The U.S. Bankruptcy Court in Delaware officially made The Cannabist Co. the first cannabis multistate operator to successfully obtain federal bankruptcy protection when it granted the company’s petition for Chapter 15 protection this month.
“This appears to be the first case of its kind. While lacking some of the substantive provisions of chapter 11, chapter 15 offers a useful alternative roadmap, particularly considering the prevalence of Canadian cannabis companies with US operations and subsidiaries,” wrote attorney Zachary Kobrin, partner at Saul Ewing, in a social media post reacting to the news.
Unlike Chapter 11 and Chapter 7, which typically involve restructuring and liquidation, respectively, Chapter 15 is used to recognize ongoing debt-related litigation from another country. In this case, The Cannabist Company Holdings Inc. is undergoing a process similar to bankruptcy under Canada’s Companies’ Creditors Arrangement Act (CCAA).
22% of Canadian restructurings this year are cannabis companies
Canada’s CCAA allows companies with at least $5 million in debt to enter into a restructuring phase while being protected from its creditors. The law, enacted in 1933, is a means for companies to avoid bankruptcy or receivership.
Legal adult-use sales in Canada started in mid-October 2018. Since then, numerous U.S.-based MSOs have established themselves in Canada, which allows them to access CCAA protection and be listed on the Toronto Stock Exchange.
As the national Canadian market has matured, an increasing number of companies have filed for CCAA protection.
As of May 1, Canada’s government granted CCAA status to 27 companies in 2026. Of those, six companies were in the cannabis industry. Comparatively, 2025 saw only three cannabis companies approved for CCAA status among a total of 64 companies.
U.S. Bankruptcy Judge Brendan Shannon determined that not affording Chapter 15 protection to The Cannabist Co. could undermine the CCAA proceedings in Canada.
“Absent the requested relief, the efforts of the Debtors, the Canadian Court, and the Foreign Representative in conducting the Canadian Proceeding and the restructuring process thereunder and Canadian law may be frustrated by the actions of individual creditors, a result contrary to the purposes of chapter 15,” he wrote in the nine-page order on May 9.
In short, The Cannabist Co. is in the process of liquidating its assets through the Canadian court, so the U.S. Bankruptcy Court paused domestic collection proceedings to allow those proposed transactions to take place.
Cannabist sells licenses following failed merger
Illinois-based Cresco Labs and Columbia Care in Chelmsford, Mass., announced a $2 billion merger in March 2022. While that deal would have been a major development in the national market, it also required a significant amount of divestment in markets where both companies had a combined number of licenses that exceeded the state maximum.
Ultimately, the deal was called off the following year in a July 31, 2023, announcement. A few months later, Columbia Care announced it was changing its name to The Cannabist Co.
Since then, Cannabist slowly continued divesting. Almost two years ago, the company sold its license in Florida, just ahead of the ill-fated 2024 referendum on adult-use that drew about 55% of the vote, when 60% was needed to legalize in the Sunshine State.
The Cannabist Co. filed for CCAA protection on March 24, 2026.
As part of the CCAA proceedings, The Cannabist Co. filed for a transaction approval on April 15. Under the terms of the proposal, the parent company would sell Columbia Care Delaware to Parma HoldCo., which previously acquired Cannabist’s Virginia licenses as an indirect affiliate of Mill Street Credit Fund, according to court filings. In a separate transaction, the company would also sell its Ohio assets to Holistic Industries Inc.
Holistic Industries already has licenses in Delaware, Massachusetts, West Virginia, Michigan, Illinois, California, Maryland and D.C., according to the CRB Monitor database.
The recently closed Virginia deal netted The Cannabist, or at least its debt holders, $130 million. The Ohio asset sales are worth $47 million, while the Delaware deal is for $16.5 million.
Cannabis’s illegal status has prevented U.S. bankruptcies
Until now bankruptcy has remained out of reach for any company that directly deals in cannabis.
The closest that a cannabis company came to federal bankruptcy protection was when the U.S. Bankruptcy Court in California allowed Hacienda to move forward with its plan to liquidate its holdings to settle outstanding debt, against the wishes of the U.S. Trustee, which is a position that has consistently opposed bankruptcy protection for federally illegal businesses.
“The UST (U.S. Trustee) argues that this case is different because the underlying criminal activity is continuing postpetition. But nothing that Debtor proposes to do postpetition will foster a single additional sale of cannabis products, nor will it add a single dollar to any cannabis-related enterprise. All that Debtor will do is pay its creditors by selling its stock, over time, in a company that is legally traded in Canada,” wrote U.S. Bankruptcy Judge Neil Bason in a Sept. 20, 2023, opinion denying the motion to dismiss from the U.S. Trustee.
In that case, the judge denied an effort to block Hacienda’s restructuring, while noting that his decision should not be considered a precedent for subsequent cannabis cases.
With medical cannabis rescheduling and a potential larger-scale rescheduling of cannabis taking place this year, more courts may begin ruling in favor of cannabis companies seeking federal debt protection.
“Perhaps with cannabis rescheduling we are witnessing a policy shift at the United States Trustee — and a potential option to restructure a cannabis company in bankruptcy that is going to emerge in compliance with federal law,” wrote Jason Rosell, an attorney with Pachulski, Stang, Ziehl & Jones.
