When federal prohibition becomes defense

A ruling by the Sixth Circuit that overturned a $31.8 million verdict against entities linked to Curaleaf brings to the forefront once again a central contradiction of American cannabis: businesses that are legal under state laws but still operate within a restrictive federal framework.

For years, the cannabis industry has learned to live with a paradox that is hard to ignore.

States grant licenses.

States regulate.

States collect taxes.

Companies sign multi-million dollar contracts.

But the conflict arises when one of those business relationships ends up in federal court.

That is precisely what happened in Hello Farms Licensing MI, LLC v. GR Vending MI, LLC , a case that has just produced a decision with implications that could be closely watched by other companies in the sector.

$31.8 million that were cancelled

Hello Farms, a Michigan cannabis producer, had agreed to sell its 2020 and 2021 harvests to GR Vending, an entity linked to Curaleaf, with CURA MI as guarantor.

After the buyer stopped accepting deliveries, Hello Farms sued for breach of contract.

A federal jury ended up awarding approximately $31.8 million to the producer.

But Curaleaf appealed.

Their central argument was that the contract involved cannabis-related activities that, although permitted under Michigan law, remained prohibited under federal law.

On September 10, 2026, the Sixth Circuit Court of Appeals accepted that argument and reversed the decision. The court held that federal courts cannot enforce contracts based on agreements to engage in conduct that federal law deems illegal.

The decision does not say that cannabis is illegal in Michigan. Nor does it automatically invalidate all existing cannabis contracts.

Its scope relates to the ability of federal courts to enforce certain agreements when those agreements involve conduct prohibited by federal law.

And that's where things get really interesting.

The American Cannabis Paradox

The industry has built much of its commercial infrastructure within state systems that allow activities that continue to face federal restrictions.

This means that a company can be perfectly licensed by its state, pay taxes, comply with regulatory requirements, and enter into commercial agreements within that market, and still run into a problem when a contractual dispute reaches the federal level.

In the case of Hello Farms, that contradiction ended up being decisive.

The Sixth Circuit Court of Appeals stated that state legalization does not, in itself, change the federal prohibition applicable to the contract. The court also rejected the argument that recent changes to the federal classification of cannabis resolved the issue raised in this case.

The result is hard to ignore:

The $31.8 million awarded by a jury ended up not being enforceable through that contract in federal court.

And what does Cookies have to do with it?

This is where it's important to separate the cases.

While Curaleaf's ruling came in a federal appeal over a cannabis supply contract, Cookies faces a different arbitration proceeding .

On September 9, 2026, Gron Ventures announced that an arbitrator had awarded more than $61.5 million to Gron and Red Tech Holdings in a dispute against Cookies Creative Consulting & Promotions and Parker Berling.

According to Gron's announcement, the award included findings related to fraud, securities fraud, intentional interference with contract, and contractual breaches. He also noted that Cookies' counterclaims were dismissed.

The conflict dates back to investments made by the two groups in 2019 and 2020 and a subsequent transaction that, according to the investors, would have altered their economic and corporate rights.

But there is a fundamental difference:

The Cookies award is not the same type of proceeding as the Hello Farms case.

Therefore, the Sixth Circuit's ruling does not automatically mean that Cookies can use it to eliminate or avoid the $61.5 million award .

So, what changes?

The true importance of the Curaleaf case may lie in the question it leaves open for future disputes.

If a contractual obligation depends on activities that federal law still considers illegal, can one of the parties go to federal court to demand performance of that obligation?

The Sixth Circuit just responded that, under the circumstances of this case, no.

That could become an argument that other companies try to use in future litigation.

But there are also important limits.

The ruling comes from the Sixth Circuit , whose jurisdiction includes Michigan, Ohio, Kentucky, and Tennessee. This does not mean that all federal courts in the country are automatically bound to adopt the exact same interpretation.

Nor does it mean that any debt, contract, or judgment related to a cannabis business can simply disappear by invoking the federal prohibition.

Each agreement, jurisdiction, procedure, and obligation will have to be analyzed separately.

The legal irony

For decades, federal prohibition was one of the main obstacles preventing cannabis from functioning as a mainstream industry.

Now, in this case, that same prohibition was used as a defensive argument by a defendant company.

The paradox is profound.

Cannabis can be a legal activity under a state license and, at the same time, generate contracts whose execution encounters obstacles when the conflict reaches the federal system.

For investors, operators, growers, and brands, the message isn't necessarily in the $31.8 million.

It's in the fine print of every agreement.

Because as long as the gap between state and federal laws continues, a state license may allow you to operate; but it doesn't necessarily guarantee how a contractual dispute will end in federal court.

And that's a difference the cannabis industry can't afford to ignore.