Scott H. Moskol, Evan Jason Zucker, and Michael B. Schaedle —
Introduction
The cannabis industry has been undergoing a significant wave of defaults and receivership proceedings in recent years. Faced with price compression and increased competition including from the illicit market, limited access to traditional sources of debt and capital markets, and compressed margins, many cannabis companies have found themselves unable to service their debt obligations. The Cannabist Company Holdings Inc.’s (“CCHI”) restructuring is emblematic of these broader industry challenges and provides a potential new roadmap for other cannabis enterprises navigating similar financial distress.
On May 9, 2026, the United States Bankruptcy Court for the District of Delaware entered an order granting recognition of the Canadian insolvency proceeding of CCHI and The Cannabist Company Holdings (Canada) Inc. (collectively, the “Debtors”) as a foreign main proceeding under Chapter 15 of the Bankruptcy Code. This decision is the first time a U.S. bankruptcy court has recognized a foreign insolvency proceeding involving a cannabis-related business under Chapter 15, notwithstanding the continued federal prohibition of adult use cannabis under the Controlled Substances Act (“CSA”). Importantly, the entities that obtained recognition are not the “plant-touching” cannabis operating companies. The subsidiaries that hold state licenses and directly produce, sell, and handle cannabis are not debtors in either the Canadian proceeding or the Chapter 15 cases.
This recognition, coupled with the recent rescheduling of medical cannabis from a Schedule I to a Schedule III controlled substance under the CSA, marks a significant shift in the federal posture toward the cannabis industry. Together, these developments open the door to new forms of relief under the Bankruptcy Code for cannabis-related businesses, which have historically been denied access to federal bankruptcy protection.
Background: The Cannabist Company and Its Restructuring
The multi-state operator (“MSO”), CCHI is a Canadian holding company publicly traded on the Cboe Canada Inc. stock exchange, and the ultimate parent of non-debtor subsidiaries that operate a vertically integrated cannabis cultivation, manufacturing, and retail business in eight U.S. states where medical or adult-use cannabis is legal under state law. The debtors, along with their non-debtor’s subsidiaries (the “CC Group”) have a capital structure that included approximately $220 million in funded debt, primarily consisting of approximately $179 million in senior secured notes issued under a Canadian-law-governed indenture. The CC Group incurred net losses of $105.1 million for the 12 months ended December 31, 2024, and $124.2 million in net losses for the nine months ended September 30, 2025.
Following a default on the Senior Notes in January 2026, the CC Group entered into a forbearance agreement with a majority of senior noteholders and subsequently commenced a Companies’ Creditors Arrangement Act (“CCAA”) proceeding in the Ontario Superior Court of Justice (Commercial List) on March 24, 2026. On March 25, 2026, CCHI, acting as the duly appointed foreign representative, filed Chapter 15 petitions in Delaware, seeking recognition of the Canadian proceeding and enforcement of the Canadian court’s initial order.
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