likely limited from a practical perspective to a few companies.”
John Cannizzaro, a partner at Ice Miller, pointed to Cannabist’s holding company structure as a key factor in the Trustee’s non-objection. Because Shannon’s order recognizes a Canadian proceeding rather than directly administering cannabis assets in the U.S., a court-appointed trustee never has to touch the cannabis business itself. “We have one bankruptcy court that has granted foreign recognition, so we should expect more companies to try it,” Cannizzaro told Bloomberg Law.
The ruling lands at a moment when the federal picture around cannabis is shifting. Jonathan Robbins, chair of Akerman’s cannabis practice, noted to Bloomberg Law that rescheduling forced the federal government to formally acknowledge accepted medical uses for marijuana, and would also remove the Section 280E tax burden that has saddled operators with significant tax liabilities even when they were losing money. In Cannabist’s case, the IRS had asserted $51 million in federal income tax claims for 2022 and 2023, according to court filings. The DEA is scheduled to hold a rescheduling hearing in June.
Cannizzaro cautioned, however, that rescheduling alone does not open the door to domestic bankruptcy for most operators. The majority of MSOs run both medical and adult-use operations, and until federal law changes to make operating or liquidating a cannabis business legal at the federal level, access to Chapter 11 will remain restricted.
Meanwhile, Cannabist’s asset disposals are moving. A Virginia transaction closed for $130 million, Ohio assets are under agreement with Holistic Industries for $47 million, and Columbia Care Delaware is proposed for sale to Parma HoldCo. for $16.5 million, according to CRB Monitor. Robbins expected others to follow: “We’re going to see some people testing the waters.”
For more information:
The Cannabist Company
www.cannabistcompany.com
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